Even amid decreasing market values and the office and retail sectors' structural challenges, S&P Global Ratings believes European CMBS loans maturing in 2025 are largely well-positioned for successful refinancing. We base this on our latest analysis of the loans due for refinancing backing the European CMBS transactions that we rate. Some loan defaults are unavoidable, with a small number likely ending up in a workout situation with a principal loss, but loans maturing in 2025 show a low risk of default and a high chance of being refinanced. Although we may take some negative rating actions this year, the longer tail periods in loans structured since 2017 will help mitigate principal losses for the rated notes. In 2026, there are three loans due to refinance. We believe that these loans have a good chance of refinancing due to their asset type and moderate loan-to-value (LTV) ratios.

Several European CMBS loans failed to repay at loan maturity due to rising interest rates, which began increasing in Q1 2022. Although rates have continued to decrease slightly since Q1 2024, the changes have not been significant enough to alter the overall trend. As a result, many loans have requested for a one-year extension to their maturity dates which have been granted. This situation has left many loans either unhedged or extended with higher hedging rates. Although interest rates have decreased over the past year, some borrowers still face challenges in refinancing, as certain loans have also lost value, leading to further extensions or restructurings. We currently monitor CRE loans in European CMBS transactions across various countries and property types, with U.K. assets dominating, followed by Germany (see charts 1 and 2).

A Brighter Outlook For The CRE Sector

European CRE is still recovering from the value setbacks experienced as a result of the COVID-19 pandemic. Office leasing rates are likely to increase slightly as hybrid working is receding and new supply is limited. For the same reason, we believe prime logistics rents may increase unless the impact from U.S. tariffs severely affects global trade. Similarly, retail sales may decline if tariff inflation takes hold, but the lack of new office supply has recently helped to stabilize that sector. Tourism may also be affected if discretionary consumer spending declines, which could negatively affect hotel revenue per available room.

Interest rates have begun to decline after a prolonged period of elevation, which affected CRE loans manifold. Borrowers faced increased financing and hedging costs, which made floating-rate loans more expensive. For instance, hedge rates for loan extensions rose to over 4.0% from approximately 2.0%. Additionally, higher interest rates typically led to falling CRE values, resulting in increased leverage on loans and requiring borrowers to secure additional equity. Since 2023, we have seen a decline in CRE values, and as a consequence LTV ratios have risen for most loans maturing in 2025.

Chart 1

Chart 2

Breaking Down The Maturity Wall

Our primary focus for maturing loans is assessing whether borrowers can repay the principal upon loan maturity. We have identified two loans with extended maturity dates that have eaten into their tail periods. Specifically, Oranje (European Loan Conduit No. 32) DAC extended its loan maturity date, reducing its tail period to four from five years. Similarly, Salus (European Loan Conduit No. 33) DAC initially had a five-year tail period, which reduced to four years when the loan was extended. Recently, this loan extended both its loan and note maturity dates through a note consent solicitation, approved by noteholders to preserve a four-year workout period.

Loans initiated in 2018 and 2019 (record years for EMEA CMBS new issuance) were mainly structured for a five-year period (including loan extensions). This means that most of the loans we monitor were due for refinancing in 2023 and 2024. A large proportion of the loans maturing in 2023 had loan extension options that were exercised, pushing their maturity into 2024 (see charts 3 and 4). While most of the loans were repaid, a few were extended to 2025, 2026, and even as far out as 2028.

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Loan Maturities Overview

In our view, the loan refinance risk profile has remained stable over the past three years, with most loans exhibiting low refinance risk (see table 1). We anticipate this trend will persist as interest rates stay low.

Most loans maturing in 2023 and 2024 have been repaid. Only a small number incurred some principal losses which we expected. The number of loans maturing in 2025 is largely due to the extension options or restructuring of many loans originally due to be repaid in 2023 and 2024.

Table 1 shows our assessment of upcoming loan maturities and how refinance risk has evolved since we first published this analysis in 2023.

Table 1

Unlike in 2023, when most loans were set to mature in the eurozone, and in 2024, when most loans were due to mature in the U.K., this year's maturing loans are equally split between both the U.K. and the eurozone (see table 2)

Table 2

U.K. Loan Maturities

Our data shows 12 U.K. loans were scheduled to mature in 2024, of which eight repaid. Of these repaid loans, one had its debt partially repaid following a restructuring with the remaining balance converted into payment-in-kind (PIK) notes (SGS Finance PLC) and the Maroon loan (Elizabeth Finance 2018 DAC) was repaid through a workout that resulted in a principal loss for all noteholders. Six other loans were repaid between September 2024 and April 2025 with no principal loss.

