The coronavirus pandemic majorly disrupted the finance world. Especially, the banking system. Our government has been investing trillions of dollars into the economy to help bailout industries, as well as help individuals as this crisis has unfolded. This has caused untold stress on most banks, as they are the ones helping to get the individuals and their business the loans, to keep everyone afloat during the crisis.
This interruption of business as usual in the banking industry has greatly impacted how commercial real estate owners are able to get the financing they need. COVID-19 has delayed construction for developers as well, costing unforetold amounts – meaning that funding is needed more than ever.
WHAT PEOPLE ARE SAYING
Banks are trying to just take care of their existing clients but cannot even consider new deals from new potential customers because they are just too busy.
Bankers have no time to discuss new business as they are trying to help their clients with PPP/SBA and Care loans from the government. For the moment they cannot work on securing new financing for clients. Yet clients still have deals and must close on new deals or mortgages that are coming to an end.
A number of banks are currently overwhelmed by commercial clients seeking deferrals on loans because of non-payments from their tenants. Landlords are now seeking relief with some having no ability to pay.
BANKS WARN OF ‘OVERWHELMING’ DEMAND AND MESSY START FOR SMALL BUSINESS LOANS, CAUSING A DRAMATIC EFFECT ON COMMERCIAL REAL ESTATE LOANS.
This has had a “spill over effect” on all loans including real estate deals from construction to perm, purchase and re-financing.
“The response is overwhelming — it’s unlike anything I’ve ever seen in my career,” said Craig Street, the chief lending officer of United Midwest Savings Bank, a community bank in Columbus, Ohio. “We’re talking about attempting to do 10 times our normal monthly loan volume, and maybe more than that.”
Help when you need it.
Our financial experts are available to do Virtual Consultations to give free advice and counsel during these unprecedented times. While many banks are feeling the effects of COVID-19, they may not be able to take on new lending responsibilities due to the overload of PPP/SBA lending responsibilities. We have established relationships with many banks around the metro NYC area. If you are in need of a trusted advisor to look over your current situation, please know that we are here to help.
When shopping for a property, clients typically receive a marketing brochure on the property. This contains much needed information such as Tenant Income, Expense Items, NOI or net operating income. All of this must be checked and your job is to start by doing due diligence on all items posted. You may start with prior financials, checking with DOB on information as well as other brokers. A review of all the leases is needed as well.
“You Need to Get Transparency on the Property Your Purchasing…”
– Stuart Gelb, President
A) When are the current leases ending? Are the rents below or above market?
B) What are the comps in similar buildings?
C) Are the tenants paying in a timely fashion?
D) Is the location of the property strong in the area that your considering?
E) Is the net operating income consistent with the cap rates of other properties recently sold?
F) Does the property need cap ex work as this should be added to the cost of the purchase?
G) Do you have the ability to check the expenses advertised by the brokerage?
H) What is the best bank or bank type to make a deal that is customized to your needs?
I) What is your long term goal?