MSCI now expects apartment foreclosures to pick up in the second half of 2026, concentrated in 2021 and 2022 vintage deals. Those were financed at the top of the market on five-year loans that are now maturing into depressed values, driven by softer rents, higher expenses, and cap rates that have climbed with interest rates. The extend-and-pretend period that carried many of these deals for an extra two years is running out of road.

For buyers, lenders, and receivers, the practical question is not whether the distress is coming. It is what a takeover actually looks like once the keys change hands.

Ron Kutas, Chief Executive Officer of OneWall Communities, spends most of his acquisition pipeline on exactly these situations. Many of the assets his team is asked to evaluate now come from lenders whose loans have already matured or will mature by the end of 2026.

A maturity default is almost never a case of a healthy asset that happens to owe more than it is worth. There is usually a story of distress underneath it.

“These loan maturity defaults are never clean,” Kutas says. The more useful question, he argues, is whether the current ownership group or the lender has the capital to actually fund a turnaround. Stepping into management of a property that cannot be recapitalized is the worst outcome for everyone, because no amount of operational skill fixes a building that has no money behind it.

The condition of the asset also depends heavily on how it arrived at default. A property whose owner recently realized a refinance was not going to happen may be only a month or two behind on payables and service contracts. A property that ground through a year-long foreclosure, with an operator siphoning cash the whole way, is a different animal entirely.

Kutas describes a recognizable sequence in assets that were propped up for two extra years. First, vendors stop getting paid. Owners age their payables and promise payment that does not come, and after a few months the vendors simply stop working. Deferred maintenance then compounds quickly.

From there, the decline feeds itself. Services lapse, so paying residents leave. The residents who remain are often the ones who are not paying, and clearing them out leaves units in poor condition. There is no capital to turn those units and no leasing staff to fill them. Each problem makes the next one worse.

The instinct of many new owners is to move fast on rent. Kutas sees that as the most expensive early mistake, because the timeline is longer than buyers expect.

By his estimate, it takes roughly 90 days simply to understand the real problems, another 90 to settle on a plan, and about a year to execute it. There is no silver bullet, at OneWall or anywhere else, that compresses that.

The early operational work is more prosaic than a rent roll. OneWall starts with curb appeal, the first thing a prospect sees: landscaping, whether the pool is open and clear, whether gates and security are functional, whether signage and gutters are falling off. Interior work then proceeds unit by unit, prioritized by what the local market is actually leasing. If most leads want two-bedrooms, the team turns a handful of two-bedrooms, leases them, and only then moves to the next batch, rather than spending all the capital at once.

Much of the tension between owners and managers in a turnaround comes down to what “ready” means. An owner walks a unit and sees a quick clean and a few small fixes. Kutas points out that prospects do not rent that way. They want a unit that is genuinely move-in ready, and paying market rent on a unit that only looks half-finished is not something renters do.

For a capital-starved but fundamentally sound owner, Kutas’s advice is to open the conversation with the lender early. Lenders do not want to own the property; they want to be repaid. An owner who brings a credible plan and gives the lender a seat at the table before things break tends to find a willing partner. An owner who stays silent until it is too late has usually already lost the lender’s trust.

As more 2021 vintage loans reach maturity through the end of 2026, the distance between operators who can execute a real turnaround and buyers who simply inherit someone else’s deferred maintenance is likely to widen. The opportunity in this cycle is real, but it favors the parties who understand how long the work actually takes.

About the Expert: Ron Kutas is Chief Executive Officer of OneWall Communities, a vertically integrated multifamily owner-operator that provides 3rd party management services. He works in workforce housing and Class B multifamily operations across the Northeast and Sunbelt.

Disclosure: Individuals or companies mentioned may have a commercial relationship with KeyCrew.

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