Commercial Refinance Loans in Los Angeles: Rate & Cash-Out Options (2025)

Los Angeles commercial property owners are staring down a convergence of refinancing pressures unlike anything in recent memory. The nationwide maturity wall is sending over $936 billion in commercial mortgages to their due dates in 2026, and LA sits at the center of some of the most acute stress. CMBS office loans originated during the 2015-2017 boom are maturing into a market where remote work has hollowed out Class B and C buildings. Measure ULA's transfer tax of up to 5.5% on property sales above $10.6 million is pushing owners to refinance rather than sell. And the January 2025 wildfires sent commercial property insurance costs spiraling upward, squeezing net operating income right when lenders demand stronger coverage.

This guide covers the full spectrum of refinance strategies for LA commercial property owners: rate-and-term refinancing, cash-out programs, CMBS defeasance, maturity extensions, and loan restructuring. For a broader overview of national programs, visit our commercial refinance loans page.

Why Is the 2025-2026 Maturity Wall Hitting Los Angeles So Hard?

The 2025-2026 maturity wall represents the largest concentration of commercial mortgage maturities in U.S. history. Nearly $1 trillion in loans matured in 2025, and another $936 billion is scheduled for 2026. Nationally, $231 billion of those maturities sit in CMBS, CLOs, or other asset-backed securities, and CMBS delinquency rates have climbed to 7.29%, nearly six times higher than traditional bank loan delinquencies.

Los Angeles faces an outsized share of this pressure for several reasons. The metro area contains one of the largest concentrations of commercial real estate in the country, with over 200 million square feet of office space alone. Loans originated in 2015-2017, when LA was experiencing a construction and investment boom fueled by tech expansion in Silicon Beach, foreign capital inflows, and historically low interest rates, are now reaching their 10-year maturity dates. Borrowers who locked in rates between 3.0% and 4.0% now face a refinancing market where rates start at 5.11% and can exceed 7.5% depending on property type and leverage.

The impact on debt service is stark. An owner with a $15 million interest-only loan originated at 3.5% paid $525,000 annually in interest. Refinancing that same balance at 6.5% pushes the annual cost to $975,000, an 86% increase in debt service that directly compresses cash flow and threatens debt service coverage ratios.

More than $21.3 billion in CMBS office loan balances are coming due through the end of 2026 nationwide, and among office loans that matured before 2026 and still carry outstanding balances, 83.7% show delinquencies and 92.7% are in special servicing. LA's office market, particularly the older Class B and C inventory along Wilshire Boulevard, in Century City, and in downtown, faces similar distress patterns.

What Are Current Commercial Refinance Rates in Los Angeles?

As of early 2026, California commercial mortgage rates start as low as 5.11%, though actual pricing depends on property type, LTV, borrower strength, and loan structure. The 10-year Treasury yield near 4.19% and the 5-year Treasury at 3.73% form the benchmark for most permanent commercial loans.

Here is how rates currently break down by loan type for Los Angeles properties:

• Agency (Fannie Mae/Freddie Mac): 5.25% to 5.85% for qualifying multifamily properties with 5-10 year terms, up to 80% LTV
• CMBS: 5.50% to 6.75% for stabilized commercial properties at 60-75% LTV with 5-10 year terms
• Bank/Credit Union: 5.75% to 7.25% for relationship borrowers, typically 5-year terms with 25-year amortization
• Life Insurance Companies: 5.20% to 5.90% for low-leverage (under 60% LTV) Class A assets in prime LA locations
• Debt Funds/Private Lenders: 7.50% to 12.00% for transitional, value-add, or higher-leverage refinancing
• HUD/FHA 223(f): 5.64% to 5.94% for multifamily refinance with up to 35-year fully amortizing terms
• SBA 504: 5.50% to 6.50% for owner-occupied commercial properties with up to 90% LTV

Estimate your monthly payments using our commercial mortgage calculator to run scenarios across different rate levels and loan terms.

