Storage Business Owners Alliance
30665 Northwestern Highway  Suite 100
Farmington Hills, MI 48334 USA
Toll Free: (248) 254-9000
(248) 254-9000
Phone: (248) 254-9000
Fax: (248) 538-4327
Email: info@thesboa.com

COVID-19: State of the Capital Markets Second Edition

Date: 4/8/2020

 To borrow a catch phrase from Harry Carey, the legendary broadcaster for our beloved Chicago Cubs…HOLY COW!   What a difference just a few weeks can make.

First and foremost, we hope that you and your families, both personal and work, are safe and healthy.  If we all follow the advice of the health professionals that are so bravely battling this on the front lines, hopefully we can get back to a more normal work-life balance in the not-too-distant future.

After more than a decade of historically low interest rates, stability and liquidity in the commercial real estate markets, things have changed quickly. We continue to speak with lenders and clients daily and have several transactions in progress.  If you are currently in the market transacting, it is important to be patient and understand that the market is fluid.  Our current view of the market can be generally summarized as follows:

General Market Conditions

Balance Sheet Lenders

CMBS

Bridge Lenders, Debt Funds, and Private Capital

Other General Observations

Some property types will be affected more heavily than others.  Self-storage remains attractive as does multifamily, manufactured housing, and industrial.  Hospitality and retail face significant obstacles in the near term and potentially indefinitely.

Despite the likely short-term disruptions expected from the "no eviction" mandates, multifamily and manufactured housing properties will continue to benefit from the additional liquidity provided by Fannie Mae and Freddie Mac.

Equity will be affected by alternative investment opportunities that have resulted from a general market correction.  Deals that rely on “syndicated” type structures seem most vulnerable as individual investors consider alternative options.

Bridge capital that has been available to take-out construction loans on recently completed self storage properties may become scarce.  This could place pressure on maturing construction loans on projects that have been slow to lease up.

The CARES ACT

The programs and initiatives in the Coronavirus Aid, Relief, and Economic Security (CARES) Act that was just passed by Congress are intended to assist small business owners with whatever needs they have right now.

This program is extremely comprehensive and includes capital available to cover the cost of retaining employees through the Paycheck Protection Program (PPP), emergency economic injury grants, mortgage assistance via the small business debt relief program, and other resources.

For a comprehensive guide to help you better understand what is available to you and how to get started, click here.

If you need to transact, you should get into the market as soon as possible as the process is likely to be protracted given that lenders are overwhelmed by loan requests.  Borrowers need to be prepared for slower response times given general business interruption and distracted employees who are dealing with various iterations of the quarantine.

Our team at The BSC Group remains committed to supporting our clients and industry friends through all types of market conditions; after all, our company was founded in 2009 and we have deep experience navigating in choppy seas. Working with a mortgage broker can help ensure that your transaction is being prioritized by lenders that remain active, and that any perceived market risks are being mitigated upfront. If you need help with a transaction, or simply need counsel regarding the current state of the capital markets, we are standing by to assist.