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Lender concessions have mostly not entered the equation. By Paul Bergeron | January 12, 2023

The rising cost of debt is the top issue among participants in BPM’s Real Estate Market Conditions Survey as 72% expressed concern.

It’s a problem that isn’t likely to end soon as higher interest rates are causing borrowing costs to spike — limiting the ability to finance deals.

Perhaps more intriguingly, 88% reported that they are not yet seeing any lender concessions even as costs rise. “Overall, CRE lenders have become more stringent over a short amount of time given the current economic environment,” Paul Rahimian, CEO and founder with Parkview Financial, tells

Some Existing Loans Seeing Concessions

Rich Marshall, partner, Duane Morris, who focuses most of his practice on real estate, banking, and finance, says that lender concessions (via loan modifications) are occurring on existing CRE loans with variable interest rates, due to the recent spikes in the applicable interest index rate (SOFR, LIBOR, Prime, etc.). “These concessions are primarily, if not solely, implemented to avoid a loan default, such as a breach of the debt service coverage ratio covenant in the loan agreement,” Marshall said.

“However, I am not currently seeing any lender concessions on CRE originations. Rather, most lenders seem to be scrutinizing every CRE loan request and thus granting approvals on a limited basis.

He said that some lenders are only issuing new debt to their long-standing and proven customers. “While loans secured by Class A/B apartments or income-producing industrial sites are still attractive, lenders are not presently in an ‘aggressive pursuit’ mode.

“This trend of no lender concessions on new loan originations will continue unless and until the profitability of the applicable lender is adversely affected.”

Keyvan Ghaytanchi, chief investment officer of BEB Capital and President of BEB Lending, said his company is not seeing the need for concessions in any of its loans.

“We primarily lend on industrial and multifamily assets which have remained strong,” he said. “We are seeing opportunities to originate better quality deals and are taking advantage of that.”

Lenders Compete on Price as a ‘Concession’

Jason Kirschner, managing director, finance & capital markets at Hudson Realty Capital, tells that in today’s high-interest rate environment, lenders generally don’t need to offer a lot of concessions considering it’s “a lender’s market” and “there is a lot less competition with many debt providers still hesitant to transact.

“Concessions would only be necessary on the best deals for the best trophy assets and sponsors that work well with sizing based on the new interest rate environment. For these deals, lenders will likely compete on price, as the ‘concession,’ and hold the line on the structure they need.”

Kirschner said that when it comes to “amend and extend” concessions on existing loans, “there is more to discuss.”

Paul Bergeron


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