What Is the Difference Between Rate-and-Term and Cash-Out Refinancing in LA?

Rate-and-term refinancing replaces your existing loan with a new one to secure a lower interest rate, extend the loan term, or convert from a floating rate to a fixed rate. The new loan amount roughly matches the outstanding balance. This strategy works best when rates have declined since origination or when a borrower needs to transition from a maturing bridge loan into permanent financing.

Cash-out refinancing allows you to borrow more than your current loan balance, extracting built-up equity as liquid capital. In Los Angeles, cash-out programs typically allow up to 75% LTV on most commercial property types. Fannie Mae and Freddie Mac multifamily programs can reach 75-80% LTV, and SBA 504 loans allow up to 20% of the appraised value for cash-out on eligible owner-occupied properties.

Cash-out refinancing in LA carries a critical strategic advantage that owners in most other markets do not enjoy. Measure ULA imposes a 4% transfer tax on property sales between $5.3 million and $10.6 million, and 5.5% on sales above $10.6 million. These rates are in addition to existing city and county transfer taxes. For an owner sitting on $5 million in equity who needs liquidity, selling the property and paying Measure ULA plus standard transfer taxes could cost $400,000 to $700,000 in taxes alone. A cash-out refinance extracts that equity without triggering any transfer tax, because refinancing is not a sale.

This dynamic is fundamentally reshaping how LA commercial property owners think about liquidity. Rather than selling underperforming assets, many owners are pulling cash out through refinancing and using the proceeds for renovations, acquisitions, or portfolio rebalancing. Use our DSCR calculator to check whether your property's income supports the higher loan amount in a cash-out scenario.

How Does Measure ULA Change the Refinance vs. Sale Decision?

Measure ULA, which took effect in April 2023, created a seismic shift in how Los Angeles property owners approach capital decisions. The tax applies to all real property transfers within the City of Los Angeles (not LA County broadly) where the consideration exceeds the adjusted thresholds. As of July 1, 2025, the thresholds are $5,300,000 and $10,600,000.

For commercial property owners, the math often favors refinancing over selling. Consider a $20 million office building that an owner wants to exit. Selling triggers approximately $1.1 million in Measure ULA tax (5.5%), plus the standard LA city transfer tax of $4.50 per $1,000 ($90,000) and LA county transfer tax of $1.10 per $1,000 ($22,000). Total transfer taxes approach $1.2 million before accounting for brokerage commissions and other closing costs.

By contrast, refinancing the same property at 70% LTV ($14 million loan) involves no transfer tax whatsoever. The borrower retains ownership, avoids Measure ULA entirely, and accesses capital through the new mortgage proceeds. Even if the owner ultimately plans to sell in 3-5 years, refinancing now and selling later may still save money if future policy changes adjust or repeal the measure.

Since Measure ULA took effect, sales of high-value parcels in the City of Los Angeles have dropped by roughly half. The tax has raised less revenue than projected, which has spurred ongoing political debate. A January 2026 proposal to modify the measure died in the City Council, meaning the current rates remain in effect for the foreseeable future. Smart owners are structuring their capital plans around this reality.

Certain nonprofit and affordable housing organizations may qualify for exemptions, and public agencies are generally exempt. However, the vast majority of commercial transactions above the thresholds will trigger the full tax. Consult a tax attorney familiar with Measure ULA before making any sale or restructuring decision.

How Are Wildfire Insurance Costs Affecting LA Commercial Refinancing?

The January 2025 Los Angeles wildfires fundamentally altered the commercial property insurance landscape in Southern California. The California FAIR Plan, the state's insurer of last resort, absorbed $4 billion in losses from the fires and has filed for a 35.8% average rate increase effective April 2026, its largest in seven years. Some policyholders face increases exceeding 300%.

