You miss 100 percent of the shots you never take, and if you think it’s expensive to hire a professional to do the job, wait until you hire an amateur. FOR OVER 20 YEARS, I HAVE WORKED EXTENSIVELY WITH OWNERS AND BUYERS IN LAND, COMMERCIAL AND INVESTMENT REAL ESTATE IN PHOENIX, TUCSON AND THROUGHOUT ARIZONA. PLEASE LET ME KNOW HOW I CAN HELP YOU. Call me if you want to sell your property and need an estimated value. Phone: 480-948-5554 Prefer cell: 520-975-5207 or email me walterunger@ccim.net. – What is a CCIM. –
CLICK HERE TO VIEW ALL MY 60 MIL WORTH OF LISTINGS.
The economic fallout of the COVID-19 pandemic will have long-lasting effects on refinancing in commercial real estate.
By Gregory J. Porter | Summer 2020
While state and municipalities across the U.S. begin to reopen after COVID-19 lockdowns, commercial real estate owners with near-term loan maturities have no choice but to prepare to refinance their loans. The possibility of a technical default, exorbitant default fees, and the commencement of foreclosure proceedings should never be taken lightly. While some lenders may offer these borrowers extensions, owners need to be 100 percent prepared to refinance properties unless they have already received a loan extension or a loan modification document.
The lending landscape has drastically changed post-COVID-19. The good news is that loans collateralized by multifamily properties and manufactured home communities are currently available through government-subsidized programs like Fannie Mae, Freddie Mac, and FHA/HUD, which are similar to pre-COVID-19 loans. Even though these loans remain the best option for property owners, lenders will require new forms of documentation and offer less leverage than before the pandemic.
Owners should hire experienced mortgage professionals (ideally those with post-COVID-19 loan closing experience) to negotiate on their behalf as it relates to newly created six- or 12-month debt service, real estate tax and insurance reserves (regardless of property performance), new cash-out limitations, interest-only period reductions, and lower loan-to-value requirements. Remember, loan terms are the single most effective way for a commercial real estate owner to maximize their after-debt service cash flow and return on equity.
Owners need to be 100 percent prepared to refinance properties unless they have already received a loan extension or a loan modification document.
For non-residential commercial real estate properties, the lending options are much more limited, and the air has gotten extremely thin. As of early June, a reputable commercial mortgage-backed securities “money center bank” has re-emerged and is providing much-needed liquidity in the marketplace, though the CMBS market is not widely open for business.
Insurance companies, for the most part, have retreated on their lending activity, except for the most conservative loan terms. They are in a wait-and-see approach, which is common during periods of economic uncertainty. Some local and regional banks are still open for business, but nearly all of them require full or partial recourse, which does not work for certain borrowers or institutional sponsors. Lastly, debt funds and specialty finance companies have been the lenders that have generally been the most negatively impacted by COVID-19. The evaporation of CLO securitizations – or collateralized debt obligations, which up until COVID-19, provided many of these lenders with significant liquidity – has crippled their ability to actively lend. In addition, debt funds and specialty finance companies have been hammered with heavy margin calls by their line or repo lenders. Consequently, some debt funds and specialty finance companies are currently hoarding cash to ensure they can make future margin calls and survive.
Lenders’ appetites have also changed on an asset-by-asset basis after COVID-19. One asset type that is currently in relatively high demand by lenders is self-storage. Many lenders have recognized that this niche market sector has remained relatively unscathed by COVID-19. The basic demand generators of self-storage (including death and divorce) persist, regardless of economic turmoil, and COVID-19 has produced new temporary demand including the space needed to accommodate newly established home offices or young people who have moved back home with their parents.
Financing is available for industrial properties, but lenders are focused on determining which industrial tenants have retail exposure. Lenders are also reviewing loan proposals collateralized by office properties; however, some lenders recognize that COVID-19 may have accelerated the work-from-home model, which could decrease the long-term demand for office properties. Lenders are also particularly focused on office tenants with near-term lease expirations because they may choose not to renew, to reduce their space, or to ask the landlord for significant tenant improvement dollars to incentivize lease renewal.
Financing for retail facilities is mostly limited to essential outlets, such as pharmacies and well-performing grocer-anchored properties. Many inline tenants within unanchored or strip retail properties are either closed for business, behind on rent, or both, which creates a problem for lenders to underwrite that rental income stream. Unfortunately, no financing is available for hotels, and most hotels have not begun to operate in a manner that can satisfy a debt service payment.
The Value of Budgets
One rarely discussed documentation subject is the need to prepare your budget and operating statements for refinance. Using third-party property managers may represent the best choice for commercial real estate owners, though many third-party commercial real estate property managers create budgets that are extremely conservative to ensure property managers hit their budgets. Unfortunately, this can negatively impact a lender’s underwritten cash flow (and, consequently, the loan term) because most lenders assume an owner’s budgets reflect optimistic assumptions. Any budgeted increase in expenses will be underwritten, and a lender may pause if revenue is budgeted to remain flat or down.