Of the other four loans that were due to mature in 2024, three of these loans had their maturity dates extended to 2025, whilst the single loan in Salus (European Loan Conduit No. 33) DAC was restructured and now has a maturity date falling in 2028. Additionally, one loan scheduled to mature in 2025 repaid in May 2025 (the Zamek loan in Starz Mortgage Securities 202-1 DAC.

Table 3 summarizes upcoming maturities for loans backing U.K. CMBS transactions that we rate. We assess refinance risk using various qualitative and quantitative inputs, such as the current (estimated) leverage, interest coverage with and without hedging, the nature of the loan collateral, and the underlying property income's stability.

Table 3

UNITE (USAF) II PLC

The loan is secured on 20 student accommodation buildings spread across England, Scotland, and Wales. The borrower is an indirect subsidiary of UNITE U.K. Student Accommodation Fund (USAF), the U.K.'s largest specialist student accommodation fund. Its historical interest coverage ratio (ICR) of 2.72x according to the March 2025 investor report is backed up by the 97.3% occupancy of the portfolio in the academic year 2024/2025, along with positive U.K. student accommodation market demand. Moreover, the loan has a low leverage of 31.0%. We believe this loan is in a good position to refinance when it matures in June 2025.

DECO 2019-RAM DAC

The loan has been extended for one year until July 2025, with no further extension options remaining. The borrower significantly prepaid the loan and note balance on the May 2023 interest payment date (IPD), which satisfied the LTV ratio and ICR covenants. The securitized loan LTV ratio has further improved to 17.2% on the January 2025 IPD from 22.6% at the January 2026 IPD. The ICR for the loan is strong at 8.06x. We believe the loan is in a very good position to refinance.

Frost CMBS 2021-1 DAC

The loan (denominated in British pound sterling and euro) is secured on three cold-storage facilities in England, Germany, and France. The loan has been extended to November 2025, with a one-year extension option remaining. The borrowers entered into new interest rate swaps at 2.6% and 2.5%, respectively, for the Argentan and Rheine portions of the loans denominated in euros. The British pound sterling portion of the loans have a new interest rate of 4.3%. Previously, the cap for all portions of the loans (euros and British pound sterling) had a cap of 2.0%. The servicer reports a moderate LTV ratio of 60.9%, debt yield of 8.9%, and a debt service coverage ratio (DSCR) of 1.18x. We believe the special tenant needs for such properties will support the loan's second extension later in 2025.

Highways 2021 PLC

This is the first transaction backed by U.K. motorway service stations that we have rated. The loan was previously extended for one year and has been further extended until December 2025. The loan has one further extension option available for a further one year. All the properties are leased to a single tenant, Welcome Break, which reports an EBITDAR of 1.87x. Given the underlying tenant's stable performance and the EBITDAR, we believe the loan will be extended again. The December 2024 valuation of the underlying properties showed a 5.0% increase from December 2023.

Eurozone Loan Maturities

The number of loans in our European surveillance portfolio has been declining over the past few years, primarily due to repayments of eurozone loans and a limited number of loans being securitized in the Eurozone. As a result, eurozone loans by country exposure now represent only 7.1% of all outstanding European loans in EMEA CMBS transactions that we rate.

There were 10 eurozone loans due to mature in 2023 and 2024, with five of those now repaid.

The remaining five loans--Berg Finance 2021 DAC (Sirocco loan), Bruegel 2021 DAC (senior loan), Taurus 2019-4 FIN DAC (single loan), Frost CMBS 2021-1 DAC (single loan), and Taurus 2021-3 DEU DAC--were initially scheduled to mature during 2023-2024 but all these loan maturity dates were extended to 2025. The Berg Finance 2021 DAC loan, originally due in April 2025, has now been further extended to 2026.