For commercial property owners seeking to refinance, this creates a direct underwriting challenge. Every commercial mortgage lender requires adequate property insurance as a condition of the loan. When insurance costs spike, they reduce net operating income, which in turn compresses the debt service coverage ratio. A property that comfortably maintained a 1.35x DSCR before the insurance increase might drop to 1.15x or lower after absorbing a 40-60% premium increase, potentially disqualifying it from certain loan programs.

The FAIR Plan expanded its commercial coverage in July 2025, offering a new high-value commercial policy with up to $100 million in aggregate limits per location. This temporary program expires in 2028 as regulators work to stabilize the private insurance market. However, FAIR Plan coverage is typically more expensive and less comprehensive than standard commercial policies.

Practical steps for LA borrowers navigating insurance challenges during refinancing:

• Start insurance shopping early. Begin 6-9 months before your target closing date, not 30 days before
• Bundle properties. If you own multiple assets, portfolio insurance policies can reduce per-property costs
• Invest in mitigation. Defensible space, fire-resistant roofing, and sprinkler systems can qualify your property for lower premiums
• Consider higher deductibles. Raising your deductible from $25,000 to $100,000 can meaningfully reduce premiums while keeping lender requirements satisfied
• Document everything. Lenders want to see that you have shopped the market and secured the best available coverage

Properties in designated fire zones face the most severe insurance headwinds. If your property is in a high-fire-risk area and you are refinancing, budget 2-3x your current insurance premium in your pro forma to avoid surprises during underwriting.

How Does CMBS Defeasance and Prepayment Work for LA Properties?

CMBS loans present unique refinancing challenges because the loans are securitized and sold to bondholders. Borrowers cannot simply pay off the loan early without satisfying prepayment provisions built into the trust documents. The two primary mechanisms are defeasance and yield maintenance.

Defeasance requires the borrower to purchase a portfolio of U.S. Treasury securities that replicate the remaining scheduled payments on the CMBS loan. The Treasuries replace the real estate as collateral, freeing the property for a new loan. In the current higher-rate environment, defeasance costs have moderated because higher Treasury yields mean fewer dollars are needed to purchase the replacement securities.

Yield maintenance requires a lump-sum payment equal to the present value of the interest rate differential between the original loan coupon and the prevailing Treasury rate for the remaining term. When current market rates exceed the original coupon, yield maintenance penalties can drop to near zero, creating a favorable window for borrowers holding older, low-rate CMBS loans.

For LA owners with CMBS loans maturing in 2025-2026, the picture is mixed. Nationally, KBRA data shows nearly 90% of CMBS loans with 2025 maturity dates (by count) paid off successfully, and the payoff rate by balance improved to 74.3% from 66.6% in 2024. However, office properties tell a different story. Among office CMBS loans that matured before 2026 and still carry outstanding balances, 83.7% show delinquencies.

LA's office CMBS exposure is concentrated in downtown, along the Wilshire corridor, and in Century City. Properties with strong tenancy from entertainment, law, and technology firms are refinancing successfully. Buildings with high vacancy, short remaining lease terms, or deferred maintenance are the ones ending up in special servicing.

For a deeper understanding of bridge financing options that can provide interim capital while you resolve CMBS prepayment, read our commercial bridge loan guide.

What Is the California Commercial Foreclosure Process and How Can Refinancing Prevent It?

California allows both judicial and non-judicial foreclosure, but commercial properties almost always face non-judicial foreclosure, which is faster and less expensive for the lender. Understanding this process underscores why proactive refinancing is far preferable to waiting for default.

The non-judicial foreclosure timeline in California follows a defined sequence:

1. Notice of Default (NOD): Filed with the county recorder after the borrower misses payments. The borrower has 90 days to cure the default by paying the overdue amount.
2. Notice of Sale (NOS): If the borrower does not cure within 90 days, the lender records a Notice of Sale, which must be published in a local newspaper for three consecutive weeks and posted at the property.
3. Trustee's Sale: The property is sold at public auction, typically 21 days after the Notice of Sale is recorded.
4. Post-Sale: California does not provide a statutory right of redemption after a non-judicial trustee's sale for commercial properties.

