When Commercial Real Estate Assets Face Distress, Reliable Information Changes Decisions

What conversations at TRIGILD revealed about loan maturities, verification challenges, and the decisions facing lenders and servicers managing distressed properties.

By Troi Russell | Senior Director, Client Development, Birdsey Commercial

I have spent much of my career in credit and underwriting, evaluating risk before capital is committed. At the 2026TRIGILD Lender Conference, I had the opportunity to speak with special servicers, receivers, attorneys, and other professionals whose work often begins when the assumptions behind a loan no longer hold.

Their perspective is different from that of an originator. Rather than evaluating the potential of an asset, they are determining what can be preserved, recovered, or repositioned when performance falls short of expectations.

One theme emerged repeatedly: the value of reliable, verified information increases as uncertainty increases.

As loan maturities approach and performance challenges persist across portions of the commercial real estate market, decisions about recovery, disposition, and reinvestment require a clear understanding of an asset's actual condition.

The Maturity Wall Is Becoming an Operational Challenge

According to the Mortgage Bankers Association*, approximately $875 billion in commercial and multifamily mortgages is scheduled to mature in 2026.

For several years, extensions and modifications have helped lenders and borrowers navigate higher interest rates, changing valuations, and uneven property performance.

At TRIGILD, participants questioned how long that flexibility could continue for troubled assets. Professionals involved in special servicing and distressed asset resolution described increasing activity involving non-performing loans.

Their concerns extended beyond potential defaults. They were also focused on the people, expertise, and processes required to manage more complex assignments.

For lenders and servicers, the challenge is determining which assets remain viable, which require intervention, and which demand a different strategy altogether.

Recognizing that a property is underperforming is one thing. Having sufficient information to determine the appropriate course of action is another.

Trust and Verification Are Receiving Greater Attention

Another significant topic at TRIGILD involved confidence in the information supporting commercial real estate decisions.

In his presentation, Trust But Verify: An Emerging Confidence Crisis Within Capital Markets, Donald Sheets addressed the growing mistrust in the market, and the reality that when confidence in information declines, every business decision built on it becomes harder to make.

Artificial intelligence and digital tools have created substantial efficiencies, but they have also increased concerns about sophisticated document manipulation. Financial statements, rent rolls, and inspection reports remain important, but lenders and investors need confidence that the information accurately represents the asset.

For those of us with underwriting backgrounds, this concern extends beyond loan origination.

A loan may remain outstanding for years before problems emerge. By then, operating assumptions may have changed, deferred maintenance may have accumulated, and property performance may no longer resemble the information originally reviewed.

Documents can be altered. A flood basement cannot. Physical conditions still have to be examined, verified, and understood.

When difficult decisions must be made, current property-level information becomes especially valuable.

Where Engineering Reports and Ownership Decisions Can Diverge

We see this challenge in Birdsey's work involving non-performing loans and real estate owned (REO) multifamily assets.

In one assignment, a client was relying on third-party engineering reports to evaluate properties under consideration for disposition or additional investment.

Those reports fulfilled their intended purpose. They documented physical deficiencies and reserve requirements in a format commonly used for underwriting and lending decisions.

But the client needed answers to a different set of questions.

What would an owner actually need to spend to stabilize the property? Which projects required immediate attention? How would different repair strategies affect value, marketability, and disposition timing?

To bridge that gap, Birdsey developed an owner-focused capital expenditure assessment process that connects property conditions to business decisions.

Our inspectors evaluate conditions in the field, while estimating professionals translate those observations into a structured cost analysis. The resulting assessments include line-item capital planning, expenditure timing, and prioritization guidance.

We also distinguish between costs that can be reasonably estimated and conditions requiring further investigation. Estimates include confidence ratings, and when specialist review is necessary, we identify that limitation rather than fill the gap with assumptions.

That approach reflects the Birdsey Standard: Quality, Urgency, Accountability, Resilience, and Transparency.

Our responsibility is to provide clients with information they can use to evaluate their options, including a clear understanding of what remains uncertain.