Table 4

Bruegel 2021 DAC

The loan is set to mature in May 2026 after the borrower exercised its second one-year extension option (no further loan extension options remain). Our S&P value (as of June 2023) was 8.7% higher than at closing, underpinned by sustainable rental income generated and relatively low vacancy of the assets (predominantly office buildings) in the Netherlands. However, we are still cautious about the negative effects on office space demand due to the hybrid working trend and economic downturn. The loan benefits from a low interest burden based on a 1.5% interest rate cap, which remains unchanged upon loan extension. The transaction's LTV ratio of 57.3% is based on a new valuation from July 2024. Its debt yield of 13.7% remains healthy due to the secured commercial properties' overall good location and quality. Therefore, the loan maturity date is likely to be extended for a further year.

Taurus 2019-4 FIN DAC

The loan was extended for a further one-year extension to August 2025 which is one year beyond the loan's initial extended maturity date. The loan extension was granted, subject to certain amendments, including required hedging conditions. The smaller office property was sold in February 2024, and the only remaining asset is a shopping center in Finland, whose vacancy deteriorated to 12.0% in Q2 2024 but has now improved to 7.5% as new leases have been signed. The weighted-average lease term to break is short at 3.2 years, but the debt yield is 11.7%. The considerably higher reported leverage of 68.2% since 2024 was due to the release of almost all the trapped cash. Overall, we believe this loan's refinancing prospects have turned less promising, given the relatively high leverage post the release of the trapped cash.

Frost CMBS 2021-1 DAC

The loan (denominated in British pound sterling and euro) is secured on three cold-storage facilities in England, Germany, and France. The loan has been extended to November 2025, with a one-year extension option remaining. The borrowers entered into new interest rate swaps at 2.6% and 2.5%, respectively, for the Argentan and Rheine portions of the loans denominated in euros. The British pound sterling portion of the loans have a new interest rate of 4.3%. Previously, the cap for all portions of the loans (euros and British pound sterling) had a cap of 2.0%). The servicer reports a moderate LTV ratio of 60.9%, a debt yield of 8.9x and a DSCR of 1.18x. We believe the special tenant needs for such properties will support the loan's second extension later in 2025.

Taurus 2021-3 DEU DAC

The loan was set to mature in December 2024 with no extension options exercisable. According to the latest special notice published in December 2024, the loan has been extended for one year subject to several loan extension conditions including a cash trap, a reserve of €14.5 million, and the rental income from the hotel being placed in a rental income account, as well as all of the hotel disposal proceeds being used to prepay the loan. The loan is secured by the Squaire building complex adjoining Frankfurt Airport, comprising primarily office space and two hotels. The vacancy rate is high at 19.0% and the 7.0% debt yield continues to deteriorate and is close to the 6.7% covenant. Declining cash flows from the office space could expose this loan to refinancing risk when it reaches its extended loan maturity in December 2025.

Most Maturing CMBS Loans Face Low Refinance Risk This Year

The substantial number of loan maturities this year is due to the significant amount of new issuance loans in 2019, which were originally due to mature in 2024 and had their loan maturities extended for one year. The prudent loan underwriting in these loans, compared with older vintage CMBS loans underwritten before 2008, will ensure these loans have a good chance of refinancing once the extended loan matures due to lower interest rates and lower LTV ratios compared with previous years. Some loan defaults are likely unavoidable, and a small number of loans may even end up in a workout situation with a principal loss, but those loans maturing in 2025 are likely largely well-positioned for successful refinancing.

Most eurozone loans in our surveillance book mature by December 2025. The weighted-average LTV ratio for the eurozone loans is 56.3%, very similar to the U.K. loans at 56.2%. The highest current LTV ratio among the eurozone loans is 68.2%, attributed to a single loan in Taurus 2019-4 FIN DAC, closely followed by the Squaire loan in the Taurus 2021-3 DEU DAC transaction, with an LTV ratio of 68.1%.

In our opinion, office and retail loans will face increasing refinancing challenges due to the already strained market conditions. The hybrid working trend has affected cash flows for certain assets, with office properties experiencing about 15.0% year-over-year value decline. In contrast, loans secured on industrial/warehouse or residential properties are finding it significantly easier to refinance, thanks to a more favorable market outlook. Retail property values appear to have stabilized after several years of continuing decline.

The last time European CRE asset values witnessed a similar slump was during the global financial crisis, when the sector faced a maturity wall. However, leverage for CRE loans was significantly higher, with most loans originated at 80.0% leverage or more. This left borrowers little incentive to engage in workouts, as the loans had minimal capacity to absorb market value declines. By contrast, we believe the loans originated in 2017 and 2018 are fundamentally different, as most loans set to refinance this year are either lowly or moderately leveraged, with LTV ratios of approximately 60.0%.

