I know this sub is mostly brokers but wanted to share my experience so far as a developer/landlord.
- Retail tenants just can't pay. Working with them. Some need 50% discount to be paid back. Some just need straight rent forgiveness. That I expected.
- Some office tenants are also struggling but less so than retail. Some have very little cashflow so we're working out deals. 50% discount for 2-3 months to be paid back in installments over the rest of 2020. Did not expect this as much.
- Weirdly not a single residential tenant has reached out yet. Our units are fairly expensive in HCOL area. I expect we have very few service sector workers. We're a bedroom community of NYC so I expect a lot of them are still getting a paycheck working from home. Will be interesting to see what happens on the 1st of the month.
- Banks have been great. Was one the phone with several today and all of them have offered 90-day forbearance. We have a very strong PG from our principal so I assume that has a lot to do with it. Some banks offering principal only forbearance. Some offering no payment whatsoever.
- On schedule to close on a $2.5 perm loan next week. Keep waiting for the call that they're pulling it but so far everything moving forward.
- In talks with a different bank to put a perm loan on a fully tenanted medical building. Term sheet will come next week but indicative rate is 2.9%!
- Above bank is ready to do a deal because principal has a very large and long standing deposit relationship. Most banks I talked to about the deal were only willing to look if it included $2M+ minimum deposits. They always always want the deposits but on this one it was going to be a requirement/contingency.
- Several banks have not adjusted their floor rate which surprised me. Probably just a matter of time.
Multifamily data point: our portfolio (over 20,000 units) has collected 92% for April, compared with 97% for March. We are hoping unemployment benefits roll out to help ease some of those delinquencies, but so far it wasn’t as bad as we thought.
Great data! Thanks for sharing.
May I ask your opinion on shopping malls - do you think some will fold/close up due the Coronavirus? Do you think that consumer habits will change to a degree where they will go to the mall less?
Mall REITs are very low priced now; I'm really curious as to how Corona will impact them long term. Some of my friends think this will be the "nail in the coffin" as consumer switch even more to online shopping. But I have a hard time believing that people won't want to go shopping again; people like to get out of the house, try on clothes, touch things, etc.
BUT... I'm sure there will be a % of people who feel vulnerable and will just go out in public less. So I would think that mall traffic would decline, I just don't know by how much.
Have any of the banks given you deferment on your spec projects?
Banks are going to tighten their underwriting on basically everything as a result of this. Hotels and other leisure based real estate will get hit hard and take a while to recover. Acquisitions and new construction will be very difficult. If you are a broker, it’s going to be hard, but it creates an opportunity to pick up clients/market share if you are able to get deals done during a time like this.
I'm a broker and finding my clients the right financing is already proving to be a little more challenging but I never give up. Had a $1.95M refi deal no go through a few days ago, already got it placed with a lower rate at a different bank!
My bank, super regional/Lpo national, is tightening up. Market risk is coming off the table, cycle tested highly liquid sponsors now mandatory. MF adc has been a stalwart, now in question. Value add office is going to be a red headed step child. Non-zero Libor floors are descending with flight of the valkyries in tow.
Retail was already tight and now shutdown. Hospitality more so. It's about to get real out here
Now that lenders have had some time to monitor the situation, we ran a survey about how they are reacting. Here are the key points: https://www.stacksource.com/blog/how-lenders-are-reacting-to-the-quarantined-market
Does this mean price drop?
My two cents from the investment side with properties in all commercial asset classes across North America.
- lending: there is very limited liquidity in the market. lenders are only lending to their clients and mostly on files that were started before this crisis. Very few lenders are looking at new properties for long term financing and the spreads are insane even from big banks.
- retail tenants who are closed can't pay rent, even some major corporate chains, we received about 50% of April rent from our grocery anchored and strip malls
- office tenants who are not using their offices are wondering why they should pay rent and trying to use the situation, but most companies are still running albeit at a slower pace and revenues aren't as strong. Some will struggle to pay rent.
- industrial tenants, it really depends on what they do. Some are calling for more space, and some can't work and are asking for rent relief.
Longer term impact:
- economy: depending how long these lockdowns last, companies (both retail and office) will go bankrupt, and the re-start of the economy will be a lot more gradual than the pundits are saying. people won't run outside and spend a bunch of money right away.
- lending: banks will tighten their underwriting even more, especially on retail and office, and higher spreads will make up for the lower interest rates. At the moment, there's not a lot of li
- retail: e-commerce will most likely increase its market share even more now that people had to do it for several months, and this will affect even the best super-regional malls. "essential services" tenants are going to be the new e-commerce resistant tenants. a lot of tenants will struggle and properties will suffer.
- office: I believe the work from home trend is overhyped with what is happening. A lot of people are realizing how difficult it is to work from home. Also the open space offices might be reimagined to limit the spread of diseases in the future which might balance out the reduced space needs if working from home because more prevalent.
lending has dried significantly. Hard to find any long term financing options even for the very best assets.
retail collections in our portfolio are at about 50% of a normal month
office and industrial are doing mostly ok for now
Single-tenant retail with strong credit or drive thru QSRs still seems healthy. Clients are more focused on investment grade and strong corporate backed leases. Currently working on 7-Eleven, Firestone, Chick Fil A, Wendy’s, Popeyes, dollar general, etc. All moving forward without major change in lender quotes (and no repricing so far for deals under app).
Hotels are non-starter with lenders. It sounds like some CMBS is still quoting but suspect this will dry up.
Multi-tenant retail with service oriented tenants (gyms, salons, sit down restaurants, etc) is going to take a long time before lenders want to quote. Many landlords (including myself) have already received tenant notices asking for rent relief or total abatement. These are national, well known tenants, so I can only imagine how bad it just be for ma and pa tenants.
Multi-family is still active. Lenders are giving best pricing here.
We are starting to get a lot of existing clients calling in about debt payment relief. Some plan to just stop paying mortgages since tenant income has dried up. Lenders will have to eat it or pray for some government intervention to help.
Source: commercial loan broker / property owner.
I second all of this. I’m seeing the same things. 🙌🏼👍🏼🙏🏼
Anyone had a deal blow up last week? We pushed up a close from this upcoming week to Friday in case seller / lender / equity got cold feet.
I’ve got a sale on life support because of this garbage.