ARD vs. Maturity

What’s the difference between an ARD vs. maturity of your loan?

by Ann Hambly

The simplest way to explain the difference between an ARD and a maturity of your CMBS loan is this:  An ARD is a suggested maturity date and a true maturity date is a demand, not a suggestion.

ARD stands for Anticipated Repayment Date and although it is simply a suggested date by which the CMBS loan should be paid off, there are steep consequences for not paying the loan off at this suggested maturity date.  The consequences typically include an increased interest rate for the loan as well as a provision that requires all net cash flow after debt service to be applied to principal.  So, the net -net to an owner when a loan is not paid off by the ARD is that the interest rate increases by typically 2% and the owner will not have access to any cash generated from the property other than what is required to pay necessary operating expenses.  Although these consequences are painful, the owner can keep the loan in place under these conditions until the actual maturity date; which is typically at the end of the 30-year term of the loan.

It is vitally important for an owner to know if they are facing an ARD or a true maturity of the loan.  A true maturity of the loan carries steeper penalties for not paying off, including foreclosure if a forbearance or extension is not granted.