Highlights from the Yieldstreet x iBorrow Webinar

Banner highlighting webinar on commercial real estate lending during a global slowdown

Yieldstreet Senior Director, Real Estate, Mitch Rosen was recently joined by iBorrow CEO, Brian Good, and Co-Executive Chairman, Andy Peltz for a discussion on commercial real estate lending during a global slowdown.

 

iBorrow is a nationwide lender that provides non-recourse bridge loans on all commercial real estate (CRE) property types to borrowers who are looking for a fast, flexible, and reliable financing option. Together, Brian and Andy have originated over a billion dollars in loan products through iBorrow. 

Here are some of the key insights from the panel discussion held on April 29, 2020. 

How is the current economic slowdown different from those in the past?

The panel concurred that the full impact on the global economy is still yet to be determined for the long run and that there were some immediate differences between this and previous slowdowns: 

  • The slowdown caused by this pandemic is truly global. 
  • The near-total shutdown of all economic activities is unprecedented.
  • It will be important to watch the speed at which the economy can recover after the shut-down ends.
  • Consumer behavior could be severely impacted, with travel, food, and hospitality industries all being affected by the pandemic.

“In 2008 the focus was on banks who were insolvent, but this time the impact is being seen on every industry, including real estate. We are seeing tremendous lay-offs, furloughs, and unemployment claims. The pandemic will affect how people will go about living their daily lives and there’s a real fear that this won’t go away anytime soon,” said Andy Peltz

What are the opportunities to look forward to and avoid in CRE?

The panel discussed what kinds of opportunities they would consider within the CRE space going forward, and what they would be avoiding. 

  • There will be opportunities across the board. Landlords will have to scrutinize rents on their properties based on the situation of their tenants.  
  • The hotel industry has seen the most catastrophic blow and is by far the hardest hit. There may also be long-term effects as people travel less and feel less comfortable staying in hotels.
  • The senior living space industry, such as nursing homes or assisted living facilities, has also taken a major blow as labor costs are significantly rising to combat the coronavirus. While selective proactive operators may survive, many of the mom and pop operators will not have the resources to provide a defense to the virus. Refinancing these loans will also be challenging as lenders will be concerned about resurgences.
  • Multi-family, apartment and industrial real estate markets are likely to be the most stable.

  • Rescue capital for opportunistic, distressed investments will likely flow towards the hotel and senior living markets.

“It seems like when the virus gets into senior living spaces, it wipes out the facility and destroys reputation, making it harder to recover,” said Brian Good. 

What should be the approach to loans that are having issues?

The panel discussed how they would go about approaching a loan that is having issues and how they think about payment modification, foreclosures, and forbearances.

  • It’s important to be deal-specific depending on the circumstances of the loan in question, with leverage being an important factor. 
  • In a scenario where the borrower is abusing the situation, there may be less tolerance. However, borrowers that communicate legitimate issues and are proactive borrowers are more likely to receive assistance with forbearance or slight modification. 

“It really is borrower-dependent. If the borrower really needs the capital and they’ve been a good borrower, we’re going to do everything we can to help them out,” said Andy Peltz. 

What will be the impact on the retail sector?

The panel discussed how they expect to see the economic impact of the pandemic on the retail sector play out. 

  • The future of retail will depend on the tenant mix, location, and building structure of retail properties in certain cities. 
  • Retailers will be forced to innovate. There is a push to reopen large shopping centers but even if they do reopen, there is still a question as to whether people will visit or purchase anything.
  • Retail is going to be continually reinvented. 

“You can still have a successful shopping center. I think drug and market centers are surviving if the structure is right in terms of the physical structure and location. Certain cities are overly retail-focused, with too many shopping centers. I think it should be included in real estate portfolios but they must be built the right way, with an appropriate structure and tenant base and people should want to go there,” said Brian Good,

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