KPMG article: Debt workouts in commercial real estate

Tax ramifications to borrowers looking to refinance properties

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January 22, 2025

The Federal Deposit Insurance Corporation (FDIC) along with other federal agencies in June 2023 issued a policy statement on commercial real estate loan accommodations to provide guidance on commercial real estate loan workouts and short-term accommodations, suggesting that banks “work prudently and constructively with creditworthy borrowers during times of financial stress.”* Current commercial real estate interest rates are generally higher than rates on expiring debt, and for many segments of the market, values are lower because of a combination of higher vacancy and cap rate expansion.

Read a January 2025 article** prepared by KPMG LLP that examines the tax ramifications to borrowers who are looking to refinance their properties hoping for a soft landing by restructuring existing debt or in some cases just walking away.

*Treasury Office of the Comptroller of the Currency, Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation, and National Credit Union Administration, “Policy Statement on Prudent Commercial Real Estate Loan Accommodations and Workouts,” 88 F.R. 43, 115 (July 26, 2023).

** This article originally appeared in Tax Notes Federal (January 13, 2025) and is provided with permission.

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