Welcome to WSJ Pro Bankruptcy's Daily Briefing. It's Tuesday, February 17. In today's briefing, the volume of distressed commercial real-estate debt has climbed to levels not seen since the aftermath of the financial crisis. So what are lenders doing about it?

Real-estate lenders are done with extend-and-pretend. Lenders to commercial real estate owners are reaching the breaking point, calling in tens of billions of dollars of troubled loans.

The end of many forbearance agreements around the real-estate finance market reflects how lenders have made two determinations. For one, they are betting that mortgage rates aren’t going back to the historic low levels seen during the pandemic. Lenders are also concluding that declining property values aren’t simply a response to the economic cycle, but a result of structural changes around the workplace and hybrid work that have permanently reduced demand for most office space.

In a chaotic market, investors learn to cope with surprises. Tariffs. AI innovations. Pressure on the Federal Reserve. The Venezuela incursion. A year into the second Trump administration, traders and investors say they are growing more accustomed to what is known in Wall Street parlance as “event risk”—sudden, unexpected news triggering outsize market swings.

Share your tips, suggestions and feedback with the WSJ Pro Bankruptcy team: Alexander Gladstone; Jodi Xu Klein; Akiko Matsuda; Alicia McElhaney; Andrew Scurria; Becky Yerak. 

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