Where Did the Proceeds Go?

June 2026

One of the most common questions we’re hearing from borrowers today is surprisingly simple:

“Why is my lender offering less than they did a few years ago?”

The answer varies from transaction to transaction. In some cases, property performance has fallen short of original projections. In others, lease-up timelines have extended, expenses have increased, or business plans simply require more time to execute. We are also seeing a growing number of bridge-to-bridge refinancings as borrowers work toward stabilization in a market that has proven less predictable than many anticipated.

Regardless of the reason, owners across a variety of property types are confronting the same reality, replacing maturing debt has become more challenging than originally expected.

Borrowers Are Asking Different Questions

Not long ago, refinance conversations often centered on maximizing proceeds, pulling equity from an asset, or taking advantage of favorable financing conditions.

Today’s conversations look different.

Many borrowers are now focused on determining how much leverage the market will support, whether existing debt can be fully refinanced, and what options exist if proceeds come in below expectations. The discussion has shifted from optimizing a capital structure to preserving one.

For borrowers facing upcoming loan maturities, the question is no longer simply whether financing is available. The question is whether the financing available aligns with the capital needs of the transaction.

The Rules Have Changed

Part of the challenge is that lenders are evaluating opportunities differently than they did several years ago.

Across much of the market, lenders are placing greater emphasis on debt service coverage, debt yield, sponsorship strength, liquidity, and the durability of in-place cash flow. At the same time, many lenders are applying more conservative assumptions around future rent growth, lease-up velocity, and asset appreciation.

The result is that even assets that are performing reasonably well may not generate the loan proceeds borrowers anticipated when they first acquired, developed, or refinanced the property.

The Refinance Gap Is Real

This shift has created what many owners are experiencing firsthand, a refinance gap.

Loans originated in a different market environment are reaching maturity, only to be replaced by financing that may offer lower leverage and more conservative sizing. In some situations, borrowers are discovering that proceeds are insufficient to retire existing debt without additional capital.

The challenge is often not finding a lender willing to make a loan. Rather, it is finding a solution that balances lender requirements with borrower objectives.

Borrowers Are Getting More Creative

Fortunately, owners are adapting.

We are seeing borrowers evaluate a variety of approaches to bridge refinancing shortfalls and position assets for long-term success. In some situations, fresh equity is being contributed to right-size the capital stack and create a more durable financing structure. Others are exploring preferred equity or mezzanine financing to help close the gap between available proceeds and capital needs.

We are also seeing borrowers expand the range of capital sources they are willing to consider. In some situations, lenders commanding a higher spread may offer greater flexibility regarding leverage, lease-up, or transitional business plans, depending on their investment objectives and risk tolerance.

Borrowers are also considering strategies that can improve loan sizing directly. Interest rate buy-downs, for example, can enhance debt service coverage and increase proceeds in certain circumstances. Recapitalizations, selective asset sales, and portfolio-wide financing solutions may also help create additional flexibility depending on the asset, ownership objectives, and market conditions.

While no single strategy fits every situation, borrowers who evaluate multiple options early in the process are often better positioned to achieve their financing objectives.

The New Lending Reality

When borrowers ask, “Where did the proceeds go?” they are really identifying a broader shift taking place across commercial real estate finance.

Capital remains available across banks, life companies, CMBS lenders, debt funds, and private capital providers. What has changed is how that capital is being underwritten and deployed.

For borrowers, the implications are clear. Earlier planning, realistic expectations, and a willingness to evaluate multiple financing strategies can significantly improve refinancing outcomes.

The market has not run out of capital. But compared to just a few years ago, it is demanding a different conversation.