As The North Star Universal, LLC, we spend a lot of time in loan stacks and lease rolls, not headlines. Still, one chart from this week caught our attention. New York commercial mortgage rates were updated again on December 1, with stabilized commercial property loans now starting near 6% and multifamily around 5.1%, depending on leverage and underwriting.(Select Commercial)
Paired with rising operating costs and uneven recovery in office demand, those numbers frame the core risk story for 2025: refinancing. For many owners, the real question is no longer Will tenants come back? It is Will my cash flow support the new debt service when my loan matures? That is where The North Star Universal, LLC focuses our commercial property risk mitigation work today.
Why Refinancing Risk Now Sits at the Center of NYC Risk Management
Refinancing risk has moved from a line item to the headline. Across U.S. commercial real estate, over a trillion dollars of loans will roll by the end of 2026. Many were underwritten in a 3–4% interest rate world. They now refinance into something very different, often with lower property valuations and more conservative lending.(PBMares)
In New York City, this plays out most dramatically in office and mixed-use assets. Office mortgages securitized into CMBS have seen delinquency rates spike to historic highs, underscoring how fragile some capital stacks have become.(Wolf Street)
At the same time, the real economy is not collapsing. Kastle data shows NYC office occupancy recently touched a post-pandemic high near 58%, while top-tier Class A+ towers see far higher visitation.(NYCEDC) That tension—improving fundamentals but higher debt costs—is exactly where we operate. The North Star Universal, LLC views refinancing risk as the bridge between asset performance and lender behavior.
Today’s Rate Environment and DSCR Expectations
In this environment, interest rate quotes are only half the story. Most commercial lenders are pressing harder on the debt service coverage ratio (DSCR). A DSCR of 1.25x is the common threshold for stabilized, low-risk assets in 2025. Lower than that, lenders demand additional equity, guarantees, or stronger sponsor track records.(Terrydale Capital)
We treat DSCR as the heartbeat of refinancing risk. If projected NOI cannot support acceptable DSCR at a realistic refinance rate, there is no sustainable exit strategy. That is true whether the asset is a Midtown office tower or a neighborhood retail strip.
Case Study 1: Midtown Office and the “Extend or Restructure” Question
Consider a hypothetical, but typical, Midtown Manhattan office tower. The original loan was sized at a 3.5% interest rate with a comfortable DSCR of 1.45x. As the 2025 maturity approaches, the new rate quote lands near 6%.
Even with leasing incentives and stable occupancy, the higher rate pushes DSCR down toward 1.15x. On paper, this is still positive cash flow. Yet it falls short of most lender underwriting standards and puts both valuation and refinancing options at risk.
In this scenario, The North Star Universal, LLC would:
- Rebuild the cash flow model under multiple rate and amortization structures.
- Test different CapEx deferral and reserve strategies for near-term stability.
- Prepare a lender narrative that emphasizes lease quality and operational risk controls.
The outcome is rarely binary. Often, we see a combination of amortization adjustments, additional equity, or partial paydowns instead of a simple “no refinance” answer.
Case Study 2: Brooklyn Mixed-Use and Cash Flow Stability
Now shift to a mixed-use building in Brooklyn with ground-floor retail and apartments above. Residential rents have grown steadily; retail tenants are local service providers with relatively sticky demand.
Here, the refinancing risk story is different. NOI growth from residential units offsets some rate pressure. However, the ground-floor leases still drive lender perception of operational risk. A single retail default could push DSCR into uncomfortable territory.
Our investment property strategy in that case focuses on:
- Upgrading tenant credit quality at renewal, even at slightly lower base rent.
- Structuring leases to align rollover with key refinancing dates.
- Building a realistic CapEx schedule for façade, mechanicals, and retail fit-outs.
By tying lease management directly to the capital stack, The North Star Universal, LLC can frame a more resilient cash flow profile for lenders, even if base rates stay elevated.
Case Study 3: Global Logistics and the Staggered Maturity Ladder
Refinancing risk is not just a New York story. Consider a European logistics portfolio held in a global fund. Many assets enjoy strong demand and low vacancy, but a cluster of loans mature within a tight two-year window.
In that context, the fund’s biggest vulnerability is concentration of maturities, not weak NOI. Our preferred approach is to build a laddered refinancing schedule:
- Advance-refinance some assets early while credit spreads are favorable.
- Extend or restructure others to avoid a single “cliff” year.
- Use disposals of non-core assets to deleverage and improve portfolio-level DSCR.
The lesson for NYC owners is clear. Refinancing risk is manageable when you view it as a portfolio design problem, not just a single-asset crisis.
Our Playbook: How We Underwrite Refinancing Risk Today
When we work with owners and investors, we treat refinancing risk as its own discipline. It sits alongside leasing, CapEx, and asset management.
Stress-Testing NOI and DSCR Under Realistic Assumptions
We start with a simple question: What DSCR can this asset truly support at market rates? Then we run scenarios:
- Base case: current NOI, refinance at today’s indicative rate and terms.
- Downside: modest NOI decline, slower lease-up, modest CapEx overshoot.
- Upside: targeted leasing wins, rent growth in line with recent comps.
Within each scenario, we map DSCR outcomes and test minimum covenants during the loan term, not just at closing. That highlights when cash flow stability is at risk and where equity infusions or amortization changes may be required.
Integrating CapEx, Valuation, and Exit Strategy
Next, we integrate CapEx with property valuation and exit strategy. Many assets face higher CapEx in the next cycle—façade repairs, sustainability upgrades, or tenant improvements required to stay competitive.
We fold these investments into both NOI forecasts and valuation assumptions. That lets us answer tougher questions, such as:
- Does the planned CapEx actually protect or enhance value under realistic cap rates?
- Is a partial sale or recapitalization a better path than a full refinance?
- Should we treat the next refinance as a bridge to a sale, or a long-term hold?
By aligning CapEx with refinancing events, The North Star Universal, LLC helps owners prioritize projects that actually support future debt service, not just aesthetics.
Looking Beyond 2025: Opportunity in a Higher-Rate World
We do not see 2025 as a purely defensive year. Yes, refinancing risk is real. But so are opportunities. As lenders ease some of the strict tightening seen in prior years, well-prepared sponsors can secure financing on quality assets that weaker borrowers cannot support.(Deloitte)
For disciplined investors, this environment rewards clear thinking about DSCR, cash flow stability, and exit strategy. It also rewards those who treat refinancing as a continuous process, not a one-time event.
From our vantage point, the refinancing wall is not a dead end. It is a sorting mechanism. Owners who proactively manage risk, communicate transparently with lenders, and structure capital with intent will pass through. Others will be forced to sell, recapitalize, or hand back keys.
The North Star Universal, LLC exists to help our clients land on the right side of that divide.
Practical Next Steps and Engagement
If you own or finance New York commercial property, this is the right moment to:
- Rebuild your refinance models at today’s rates and DSCR standards.
- Align lease rollover and CapEx timing with debt maturities.
- Revisit your portfolio-level maturity ladder and exit strategy.
We invite you to use this article as a starting point. Share it with your capital partners. Sit down with your team and ask, “What does our 2025–2027 refinancing map really look like?”
If you would like a structured review of your refinancing risk profile, we welcome the conversation. Follow The North Star Universal, LLC for ongoing insights, and reach out if you want a deeper, asset-specific review.
If you found this perspective useful, we encourage you to follow, share, or discuss these insights with your team and peers in the industry.
The North Star Universal, LLC is a risk management and advisory firm. Follow this blog for more insights into the evolving world of NYC realty and beyond @ thenorthstaruniversal.com/WP.