A quiet accounting strategy is buying lenders time — but the math can’t be deferred forever.
By CoinEpigraph Editorial Desk
The phrase “extend and pretend” has re-entered financial conversation rooms — this time as a defining feature of the 2025 U.S. commercial real-estate market.
It describes a subtle, system-wide effort by banks to delay acknowledging losses on billions of maturing property loans by quietly extending their due dates instead of forcing refinancings or foreclosures.
The Game of Delay
When pandemic-era leases faded and remote work hollowed out city centers, valuations of office and retail towers fell as much as 30–40 percent.
At the same time, more than $1.8 trillion in commercial-mortgage debt is scheduled to mature by 2026 — much of it issued when interest rates hovered near 3 percent.
Refinancing today means paying 7 or 8 percent and facing new loan-to-value math that no longer fits.
Rather than book immediate write-downs, many regional and mid-tier lenders — which collectively hold around 70 percent of U.S. CRE exposure — are choosing to roll the dice on time.
They extend loan maturities 12 to 24 months and pretend the properties still justify their original valuations.
The Hidden Wealth Transfer
What looks like a “market correction” is often a rebalancing of ownership — not destruction of wealth, but its migration. When valuations fall, leverage resets, and lenders pull back, private equity steps in with liquidity and patience capital. Assets don’t vanish; they simply change hands at a lower cost basis.
This mechanism — disguised as a downturn — is where the most sophisticated funds excel. They wait for distress to surface, buy premium assets from forced sellers, recapitalize them under new debt structures, and ride the recovery cycle. It’s not chaos; it’s strategy — a wealth transfer from the over-leveraged to the well-capitalized.
That’s why every “correction” in commercial real estate, from Tokyo in the 1990s to Helsinki or Houston today, ends with the same pattern: those with dry powder become landlords of the future.
The hope is simple: that rates will ease, demand will return, and the market will re-price itself higher before auditors and regulators demand full transparency.
How It Works
- A loan matures; the borrower can’t refinance.
- The bank quietly grants an extension, often interest-only.
- The property stays marked at its previous appraised value.
- No loss is realized — and no capital call is triggered.
On paper, portfolios look stable. In practice, the system’s credit plumbing is clogging with loans that should have been re-rated months ago.
The Costs of Pretending
This policy of patience has side effects:
- Zombie properties that survive only through accounting grace.
- Distorted pricing, as true market comparables vanish.
- Hidden risk within regional-bank balance sheets if auditors eventually demand re-marking.
Economists call it liquidity illusion — the sense that stability exists because no one has been forced to test it.
Who Benefits — and Who’s Waiting
Banks gain breathing room. Developers hold onto assets they’d otherwise surrender. But private-capital giants — from Carlyle to Blackstone to Middle Eastern sovereign funds — are already preparing for the reset phase when extensions expire and assets finally reprice.
Distressed-debt desks, opportunistic REITs, and tokenized-asset startups are watching for that moment: when deferred losses convert into discounted ownership.
CoinEpigraph Take
“Extend and Pretend” is not new — it surfaced after the S&L crisis and again during 2008.
This time, it’s the institutionalized pause button on a slow-motion correction.
Whether it works depends on how long capital can tolerate suspended reality.
For investors, the signal is clear: real price discovery has merely been postponed.
When it returns, so does opportunity — for those ready to buy what others delayed facing.
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