Interest Only Maturities Nobody Is Talking About

Terrydale Capital

May 13, 2024 4 Min read

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Property distress and maturities have been hot topics throughout 2024 with the numbers for distressed properties growing and billions of dollars worth of maturities rapidly approaching. On top of this, investors who are currently set in fixed rates on interest only loans are also in trouble. This statistic is one that many experts are not taking into account as the market continues to unfurl. Here we will explain this hidden statistic in the commercial real estate market and its implications for investors.

The Rundown

With construction loans moving to amortizing loans and agency loans barely working from 2021-2022 without the ability to use interest only, these types of loans are going to have immense pressure to perform under amortization. The number of these types of loans is estimated by some to be as high as the wall of maturities coming forth. Banks, CMBSAgency, LifeCo, and debt funds all originated these types of loans and they will not be visible on a maturity schedule. This has led to an uptick that we have seen in loan assumptions of older loans that have run the course of their interest only periods. 


Loan assumptions of loans that have completed their interest only periods have a major benefit of going at a discount for investors. Along with this, we will see an even higher increase in properties coming for sale soon. The current debt service cannot be maintained as management, insurance, taxes and payroll are outpacing rental growth.

Therefore, the question remains, is assuming a loan a good idea. No matter the price one may pay, they may inherit a loan that may eventually become non-compliant, especially on non-recourse loans

While some investors may be able to create some long-term value through extra capital and good business plans, most of these deals will need to be sold, be repriced and have new debt that is functional for current operations. 

In Conclusion

Despite many not paying attention to these developing factors in the market, they have some implications for both current prospective investors. At Terrydale Capital, we are being creative for buyers in this market through both fixed and floating rate options that allow new buyers to come in and stabilize properties. When you need the right team behind you, contact us today. 

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