Now in mid-stream of the pandemic, commercial lenders are looking primarily at industrial, multifamily and selected office deals. But beyond that, other asset classes are drawing lesser interest, even though in some cases lenders are willing to stretch their comfort level.
Some pandemic-driven re-purposing properties are being seen like life sciences conversion projects in nontraditional markets like Phoenix. With the talent present that supports the host of hospitals and medical related services, these projects are attracting attention of investors and lenders alike.
While life sciences are currently hot, people are cooling off of other sectors. Investors need to distinguish between short- and long-term risk in a sector. If lenders and investors agree on an asset class and a location, a deal will have plenty of financing solutions. But if something changes around an asset class, like tenant/user or customer behavior, or government regulations, the lines of agreement may shift.
There are 2 elephants in the room when considering what may cause changes, both short and long term: certainly, the continuing COVID pandemic, and more recently a new presidential administration. A current drill-down into the changes (risks) that may emanate from these 2 sources exhausts the scope of this discussion.
Not long ago senior housing was an attractive investment segment. Now, lending to a senior housing facility that has had COVID deaths could potentially provide an operating risk for the investor, and a reputational risk for the lender.
There is still conventional re-financing capital available for owners who need help, though it may be more expensive than from alternative lenders. The latter group will provide bridge financing temporarily because they believe in a certain asset class’s long-term viability.
For construction projects, it may be more difficult to find capital. Many lenders have vacated the construction arena creating a supply-demand imbalance and liquidity deficiency. Construction loan participants are harder to find, making the capital more expensive.
In addition to the economic and financial risks of a project, lenders are keeping a close eye on pronouncements coming out of Washington. Between coordination/cooperation of the Fed and the Treasury, and new regulation by executive order, lenders are trying to anticipate where and when the next axe will drop.
Meanwhile, still in the game, this just recently offered into the market. The recent Economic Aid Act now includes benefits for the small business borrower that could be advantageous. (Contact us for qualified use of proceeds from these sources.)
For new SBA 7(a) borrowers:
• SBA will pay principal and interest on the first 6 months of loans approved between 2/1/2021 and 9/30/2021, capped at $9,000 per month.
• Increased SBA Guaranty from 75% to 90%.
• Borrower’s SBA Guaranty fee waived.
For new 504 borrowers:
• SBA will pay principal and interest on the first 6 months of payments, up to a maximum $9,000 per month.
• SBA fees waived.
For feasibility discussion and capitalization assistance, contact us at the Counsel Mortgage Group.
Today’s post is written by Michael Green, Commercial Loan Originator for Counsel Mortgage Group, LLC.
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