What We’re Seeing in Today’s Market—and How Borrowers Are Responding
Over the last 12–18 months, we’ve seen a clear shift in how distressed real estate presents itself. While large-scale defaults and foreclosures aren’t yet widespread, refinance-driven distress is rising across asset classes.
As interest rates stay elevated and conventional financing becomes harder to secure, more property owners—especially those in or near bankruptcy—are turning to bridge financing as a short-term solution.
At Edgewater Lending, we’ve been tracking borrower behavior, lender hesitations, and asset-level risks. Here’s what we’re seeing now.
1. Refinancing Challenges Are the Root Cause
For many borrowers, it’s not occupancy or performance issues driving distress—it’s loan maturity.
Loans originated in 2020–2022 often featured short terms and floating rates. Now those loans are coming due, and borrowers are facing:
- Higher DSCR requirements
- Lower appraised values
- Fewer institutional lending options
This has left a significant segment of borrowers with viable properties—but no financing path.
2. Distress Hotspots by Asset Type
➤ Office
Remote work has altered demand, particularly in secondary and urban fringe markets. Office assets with expiring leases or weak rent rolls are struggling to attract refinancing.
➤ Retail & Mixed-Use
In mid-size markets, older retail centers and small-scale mixed-use properties are seeing valuation gaps. Lenders are hesitant to extend loans unless fully stabilized.
➤ Multifamily
While still attractive to lenders, some multifamily properties face issues due to lease-up delays, over-leveraged construction debt, or rent control challenges.
3. How Borrowers Are Responding
Here’s how we’re seeing owners adapt:
- Filing Chapter 11 to pause enforcement and negotiate
- Pursuing DIP financing to retain control of assets
- Using bridge loans to exit bankruptcy or extend timelines
- Negotiating with creditors using capital as leverage
Bridge Financing as a Solution
Bridge loans provide short-term liquidity—secured by real estate equity—allowing borrowers to buy time, reposition assets, and exit distressed situations with control.
At Edgewater, we specialize in real estate-backed lending tailored to complex, time-sensitive situations like these.
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