12D — November 13 - December 10, 2020 — Financial Digest — Lenders Directory — M id A tlantic Real Estate Journal
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L enders D irectory
By Brenner Green, Real Property Capital, Inc. The Ripple Effect of 2020, Looking Ahead
A
A spaces, which are mainly leased in large blocks by big corporations, are ghost towns in many/most instances, but the big companies aren’t going to quit paying rent in the middle of a lease. We may not know whether or not they will renew until the lease expirations happen over the next several years. Class B and C spaces, primarily leased to smaller users who are primarily small businesses, have for the most part remained unaffected since small business owners can’t afford to just change the way they do business overnight. One or two bad quarters will sink
s we muddle along through what is now (thankfully) the home
ployment shoot up to nearly 15% and then settle down to recover by nearly half, leaving us with double the rate of pre- COVID. Lending ground to a halt in April and May, and has now opened up with lenders of all types back in the market looking to lend at historic low rates (howmany times have we said “historic low rates” in the last 20 years). But the question that lingers is where do we go from here? It feels pretty obvious that the ripple effects of all that’s hap- pened in the last six months are the equivalent of dropping a boulder in the center of a big
lake full of little paper boats. It will take a long time for that ripple to reach the shore. The hospitality industry was closer to the center of the lake, and many of those little paper boats are now on the bottom or filled with water and still slowly sinking. It will likely take years before we see which ones dry out and which ones sink. The little retail boats, many of which were already leaking for some time, are now sinking more quickly and many are headed to the bottom. Then there is the case of office space, which is pretty difficult to figure out. Class
most of these folks, so they have no choice but to maintain the status quo. If anything, this as- set class appears to be holding strong, for now anyway. And what about multifam- ily? Rents in major cities are falling precipitously in many instances, however there is a supply increase occurring based on construction that was put on the books a year ago or more. In 2019 Philadelphia issued permits for the development of over 4,500 apartment units. Meanwhile, thousands more new units are being added to the development pipeline in the midst of COVID. How or over what timeframe this will play out is really anyone’s guess. My personal guess is that there is some pain coming somewhere along the line here, probably sooner than later. So, in short, the real estate industry is going to be living with the ripples on the lake for years, long after there is a vaccine and COVID itself be- comes a distant memory, and it will probably continue to be a whipsaw environment with winners and losers appearing out of the blue. This is the un- fortunate reality that we must accept. There are many more variables at work than can be covered in the span of this article, but we are likely closer to the beginning than the end. The best thing one can do in these times is to take advan- tage of the “historic low rates” we are seeing once again so as to minimize debt service and maximize free cash flow. This nearly free money may not last forever. R. Brenner Green is a 20-year veteran in commer- cial real estate finance and President of Real Property Capital, Inc., a full-service commercial mortgage bank- ing firm based in the Phila - delphia suburbs. MAREJ IRC Section 721 are complex tax codes therefore you should consult your tax or legal professional for details regarding your situation. There are material risks associated with investing in real estate securities including illiquidity, vacancies, general market conditions and competition, lack of operating history, interest rate risks, general risks of owning/operating commercial and multifamily properties, financing risks, potential adverse tax consequences, general economic risks, develop- ment risks and long hold periods. There is a risk of loss of the entire investment principal. Past performance is not a guarantee of future results. Potential cash flow, potential returns and poten - tial appreciation are not guaranteed. Securities offered through Growth Capital Services member FINRA, SIPC Office of Supervisory Jurisdiction located at 582 Market Street, Suite 300, San Francisco, CA 94104. MAREJ continued on page 4D Three 1031 . . .
s t r e t c h o f 2020, we are c o n f r o n t e d wi th a diz- zying array of data that is difficult to make heads or tails of for even the most
Brenner Green
sophisticated economist out there. For example, we have seen the largest drop and larg- est gain in GDP in the history of the nation all in the span of two quarters. We saw unem-
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Real Property Capital is a Philadelphia based full service commercial mortgage banking firm with a regional focus and national capabilities. Our business model emphasizes client satisfaction through a high-touch, analytical approach that distinguishes us from the competition. Learn more about our distinct approach and proven track record of success at www.realpropertycapital.com. FOR MORE INFORMATION: R. Brenner Green, President 303 Harry Street • Conshohocken, PA 19428 • 610 - 456 - 9644 • bgreen@realpropertycapital.com
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