‘Extend and Pretend’ Era Ends as Real Estate Lenders Take Losses

Commercial real estate lenders are done pretending. After years of waiting and hoping that the market would improve, they’re selling off debt on struggling US assets, sometimes writing down as much as 85% of the loan’s payoff amount.

Lenders including Goldman Sachs Group Inc. and Deutsche Bank AG, as well as smaller companies, are showing more willingness to foreclose on troubled properties or offload non-performing loans, even if means booking steep losses. It’s painful, but they say it’s necessary to chip away at more than $130 billion in distressed commercial-property debt.

The stalled Manhattan condo conversion at 335 W. 35th St.

Photographer: Victor J. Blue/Bloomberg

It signals the end of the extend-and-pretend era, ...