The entire process can be completed in as few as 120 days (4 months), though in practice many commercial foreclosures take 200 days or longer due to negotiations, forbearance agreements, and legal maneuvering. Critically, AB 2424's enhanced protections for residential borrowers do not extend to commercial real estate, meaning commercial owners have fewer tools to delay or prevent foreclosure.

Refinancing before default is always the preferred outcome. Even a short-term bridge loan at a higher rate buys time to stabilize the property or find permanent financing. Once a Notice of Default is recorded, refinancing options narrow dramatically because lenders view the filing as a significant credit event.

How Does Prop 13 Reassessment Avoidance Factor Into LA Refinance Strategy?

California's Proposition 13 limits annual property tax increases to 2% of the assessed value, but reassessment to current market value is triggered by a "change in ownership." For commercial property owners considering whether to sell or refinance, this creates a powerful incentive to hold and refinance.

A property purchased in 2005 for $8 million might have a current assessed value of $11 million under Prop 13's 2% annual cap. If the property's current market value is $25 million and the owner sells, the new buyer's property tax basis resets to $25 million, increasing annual property taxes from approximately $137,500 to $312,500. The owner receives the sale proceeds but loses the Prop 13 benefit permanently.

Refinancing preserves the existing Prop 13 assessment because no change in ownership occurs. The owner keeps the favorable tax basis while accessing equity through cash-out refinancing. For long-held LA properties with significant appreciation, this tax benefit alone can justify holding and refinancing rather than selling.

There are nuances to watch. Certain entity transfers, partnership interest changes exceeding 50%, and corporate restructurings can trigger reassessment even without a traditional sale. Work with a California property tax attorney to structure any ownership changes associated with refinancing to avoid inadvertent reassessment triggers.

What Loan Restructuring and Extension Options Exist for LA Borrowers?

Not every maturing loan requires a full refinance. Loan restructuring and maturity extensions offer alternatives for borrowers who need more time or face unfavorable market conditions.

Maturity extensions allow the borrower to push the loan due date forward by 1-3 years in exchange for a fee, partial paydown, or rate adjustment. Many LA bank lenders have been granting extensions rather than forcing distressed outcomes, particularly on office and retail properties. Extension fees typically run 0.25% to 1.00% of the outstanding balance.

Loan modifications can adjust the interest rate, amortization schedule, or covenants on an existing loan. A lender might agree to reduce the rate or extend an interest-only period if the alternative is a default that forces the property into costly special servicing.

A/B note splits restructure a single loan into a senior "A" note at the original terms and a subordinate "B" note that may carry different terms, including potential forgiveness tied to property performance targets.

For CMBS loans in special servicing, the special servicer has broad authority to modify terms. LA properties in special servicing have seen extensions, rate reductions, and even principal reductions when the servicer determines that modification produces a better outcome for bondholders than foreclosure and liquidation.

Understanding DSCR loan requirements can help you assess whether your property qualifies for a standard refinance or whether restructuring is the more realistic path.

What Refinance Programs Work Best for Different LA Property Types?

The ideal refinancing program depends on property type, condition, location within the LA metro, and borrower objectives. Here is how different LA asset classes typically match to loan programs:

Multifamily (5+ units): Agency loans through Fannie Mae and Freddie Mac offer the most competitive rates and terms, with 5-30 year fixed-rate options and up to 80% LTV. LA's strong rental demand and low vacancy rates make multifamily the easiest asset class to refinance. HUD/FHA 223(f) provides 35-year terms at the lowest rates but involves a 6-12 month timeline.

Office: This is the most challenged asset class in LA. Class A properties in West LA, Century City, and Playa Vista with strong entertainment and tech tenancy can still attract competitive financing. Class B and C office along Wilshire, in downtown, and in the San Fernando Valley faces significantly tighter lending conditions, with LTVs capped at 55-65% and rates 150-200 basis points above multifamily.