A Distressed Multifamily Property Reveals the Value of That Distinction

One recent assignment involved a lender-owned, nearly 400-unit garden-style apartment community built during the 1970s.

The property was experiencing significant distress, with approximately one-third of the units vacant or otherwise unavailable for occupancy.

Birdsey's assessment identified roughly $9.8 million in capital needs over a 12-to-24-month period. More important than the total was understanding the conditions behind it.

The largest capital item involved roof replacement across the property. Years of deferred maintenance had contributed to active leaks and interior damage.

Inspectors also identified active plumbing failures, including a continuous hot-water leak flooding a basement area and a separate water-line failure observed through the parking lot.

Several buildings presented significant structural concerns. Deteriorated subfloors in first-floor units were severe enough to limit safe access. Rather than assigning speculative repair allowances, we excluded those unresolved structural costs from the capital totals and recommended further engineering review.

Site infrastructure added another layer of concern, including damaged fencing, ineffective access controls, and deteriorated paving.

Each condition required different expertise, different priorities, and potentially different capital decisions.

Approximately $3.9 million was associated with urgent life-safety concerns, roof replacement, and active leaks.

Other identified expenditures involved longer-term improvements that prospective buyers would likely consider when evaluating the property's condition and pricing.

Because the client was considering a sale, we also modeled a targeted disposition strategy requiring significantly less near-term capital about $1.5 million or roughly 85% less than full stabilization. That approach focused on critical repairs, selected unit turns, and additional diagnostics to clarify material risks.

The client gained a clearer basis for comparing full stabilization with a more targeted disposition approach, including the capital requirements and trade-offs associated with each.

The assignment illustrates why a single repair estimate is rarely enough to support a consequential asset decision.

The Value of Seeing More of the Asset Lifecycle

My experience at TRIGILD reinforced something I increasingly appreciate about Birdsey's position in the industry.

Our teams support clients across multiple phases of commercial real estate, including underwriting, due diligence, servicing-related reviews, asset management initiatives, and REO assignments.

The questions raised during underwriting often reappear years later in different forms when assets encounter distress.

The multifamily assessment illustrates how Birdsey Commercial and Birdsey Construction coordinate their capabilities around a specific client requirement. Field observations, estimating expertise, capital planning, and construction experience contribute to a more complete understanding of the asset and its recovery options.

That perspective also matters as lenders and servicers prepare for changing workloads. Conference participants raised concerns about the availability of experienced professionals capable of managing increasingly complex distressed-asset assignments.

Technical expertise, reliable information, and the ability to coordinate specialized resources become particularly important when decisions must be made under pressure.

Preparing for What Comes Next

I left TRIGILD with a deeper appreciation for the professionals responsible for managing distressed assets and the complexity of the decisions they face.

From an underwriting perspective, the focus is often on evaluating risks before capital is deployed. For special servicers, receivers, and asset managers, the challenge becomes determining what actions remain available when circumstances change.

Both perspectives are necessary.

Distressed assets are rarely defined by a complete lack of information. More often, the challenge is determining which information can be trusted, what remains unknown, and what actions should follow.

The conversations surrounding loan maturities, verification, fraud risk, and operational capacity reinforced the importance of combining verified field information with experienced execution.

The question I brought home from TRIGILD is one I believe more of us should be asking:

When conditions change, do we have the verified information, expertise, and capabilities necessary to make the next decision with confidence?

If you’re working through non-performing loans or REO assets and want a clearer view of what a property really needs, we’d welcome the conversation

About the Author

Troi Russell is Senior Director, Client Development, at Birdsey Commercial. Her background in credit and underwriting spans multiple commercial real estate asset classes. She works with clients to understand evolving requirements and connect them with specialized capabilities throughout the real estate lifecycle.

*Mortgage Bankers Association Article Reference: https://www.mba.org/news-and-research/newsroom/news/2026/02/09/17-percent-of-commercial-and-multifamily-mortgage-balances-to-mature-in-2026