By Seth Wellisch, Managing Director, Real Estate at Pivot >

When markets tighten and asset values slip, few sectors feel the ripple effects as acutely as real estate. For banks, funds, and investors, portfolios that once looked stable can suddenly find themselves underwater, caught between declining valuations, shifting interest rates, and rising operating costs. In these moments, the conversation naturally turns to restructuring.

But restructuring, particularly in real estate, is not simply about triage. Done well, it’s an act of strategic recalibration—balancing financial, operational, and market realities to protect value and position assets for recovery.

Real Estate as a Core Lever in Corporate and Portfolio Restructuring – Real estate often represents one of the largest line items on a company’s balance sheet. It’s also one of the most complex to untangle. In times of distress, property holdings can quickly become both a liability and an opportunity: underutilized space drains cash, while strategic consolidation or sale can free up liquidity.

For corporate occupiers, restructuring real estate might mean renegotiating leases, subleasing excess space, or re-evaluating location strategies to match a leaner, more agile operating model. For owners and lenders, it often involves asset-level analysis and assessing where reinvestment makes sense and where recovery or disposition is the best path forward.

These are not purely financial moves; they require operational insight and an understanding of market behavior. A vacant retail property in a declining corridor poses a very different challenge from a hospitality asset in temporary distress. The key is aligning real estate decisions with a broader restructuring plan that considers capital structure, cash flow, and long-term strategic direction.

When Portfolios Go Underwater: The Lender and Investor Perspective – Banks and investors now face a new cycle of stress testing their portfolios. As refinancing costs rise and asset values recalibrate, many are discovering that once-comfortable loan-to-value ratios no longer hold. Office, hospitality, and mixed-use projects have been particularly affected, but even stable multifamily portfolios are seeing margin pressure as insurance, labor, and maintenance costs escalate.

In these scenarios, lenders often find themselves becoming de facto asset managers overseeing properties that are technically sound but financially strained. The challenge lies in separating temporary distress from structural decline. Does a property need operational turnaround, capital infusion, or a change in ownership strategy?

This is where structured real estate advisory and asset management play a crucial role. By combining market analytics with operational experience, advisors help financial stakeholders preserve value through targeted interventions – stabilizing operations, engaging tenants, managing deferred maintenance, and preparing assets for eventual recapitalization or sale.

The Strategic Layer: Real Estate Decisions That Shape Recovery – Restructuring through a real estate lens goes beyond cost-cutting. It’s about repositioning assets for long-term resilience.

• Portfolio optimization: Consolidating or divesting underperforming locations can free capital and streamline operations.
• Lease restructuring: In a volatile interest rate environment, lease renegotiations can rebalance obligations and restore cash flow flexibility.
• Operational efficiency: Modernizing building systems or improving energy performance can reduce operating costs while meeting ESG and regulatory demands.

These decisions are deeply strategic, often made under tight timelines and complex stakeholder dynamics. Yet they are also the decisions that determine whether a business or lender emerges from restructuring with strength or simply survives to face the next challenge.

Real Estate and Sustainability: A Converging Priority – Restructuring used to focus almost exclusively on financial recovery, but sustainability is now inseparable from value preservation. Environmental performance, location efficiency, and adaptability have become key measures of resilience. Properties that align with sustainability goals not only attract better tenants and financing but also hold their value more consistently in downturns.

As such, modern restructuring efforts increasingly incorporate ESG considerations whether through retrofitting older assets, optimizing energy use, or rethinking location strategies to minimize environmental impact.

A Discipline of Foresight, Not Just Fixing – The best restructuring strategies in real estate are anticipatory, not reactive. They look at where the market is going, not just where it has been—and design pathways that keep portfolios adaptable. For lenders and investors, that means acting early: identifying assets at risk before they hit default, engaging with borrowers collaboratively, and aligning real estate decisions with broader financial and operational goals.

Restructuring, at its core, is a discipline of foresight. In real estate, it’s also a discipline of stewardship—protecting assets, communities, and capital alike. When done with precision and purpose, it becomes less about crisis management and more about laying the groundwork for the next cycle of growth.