M id A tlantic Real Estate Journal — Financial Digest — Creative Financing — June 12 - 25, 2020 — 11A C reative F inancing
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By George Johnson, Rittenhouse Capital Advisors Getting back to “Business as usual”
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and/or, reserves. Rates remain favorable in the low to mid-3’s for 5 and 7 year money. Agency lenders, much like in the Great Recession, have once again become (virtually) the only game in town. They’ve adapted on the fly by mitigat - ing risk with a new reserve requirement of 9-12 months of principal and interest pay- ments. Financing for student apart- ments has hit a wall as the uncertainty of a vaccine has tempered most everyone’s desire to return to “normal campus life.” On the construction and
development side of things, there are a fair amount of banks willing to consider fi - nancing new projects. The preference is for lower leverage here as well. One of the new underwriting dynam- ics we’re seeing is a trend to un- derwrite very low rent growth over a 10-year hold. This com- bined with a burn-off on your tax abatement naturallymakes a given project tougher to underwrite resulting in lower leverage. This should serve to con- strain new supply deliveries, which could be a silver lining for existing inventory, allow-
ing absorption to ratchet up with maybe even a hint of rent growth down the line. From here, expect banks to slowly dip their toes back in the water and be extremely selective as we move into the 2nd half of ‘20 and early ’21. Lenders will simply be extra cautious and underwriting will tighten up. There will be upward pressure on cap rates. The pace of additions to sup- ply across all asset types will have slowed considerably and that will allow existing proj- ects to recover and properties and markets to re-stabilize in concert with the recovery of the
economy. There has never been a real estate market dealing with so many factors all at once. So yes, getting a deal financed today is a major ac - complishment. The current blend of issues will slowly work it’s way out, concur- rent with a vaccine and the recovering economy and by late ’20, early ’21, we’ll be getting back to “business as usual”. I’m sure you are like me and can’t wait for that. George Johnson is presi- dent and CEO of Rittenhouse Capital Advisors. MAREJ
t this immediate point in time, like no other in history, simply get-
ting any real estate deal f i n a n c e d s h o u l d b e considered a major accom- p l i shment . It has been challenging to get deals
George Johnson
funded and will continue that way for the near term until there is a vaccine for CO- VID-19 and jobs lost through the pandemic come back and bring a return to single-digit unemployment. The Fed deserves a much credit for stepping up in a big way to buy bonds and equities and shoring up the capital markets. There is no question; major lessons were learned from the Great Recession. The Fed has acted swiftly and logically and by support- ing the capital markets has provided a needed sense of hope and optimism as we move into the next phase of recovery In the mean time, there has been a definite pause in the lending action due to the immediate shock caused by COVID-19. Since then, bank- ers have focused on managing loans already on the books and processing a multitude of PPP applications. Bank balance sheet lenders remainmostly on the sidelines. Those that are quoting deals are proceeding with caution and looking for some combina- tion of lower leverage, recourse G.S. Wilcox & Co. secures $17M loan ELIZABETH, NJ — G.S. Wilcox & Co. recently an- nounced that it has secured $17 million in financing for a 221,000 s/f warehouse build- ing in Elizabeth. The loan was arranged by Wesley Wilcox , vice president, and Al Ray- mond , principal, through Mu- tual of Omaha , a correspon- dent life insurance company lender of the firm. “G.S.Wilcox&Co. is pleased to secure this financing on behalf of our client. Given the current situation with Covid-19, we were thrilled to be able to close this loan especially with the increased necessity for distribution space in our market,” said Wilcox in a prepared state- ment. MAREJ
R I T T E N H O U S E C A P I T A L A D V I S O R S E x p a n d i n g C l i e n t B a s e & R o s t e r o f L e n d i n g O p t i o n s T h r o u g h C O V I D - 1 9
P r o p e r t y T y p e s I n c l u d e : M u l t i - F a m i l y , S e n i o r L i v i n g , M i x e d - U s e , R e t a i l , O f f i c e , M e d i c a l O f f i c e , H o s p i t a l i t y , S i n g l e T e n a n t N e t L e a s e
George Johnson President & CEO
Joe Hanascin VP, Lending Operations
William Patton Transaction Manager
Ken Wellar Partner
Corey Lonberger Partner
107 S. 2nd Street, 4th Floor Philadelphia, PA 19106 ph. 215.454.2852 info@rittenhousecapital.com
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