Retail: Grocery-anchored centers and essential-service retail in high-traffic LA corridors (e.g., along Ventura Boulevard, in Koreatown, on Melrose) finance relatively well. Single-tenant and specialty retail face more scrutiny, with lenders focused on lease term remaining and tenant credit.

Industrial/Warehouse: LA's industrial market, particularly in the Inland Empire gateway, Vernon, Commerce, and near the ports of Long Beach and LA, commands the most favorable financing terms in the current market. Low vacancy, strong rent growth, and e-commerce-driven demand attract competitive offers from all lender types.

Mixed-Use: Common across LA's urban corridors, mixed-use properties (ground-floor retail with residential above) are financed based on dominant use. If residential income exceeds 50-60% of total revenue, agency programs may be available.

Ready to refinance your Los Angeles commercial property? Contact our team for a no-obligation quote tailored to your property type and situation.

How Should LA Borrowers Prepare for a Commercial Refinance?

Successful refinancing requires preparation that starts 12-18 months before maturity. Here is a practical timeline for Los Angeles commercial property owners:

18 months before maturity: Order a preliminary property valuation and review your current loan documents for prepayment provisions. Begin assembling updated financials, including trailing-12-month operating statements, rent rolls, and capital expenditure history. Start shopping insurance to avoid last-minute surprises on coverage costs.

12 months before maturity: Engage a commercial mortgage broker or begin direct lender outreach. For properties with strong DSCR ratios, this lead time allows you to shop multiple lenders and secure optimal terms.

6-9 months before maturity: Lock your rate, complete the application, and begin the appraisal and environmental review process. LA properties typically require Phase I environmental assessments, seismic risk evaluations (especially for older unreinforced masonry buildings), and updated ALTA surveys.

3 months before maturity: Finalize legal review, complete title work, and coordinate closing. LA County closing costs include recording fees and documentary transfer tax on the deed (though refinances avoid this), plus lender-required reserves.

LA-specific closing costs to budget for:

• Title insurance: 0.25% to 0.50% of loan amount
• Appraisal and environmental: $5,000 to $25,000 depending on property size and complexity
• Legal fees: $15,000 to $40,000 for borrower's counsel
• Lender origination fee: 0.50% to 1.50% of loan amount
• Seismic assessment: $3,000 to $10,000 for buildings in high-risk zones
• Insurance reserves: 3-12 months of premiums escrowed at closing

Budget 1.5% to 3.5% of the total loan amount for closing costs on a standard LA commercial refinance.

What Are the Most Common Mistakes in LA Commercial Refinancing?

Borrowers in the current market frequently make avoidable errors that cost them money or delay their refinance. Watch out for these common pitfalls:

1. Ignoring insurance costs until the last minute. Post-wildfire insurance pricing in LA can derail a refinance at the 11th hour. Start shopping coverage 6-9 months before closing.

2. Not modeling Measure ULA in sale vs. refinance analysis. Owners who reflexively consider selling without calculating the 4-5.5% transfer tax may be leaving significant value on the table.

3. Waiting too long to start. Beginning the refinance process 3 months before maturity limits your options and eliminates negotiating leverage. Start at 12-18 months.

4. Not shopping multiple lenders. Rate quotes on the same LA property can vary by 75-150 basis points across lenders. Get 3-5 quotes minimum.

5. Underestimating seismic risk factors. Lenders on older LA buildings may require seismic retrofitting or additional insurance riders, adding time and cost. Unreinforced masonry buildings face particular scrutiny under LA's mandatory retrofit ordinance.

6. Triggering Prop 13 reassessment. Ownership restructuring done in connection with refinancing can inadvertently trigger property tax reassessment if partnership interests shift more than 50%. Structure carefully with legal counsel.

How Can LA Property Owners Take Advantage of Current Market Conditions?

Despite the challenges, the current market offers genuine opportunities for well-positioned LA borrowers. Property owners with strong occupancy, growing NOI, and moderate leverage can access competitive rates, particularly in the multifamily and industrial sectors.

