--- title: Your Commercial Real Estate Loan Is Maturing. What Are Your Options? description: Navigating loan maturities in commercial real estate requires careful planning. 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What Are Your Options? by [**Paulo Aguilar, CFA, CAIA**](https://blog.wealthstonegroup.com/insights/author/paulo-aguilar) on Oct 23, 2026 For many commercial real estate owners, a loan maturity creates a decision that may arrive earlier than expected. A property that made sense with its existing financing may look very different when the loan comes due and the owner has to refinance under new terms. When a commercial real estate loan matures, the owner generally has several paths to evaluate: refinance the property, contribute additional equity if required, seek an alternative source of financing, or sell. If selling becomes the best option, the decision can also create significant tax and 1031 exchange considerations, particularly for owners who have accumulated years of deferred gain through previous exchanges. The important point is to evaluate those alternatives before the maturity date dictates the decision. > A loan maturity does not automatically mean a property should be sold. But it does create a natural point to ask whether committing additional capital to the property still makes sense. ## When Refinancing Changes the Economics of the Property Commercial real estate loans can mature well before the property owner's intended investment horizon ends. When that happens, the remaining balance generally needs to be refinanced or repaid. The challenge is that the financing available today may look very different from the loan being replaced. Higher borrowing costs, changes in property income, lower valuations, or different lender requirements can reduce the amount of debt available and require the owner to contribute additional equity. The first question is whether the property can be refinanced on terms that still make economic sense. If a new lender requires the owner to contribute substantial additional capital, the analysis should go beyond whether that money is available. The owner should consider the property's expected cash flow under the new financing, future capital needs, market fundamentals, and whether committing more equity to this particular property remains an attractive use of capital. If conventional refinancing does not produce acceptable terms, another lender or shorter-term financing may provide an alternative. Bridge or private financing can create additional time to improve the property, stabilize cash flow, or pursue longer-term financing later, but generally at a higher cost. That can make sense when there is a clear path to a better outcome. Without one, it may simply postpone the same decision. If refinancing no longer makes economic sense, selling may become the better alternative. But before assuming that a lower property value means a smaller tax problem, the owner needs to understand something that is often overlooked: the property's current equity, current market value, and taxable gain are three different calculations. ## Selling May Create a Larger Tax Problem Than You Expect This distinction becomes particularly important for investors who originally acquired the property through a 1031 exchange. A 1031 exchange defers gain rather than eliminating it. The tax basis from the relinquished property generally carries into the replacement property, subject to certain adjustments. If an investor has completed multiple 1031 exchanges over many years, that deferred gain can effectively follow the investor from one property to the next. Depreciation can further reduce the property's adjusted basis over time. As a result, an investor could sell a property for less than what they paid for it and still have a taxable gain. Looking only at the property's purchase price and current sales price may therefore provide an incomplete picture of the tax consequences. Prior refinancing can complicate the situation further. Borrowing against appreciated real estate generally does not reset the property's tax basis. If an owner previously refinanced and removed equity from the property, there may be considerably less equity available at the eventual sale even though significant deferred gain remains embedded in the property. That combination can be particularly challenging. The investor may receive less cash from the sale while still facing a meaningful tax liability. > One of the surprises for long-term 1031 investors is that the property can lose value without eliminating the deferred gain that has accumulated through prior exchanges. The actual tax calculation depends on the investor's adjusted basis, depreciation history, previous exchanges, capital improvements, debt, and other factors. Investors facing this situation should work with their CPA or tax advisor to calculate the potential tax consequences before deciding whether to sell. Once that tax exposure is understood, the next question is whether the investor wants to pay the tax or continue the deferral through another 1031 exchange. If another exchange is the preferred path, the decline in the property's value can create a second challenge that is easy to overlook: the investor may now be exiting a much more highly leveraged position. ## A New 1031 Exchange May Create a Debt-Replacement Challenge Consider an owner whose property value has fallen while the outstanding loan balance has remained relatively high. From a financing perspective, the property's loan-to-value ratio may now be significantly higher than it was when the property was acquired. If that owner sells and completes another 1031 exchange, simply finding an attractive replacement property may not be enough. The investor also needs to understand the replacement value, equity, and financing structure necessary to achieve the desired level of tax deferral. This can become difficult when the investor is exiting a highly leveraged property but the replacement properties being considered use substantially less debt. Depending on the circumstances, the investor may need to contribute additional cash, recognize some taxable proceeds, or identify replacement investments with financing that better fits the exchange. The exact requirements should be modeled with the investor's tax advisor and qualified intermediary before replacement property is selected. In certain situations, higher-leverage DST offerings or zero-coupon DSTs may be useful tools. A zero-coupon DST, for example, may provide substantial allocated debt with little or no current cash distribution, which can make it useful for addressing debt-replacement needs within a broader 1031 exchange strategy. That does not mean higher leverage should be pursued simply to satisfy the exchange. The underlying real estate, sponsor, financing terms, risks, fees, hold period, and overall portfolio allocation still need to make sense. But for investors coming out of a highly leveraged property, the financing structure of the replacement investment can become just as important as the amount of equity being reinvested. ## How to Choose the Right Approach for Your Situation The analysis should happen in sequence. First, determine whether refinancing the existing property still makes economic sense. If it does not, calculate the actual tax consequences of selling based on the property's adjusted basis, depreciation history, and prior exchanges. Then determine whether paying the tax or completing another 1031 exchange better fits the investor's objectives. If another exchange is contemplated, model the equity, replacement value, and financing requirements before selecting replacement property. Working through those decisions before the maturity date gives the owner more flexibility. Waiting until the loan or sale dictates the timeline can turn what should be a planning decision into a financing and tax problem at the same time. ## Conclusion A commercial real estate loan maturity can expose issues that extend well beyond the loan itself. An owner may discover that refinancing requires more capital than they want to commit to the property. Selling may appear to solve that problem, only to reveal a significant tax liability built up through depreciation and previous 1031 exchanges. And another 1031 exchange may preserve the tax deferral while creating a new challenge around replacement value and financing. These decisions are connected. The goal should not automatically be to preserve the property or defer every dollar of tax. It should be to understand the economics and tax consequences of each alternative while there is still enough time to make an intentional decision. A structured planning discussion, coordinated with the investor's tax advisor and other professionals, can help evaluate the property's refinancing economics, adjusted basis, potential tax exposure, and 1031 exchange requirements before the loan maturity limits the available options. *General Disclosure* *This material is provided for informational and educational purposes only and is based on information from sources we believe to be reliable. However, its accuracy is not guaranteed, and it is not intended to be the sole basis for investment decisions or to meet specific investment needs.* *Wealthstone Group does not offer tax or legal advice. This content should not replace professional advice tailored to your individual situation.* *Not an offer to buy, nor a solicitation to sell securities. All investing involves risk of loss of some or all principal invested. Past performance is not indicative of future results. Speak to your finance and/or tax professional prior to investing. 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