📉 Banks didn’t fix CRE—they just moved the risk off the balance sheet. After a year of retreat, banks are back in the commercial real estate game. But don’t confuse this rebound with recovery. Here’s what’s actually happening: ✅ Troubled loans are being securitized, offloaded, or reclassified to reduce headline exposure. ✅ Some banks, like First Foundation, took mark-to-market losses when moving loans into “held for sale” status—not because they sold, but because accounting rules forced a pricing adjustment. ✅ The slickest move? Regulatory arbitrage. Private credit firms buy a troubled loan above its distressed value, then get a new loan from the bank to cover the difference. That replacement debt? Reclassified as commercial & industrial, not CRE—lowering the bank’s reported risk without actually reducing it. These moves don’t stay on bank books—they ripple into yours: Loan sales are quietly setting new pricing anchors. Your next appraisal may reflect those markdowns. Capital is back, but selective. Strong cash flow and low leverage get favorable terms. Everyone else faces higher spreads or tighter covenants. 40% of the $957B in CRE debt maturing in 2025 has already been extended once. These aren’t fresh problems—they’re recycled ones getting more expensive. Risk didn’t disappear—it migrated. It left the regulated banks and landed in private credit. If defaults rise there, the fallout hits fast—and hits values. The fundamentals didn’t improve. The accounting just got more creative. 📚 Full article via Bisnow: https://lnkd.in/eChPs62V