Another aspect that should be considered is the difference between an operating statement compiled by your accountant for tax purposes and an operating statement prepared for lending purposes. For example, an accountant may take a capitalized item, such as a roof replacement, and enter that as an expense rather than capitalize the expense and increase your carried basis. This is so you can take deductions for this year’s taxable revenue rather than reduce capital gains if and when you sell your property in the future. While the lender wants to see all your repair and maintenance expenses, they will separately deduct a static replacement reserve from your net cash flow in addition to your R&M expenses. If capital items remain on your operating statements, the lender will be hitting you twice for capital expenditures.
Non-recurring or non-property related expenses should also be deducted from your operating statements. Again, from a tax perspective, you should include all the expenses your accountant advises you to include, but if there’s a one-time legal expense or an upfront payment that will not recur in the future, you should deduct those expenses because the lender is only looking for recurring expenses.
Proving Damages
In terms of new documentation requirements, your lender will ask for documentation or evidence to help understand whether any of your tenants have been materially economically impacted by COVID-19 and the stay-at-home orders. One document is an aged receivables report. If your property has always had a portion of its tenants pay past the due date or even over 30 days late, it’s important to show your lender a pre-COVID-19 aged receivables report and provide that perspective of your business. Also, some lenders may instinctively want to take an additional bad debt vacancy deduction for any tenants paying past their due date. Generally, there is a material difference between tenants paying after their due date (or even 30 days or later) and the percentage of tenants that ultimately do not pay.
Speak to your accountant and understand what percentage of late payers ultimately do not pay and gather evidence to present to the lender. The lender will also ask which tenants are currently open for business and whether any tenants have asked for rent relief or lease modifications. You must answer these (and all) questions honestly to avoid later triggering a “bad boy carveout” relating to fraud in the event of a future loan default.
Another way dirty laundry will be aired will be through the lender’s strict requirement in reviewing tenant estoppels. Consequently, it is important to actively manage the needs of your tenants during COVID-19 and proactively come to positive resolutions with your tenants before commencing the refinance process to increase your likelihood of a successful loan closing.
Gregory J. Porter
Founder of Summit Real Estate Advisors, a New York-based mortgage broker.
Contact him at gporter@summitreadvisors.com.
CLICK HERE TO VIEW ALL MY 60 MIL WORTH OF LISTINGS.
CLICK HERE TO VIEW ALL MY 60 MIL WORTH OF LISTINGS.
https://www.crexi.com/properties?searchBrokerId=17513
https://www.ccim.com/about-ccim/what-is-a-ccim/?gmSsoPc=1
You miss 100 percent of the shots you never take, and if you think it’s expensive to hire a professional to do the job, wait until you hire an amateur. FOR OVER 20 YEARS, I HAVE WORKED EXTENSIVELY WITH OWNERS AND BUYERS IN LAND, COMMERCIAL AND INVESTMENT REAL ESTATE IN PHOENIX, TUCSON AND THROUGHOUT ARIZONA. PLEASE LET ME KNOW HOW I CAN HELP YOU. Call me if you want to sell your property and need an estimated value. Phone: 480-948-5554 Prefer cell: 520-975-5207 or email me walterunger@ccim.net.
CLICK HERE TO VIEW ALL MY 60 MIL WORTH OF LISTINGS.
https://www.crexi.com/properties?searchBrokerId=17513
http://walter-unger.com/gold-canyon-resort-sells-for-29-4m/
_____________________________________________________________________________________
You miss 100 percent of the shots you never take, and if you think it’s expensive to hire a professional to do the job, wait until you hire an amateur. FOR OVER 20 YEARS, I HAVE WORKED EXTENSIVELY WITH OWNERS AND BUYERS IN LAND, COMMERCIAL AND INVESTMENT REAL ESTATE IN PHOENIX, TUCSON AND THROUGHOUT ARIZONA. PLEASE LET ME KNOW HOW I CAN HELP YOU. Call me if you want to sell your property and need an estimated value. Phone: 480-948-5554 Prefer cell: 520-975-5207 or email me walterunger@ccim.net. – What is a CCIM. –
CLICK HERE TO VIEW ALL MY 60 MIL WORTH OF LISTINGS.
FROM ME: Now is the time, if you are thinking of selling or purchasing your Land or Commercial Building in Phoenix, Scottsdale, Maricopa County, Pinal County, Arizona / Office / Retail / Industrial / Multi-family / please call me on my cell 520-975-5207 or e-mail me walterunger@ccim.net. Investors and Owner / Users need to really know the market today before making a move. The market has a lot of moving parts. What is going on socio-economically, what is going on demographically, what is going on with location, with competing businesses, with public policy in general — all of these things affect the quality of selling or purchasing your Commercial Properties, Commercial Investment Properties and Commercial and large tracts of Residential Land Therefore, you need a broker, a CCIM (Certified Commercial Investment Member) who is a recognized expert in the commercial and investment real estate industry and who understands your needs. I am marketing my listings on Costar, Loop-net, CCIM, CREXi, Catylist, and various other web sites. I also sold hundreds millions of dollars’ worth of Investment Properties / Owner User Properties in Retail, Office Industrial, Multi-family and Land in Arizona and therefore I am working with brokers, Investors and Developers. I am also a CCIM and through this origination ( www.ccim.com ) I have access to marketing not only in the United States, but also international. Are you ready to sell or purchase your Land or Commercial Building in Phoenix, Scottsdale, Maricopa County and Pinal County, Arizona, please call me?