The improving CMBS market is a positive signal. With payoff rates climbing nationally and new CMBS issuance growing, liquidity is returning to segments of the market that were effectively frozen in 2023-2024. LA's industrial and multifamily assets are attracting particularly strong lender interest.

For properties facing valuation challenges, creative capital structures can bridge the gap. Preferred equity, mezzanine debt, and C-PACE (Commercial Property Assessed Clean Energy) financing can supplement a smaller first mortgage. C-PACE is especially relevant for LA properties needing energy efficiency upgrades, solar installations, or seismic improvements, as these loans are repaid through the property tax bill with terms up to 30 years.

The combination of Measure ULA avoidance, Prop 13 preservation, and access to equity through cash-out refinancing creates a uniquely compelling case for LA owners to refinance and hold rather than sell. Owners who act proactively, starting 12-18 months before maturity and shopping multiple lenders, will secure the best outcomes.

Need help navigating your Los Angeles commercial refinance? Our team works with borrowers across the entire LA metro on refinancing for every property type. Get started with a free consultation and let us match you with the right lending program.

For more information about commercial lending options in Los Angeles, visit our Los Angeles commercial loans page.

Frequently Asked Questions

What is the minimum DSCR required for a commercial refinance in Los Angeles?

Most lenders require a minimum debt service coverage ratio (DSCR) of 1.20x to 1.25x for stabilized commercial properties in Los Angeles. Agency multifamily lenders may accept 1.15x to 1.20x for strong properties in high-demand rental markets like West LA or Santa Monica. Office and retail properties face stricter requirements, often 1.30x to 1.50x, reflecting higher perceived risk. You can check your property's DSCR using our DSCR calculator.

How does Measure ULA affect my decision to sell versus refinance?

Measure ULA imposes a 4% tax on property sales between $5.3 million and $10.6 million, and 5.5% on sales above $10.6 million within the City of Los Angeles. These rates are in addition to standard city and county transfer taxes. For a $15 million property, Measure ULA alone costs $825,000 on a sale. Refinancing does not trigger any transfer tax because no sale occurs. Many LA property owners are choosing to refinance and hold specifically to avoid this tax burden.

How are wildfire insurance costs impacting commercial refinancing in LA?

Post-wildfire insurance costs are a significant factor in LA commercial refinancing. The California FAIR Plan has filed for a 35.8% average rate increase, with some policyholders facing increases above 300%. Higher insurance premiums reduce your property's net operating income, which can lower your DSCR below lender minimums. Start shopping insurance 6-9 months before your planned closing date and budget 2-3 times your current premium for properties in fire-risk zones.

Can I refinance a commercial property in a California fire zone?

Yes, but expect additional requirements. Lenders will require proof of adequate fire insurance coverage, which may only be available through the California FAIR Plan for properties in high-risk areas. The FAIR Plan's expanded commercial policy (effective July 2025) offers up to $100 million in aggregate limits per location. You may also need to demonstrate fire mitigation measures such as defensible space, fire-resistant construction, and sprinkler systems.

How long does a commercial refinance take in Los Angeles?

Timelines vary by loan type. Bank loans typically close in 45-60 days. CMBS loans require 60-90 days. Agency loans (Fannie Mae/Freddie Mac) close in 45-75 days. HUD/FHA 223(f) loans take 6-12 months. Bridge loans from private lenders can close in 2-4 weeks for urgent situations. The wildfire insurance shopping process may add 30-60 days to your overall timeline if you need to secure new coverage.

Will refinancing trigger a Prop 13 property tax reassessment?

A standard refinance does not trigger Prop 13 reassessment because no change in ownership occurs. However, certain entity restructurings done in connection with a refinance can trigger reassessment if they result in a cumulative change of more than 50% in ownership interests. This includes partnership interest transfers, LLC membership changes, and corporate restructurings. Work with a California property tax attorney to structure any ownership changes carefully. Contact us to discuss your specific situation.