Back in May we took a look at the lending market amidst COVID-19, which at the time was marked by volatility and uncertainty. Fast-forward three months and uncertainty still reigns, as the economic impact of the virus continues.
After being inundated with the processing of PPP loans, commercial bankers are slowly getting back to underwriting new commercial real estate loans. However, underwriting requirements continue to be a moving target, making many deals difficult for property owners to get done. Reduced property values, as a result of lost rent, have created another hurdle for those seeking financing on commercial property.
On the topic of PPP loans and the economic stimulus provided by the Cares Act, we fear, while an extremely important source of aid to many Americans during challenging times, as this aid runs out in many cases it may have only delayed the inevitable where business have not been able to fully reopen or individuals are still without work, resulting in potential for increased loan defaults and foreclosures. When considering how this may impact recovery, the idea of a “K” shaped recovery has been suggested by several economists – where some industries may begin to see swift recovery (the top sloping line of the K), while others may suffer significant disruption and decline (the bottom sloping line of the K).
Another trend to monitor is the continued response from municipal and state governments. One example is the City of Seattle extending its moratorium on residential and small business evictions through the end of the year. An uncertain regulatory environment and potential lack of recourse for both property owners and lenders will continue to limit real estate lending in cities such as Seattle and Portland.
Ultimately, as we move into the seventh month of the COVID-19 pandemic, uncertainty continues to play a decided role in the real estate and lending markets. However, uncertainty also leads to opportunity. To capitalize on opportunity real estate investors may need to be willing to think outside the box when it comes to financing real estate transactions.
If you are faced with an opportunity, give Juniper Capital a call to start the conversation today. We are open and lending across all asset classes and would welcome the opportunity to assist in these uncertain times.