Even if a loan defaults, most borrowers should be able to repay the debt during the workout process, before the notes' maturity date which typically occurs five years after the loan maturity date.

In cases where loans cannot be fully repaid at loan maturity, we anticipate these loans being further extended, potentially resulting in an increased number of loans' maturity dates entering into the tail period and shortening the time available for a workout, or the notes' legal final maturity date being extended to avoid shortening the tail period.

Structural Changes

CMBS structures now differ markedly from 2005-2007 vintages. Specifically, the pre-financial crisis transactions had very short tail periods, often leaving special servicers with only two years between loan maturity and note maturity to resolve the loan. This constrained timeframe frequently resulted in properties being sold in fire sales at substantial discounts to already depressed values. By contrast, tail periods are now more than double in length, with a minimum of five years to avoid panic selling and insufficient loan proceeds for repayment of the loans or notes. New CMBS transactions at origination can also have the option to extend the legal final note maturity date by one year if the loan extends by one year to ensure the tail period complies with the original term and does not decrease.

But What If A Loan Does Default?

When a loan defaults, it is typically transferred to the special servicer. The default gives the special servicer more powers to put pressure on the borrower and it can also often replace the property manager. Should the borrower not cooperate in an orderly workout, the special servicer can enforce on the security and take control of the property. At the height of the COVID-19 pandemic, when several loans breached performance thresholds that led to loan defaults, special servicers often agreed to plans with borrowers that included requirements for borrowers to provide more equity or give up excess cash flow in the loan, if any.

According to the servicing standard, which is documented in the servicing agreement between the issuer, the servicer, and the special servicer, the special servicer needs to act in the noteholders' best interests. However, investors have expressed that servicers tend to act more in the borrower's interest, likely due to different noteholders having contrasting interests. The interests of the junior noteholders often conflict with those of the senior noteholders and the servicer and special servicer need to satisfy both.

For example, when a loan with a 90.0% LTV ratio defaults, the junior noteholders may want a quick exit before the situation deteriorates further and they might suffer a principal loss. At the other end of the spectrum, the senior noteholders may be getting a good return and can withstand a significant decline in property value so they may favor a stabilization of the underlying assets. From our perspective, we rely on the special servicer to maximize the recovery for all noteholders. Matters of bond yield and duration are not in scope for our ratings analysis.

From a ratings perspective, our analysis assumes a 100.0% probability of default so the loan default in and of itself does not result in any rating action. Where loans have performed below our expectations, our rating actions reflect the increased risk that the issuer may suffer losses in stressed environments. We do not assess the strength of the borrower's sponsor as part of our analysis because the loans are non-recourse, and the sponsors are not obligated to support the rated bonds. Moreover, we typically do not rate these borrower sponsors.

A note on our data

We have excluded the loans in our granular pool transactions, because of their size, and the loans in the credit tenant lease transactions, because they do not feature refinance risk.

As we cease monitoring loans once they prepay, our analysis does not include the loans that would still be outstanding had they not prepaid earlier than scheduled.

Related Research

• European CMBS Monitor Q1 2025, April 30, 2025
• European Annual CMBS Monitor 2024, Feb. 4, 2025
• UNITE (USAF) II PLC U.K. CMBS Rating Affirmed Following Review, Oct. 30, 2024
• Taurus 2021-3 DEU DAC German CMBS Ratings Lowered On All Classes Of Notes, July 11, 2024
• European CMBS Can Ride The Refinance Wave, April 11, 2024
• Frost CMBS 2021-1 DAC EUR And GBP Notes Affirmed, July 13, 2023
• Bruegel 2021 DAC Dutch CMBS Ratings Affirmed, June 29, 2023
• DECO 2019-RAM DAC Class A And B U.K. CMBS Ratings Raised Following Note Prepayment, June 15, 2023
• Taurus 2019-4 FIN DAC Finnish CMBS Ratings Lowered, May 23, 2023
• Highways 2021 PLC U.K. CMBS Notes Ratings Affirmed, May 4, 2023
• European CMBS Faces Crunch Time With Loan Maturities Amid Higher Interest Rates, Feb. 23, 2023