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Rescue Financing — Pandemic Impact on Real Estate in Queens

THE CURRENT STATE OF REAL ESTATE | QUEENS, NY

  • HARDEST HIT INDUSTRIES Restaurants, Hotels, Retail, & Offices
  • MORATORIUM ON RENT & EVICTIONS has caused revenue to drastically decline for property owners
  • NON-PAYMENTS Owners are seeking deferrals from their banks due to non-payments on rent
  • INABILITY TO COLLECT RENT has escalated the hardships to pay mortgages, real estate taxes, and utilities for many owners.
  • VILIFICATION OF LANDLORDS has given the population the emotional right or excuse not to pay their rents.
Patients wear personal protective equipment while maintaining social distancing as they wait in line for a COVID-19 test at Elmhurst Hospital Center, Wednesday, March 25, 2020, in New York. Gov. Andrew Cuomo sounded his most dire warning yet about the coronavirus pandemic Tuesday, saying the infection rate in New York is accelerating and the state could be as close as two weeks away from a crisis that sees 40,000 people in intensive care. Such a surge would overwhelm hospitals, which now have just 3,000 intensive care unit beds statewide. (AP Photo/John Minchillo)

HOW TO PREPARE & WHAT TO DO IN THE WORST CASE SCENARIO

This is a quick guide to to best prepare potential property owners for forbearance agreements, loan modifications, or mortgage agreements to avoid a potential default on a property. Follow the steps below before going to your bank to prepare for the financing process.

STEPS FOR ACTION

  1. SCHEDULE TIME WITH YOUR ACCOUNTANT to update everything you may need for your bank in regard to
    negotiating your mortgage
  2. GET YOUR PERSONAL FINANCIAL STATEMENTS (must be current – within 60 days)
  3. GET BANK & BROKER STATEMENTS (must be current – within 60 days)
  4. PREPARE FILES WITH ALL LEASES Make sure all documents are dated and signed.
  5. DOCUMENT ALL ABATEMENTS AND DEFERRALS, prepare copies signed by landlord and tenant
  6. ADDITIONAL INFORMATION Current K-1’s. articles of organization 2 yr. of personal and business tax returns
  7. GLOBAL CASH FLOW statement must be prepared for owners with more than one property (must be current – within 60 days)

It takes a significant amount of time to put together this documentation. You need all of this information in order to start the financing process at any institution. I suggest that this is done professionally with the CPA firm that the investors and owners use for tax returns to put this package together.

RESCUE FINANCING| SOLUTIONS FROM THE LIQUIDITY SOURCE

Now you’ve heard all the problems the NY real estate industry is facing — but what are the solutions? These are some real examples and how we’ve used creative financing strategies to customize a solution for our clients.

  1. If an owner has sufficient liquidity, there is a reasonable chance they can set up a reserve at the bank, to cover mortgage payments and real estate taxes for 2 years. This will help establish a forbearance agreement.
  2. If an owner or landlord has multiple properties but the DSCR is under ratio, there are some banks that will consider “asset based loans” on the stable property.
  3. There are private lenders that will also lend on the stable asset with blinders on the global cash flow.
  4. Once you get the additional cash, you can potentially make a deal with your bank on forbearance, loan modification, potential lower rates or interest only deal. In all cases you will need to show the bank a plan and how you’re going to pay them back past interest and mortgage payments over time.

FINANCING EXPERTS AVAILABLE TO ASSIST

Owners and investors should consider finding and working with a commercial finance expert, not only a trusted advisor, but someone that is a “solution provider”. Working with someone who specializes in finding access to liquidity customized to your specific needs as an investor and property owner.