CMBS, Debt Funds Have Little Flexibility on Forbearance

Los Angeles

As the pandemic wears on, more rent deferral requests are coming in from commercial tenants, putting more and more pressure on commercial owners. Temporary relief for owners will largely depend on their lender. Portfolio lenders, like life companies and banks, have more flexibility to offer forbearance and loan modifications because the loan is on their balance sheet. CMBS and debt funds, on the other hand, are not able to be as flexible with borrowers.

“CMBS and debt funds really have a problem with forbearance, and it is because they don’t call their own shots,” Gary Tenzer, principal and co-founder of George Smith Partners, tells GlobeSt.com. “Once a loan is securitized, it has been sold off to a group of bond holders and the borrower deals with the servicer. The loan documents govern what the servicer can do, and there are limited things that the servicer can do.”