Click here to find out what is a CCIM: https://en.wikipedia.org/wiki/CCIM
CLICK HERE TO VIEW ALL MY 60 MIL WORTH OF LISTINGS.
https://www.crexi.com/properties?searchBrokerId=17513
http://walter-unger.com/gold-canyon-resort-sells-for-29-4m/
Walter Unger CCIM
Associate Broker
West USA Commercial Division
7077 E MARILYN RD.
Suite 200, Building 4.
Scottsdale AZ, 85254
Phone: 480-948-5554
Cell: 520-975-5207
History of Arizona from 900 BC – 2017 -Timeline.
History of Arizona from 900 BC – 2017 -Timeline.
History of Arizona from 900 BC – 2017 -Timeline.
WHY PHOENIX? AMAZING!!! POPULATION IN 1950 – 350 K PEOPLE; “NOW 5 MIL”. – “5TH. BIGGEST CITY IN USA”
- DEMOGRAPHIC FACTS ABOUT MARICOPA COUNTY:
Walter Unger CCIM – walterunger@ccim.net – 1-520-975-5207 – http://walter-unger.com
Timeline of Phoenix, Arizona history
Facts of Arizona – year 1848 to 2013
CLICK HERE: Arizona Opportunity Zones As We Understand /maps. Interested!!! Please contact me.
Feel free to contact Walter regarding any of these stories, the current market, distressed commercial real estate opportunities and needs, your property or your Investment Needs for Comercial Properties in Phoenix, Tucson, Arizona.
Walter Unger CCIM
Associate Broker
West USA Commercial Division
7077 E MARILYN RD.
Suite 200, Building 4.
Scottsdale AZ, 85254
Phone: 480-948-5554
Cell: 520-975-5207
FOR OVER 20 YEARS, I HAVE WORKED EXTENSIVELY WITH OWNERS AND BUYERS IN LAND, COMMERCIAL AND INVESTMENT REAL ESTATE IN PHOENIX, TUCSON AND THROUGHOUT ARIZONA. PLEASE LET ME KNOW HOW I CAN HELP YOU PLEASE CALL ME
CLICK HERE TO VIEW ALL MY 60 MIL WORTH OF LISTINGS.
https://www.crexi.com/properties?searchBrokerId=17513
Also Call me if you need an estimated value of your Property.
Call me if you want to see a map with what is in the Construction Pipeline for Apartments.
Prefer cell: 520-975-5207, or email me walterunger@ccim.net. CLICK HERE TO VIEW ALL MY LISTINGS.
Check out my professional profile and connect with me on LinkedIn.
Walter Unger CCIM, CCSS, CCLS
I am a successful Commercial / Investment Real Estate Broker in Arizona now for 20 years. If you have any questions about Commercial / Investment Properties in Phoenix or Commercial / Investment Properties in Arizona, I will gladly sit down with you and share my expertise and my professional opinion with you. I am also in this to make money therefore it will be a win-win situation for all of us.
Please reply by e-mail walterunger@ccim.net or call me on my cell 520-975-5207
Reasons to Consider me for Commercial Referrals
Delivering the New Standard of Excellence in Commercial Real Estate
- Commercial Real Estate Scottsdale
- Commercial Real Estate Phoenix
- Commercial Real Estate Arizona
- Commercial Investment Properties Phoenix
- Commercial Investment Properties Scottsdale
- Commercial Investment Properties Arizona
- Land Specialist Arizona
- Arizona Land Specialist
- Land Specialist Phoenix
- Phoenix Land Specialist
- Land For Sale Phoenix
- Land for sale Arizona
- Commercial Properties For Sale Phoenix
- Commercial Real Estate Sales Phoenix
- Commercial Properties Phoenix
- Commercial Properties Arizona
- Commercial Land Specialist Phoenix
- Commercial Land Phoenix
- Multifamily land Phoenix
- Retail Land Phoenix
- Industrial Land Phoenix
- Land Commercial Phoenix
- Land Retail Phoenix
- Land Industrial Phoenix
- Land Multifamily Phoenix
- Industrial Land for sale Phoenix
- Land Industrial
- P
- Investment Real Estate
Disclaimer of Liability
The information in this blog-newsletter is for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation. Tax articles in this e-newsletter are not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding accuracy-related penalties that may be imposed on the taxpayer. The information is provided “as is,” with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.