Buy, Sell or Hold?
Buy, Sell or Hold?
CREF Expert Robert Withers Offers Timely Advice
April 15, 2020
During these turbulent times, many lenders are suspending activity or taking very conservative views on ongoing business. Investors are in a panic, not knowing what their best path forward is.
Robert Withers, President and CEO of M1 Capital Corp., has navigated previous financial crises from the Savings and Loan scandal to 9/11 to the Great Recession. With more than 30 years of commercial mortgage experience, Withers is completely fluent in “Bank Speak” and deeply attuned to what financial institutions are looking for. Here he offers advice for property owners struggling to weather COVID-19.
“While some financial institutions have curtailed loans, revised their parameters or removed certain lending programs from their offerings, this should be temporary,” Withers assures. “But even after this crisis is over, the concern of valuation and risk margin will linger, hindering a full recovery in the industry at least in the short term. Lenders will undoubtably pull back on the aggressive lending practices they were demonstrating before this crisis hit.”
People are understandably worried about the current financial climate and for weeks Withers has been fielding calls with clients asking if lenders are still lending, is their property still worth what they paid for it, and what happens when tenants don’t pay their rent. “They don’t know if they should contact their lenders, and if so, how should they approach them. This is especially critical when dealing with SPEC construction loans and debt workouts with current lenders if the relationship has soured.”
In these cases, commercial property owners need to have an advocate for structuring or arranging financing for their properties: Someone who represents them—not the lenders—and who understands the processes and terms required to negotiate with a commercial lender which is, Withers notes, significantly different than a standard residential real estate transaction. This advice also applies to larger investors who have “over-leveraged” their portfolios, landlords burdened with vacancies and businesses of any size who need to refinance their loans. A good advocate can counsel clients on the most important factors to elaborate on when applying for a loan, as well as what information it is best not to mention.
Ways to Take Action
For anyone thinking about acquiring a commercial property asset in this environment, Withers recommends:
- Review the credit quality of the subject property’s tenants with your real estate broker.
- Have the tenants requested a loan via the CARES Act?
- Make sure retail tenants (on commercial and mixed-use properties) have solid financials and a “make sense” business model, especially in this economic environment
- Look to secure any prior property reports including appraisals, environmental and engineering inspections that may be available.
- Have upfront , preliminary discussions with a lending professional to understandEXACTLY how financing parameters have been impacted by the current market including “turn around” time in obtaining a loan .
- Should you decide on purchasing a commercial property make sure you have the best legal representation with in-depth experience in commercial real estate transactions, and ensure they are available from contract negotiations thru closing!What questions or information should people consider before calling an advocate? For general questions about commercial real estate, Withers is starting a weekly, interactive chat session called Ask Robert where clients, customers, friends and associates can get the answers to their questions or weigh in on the Question of the Week regarding commercial mortgages and how they are affected by the circumstances caused by COVID-19. Topics include:
- Should I consider a commercial real estate investment during these uncertain time?
- Does it fit into my investment risk tolerances?
- What are the “hot” markets to consider now?
- Is the property I am considering a viable investment, long and short term?
- Will the commercial lending liquidity markets dry up?
- How will the markets deal with the pent-up demand for products and services once this emergency is over?
- How will commercial lenders deal with missed mortgage payments if that happens?
- How can a first-time investor weight the pros and cons of owning and managing a commercial piece of property as an investment at this time?
About Robert Withers, President and CEO of M1 Capital Corp
Robert is a respected real estate finance professional with a 30-year track record of providing creative solutions for commercial real estate industry clients. M1 Capital Corp has offices in White Plains, New York and New York City and specializes in acquisition, refinancing outstanding loans, restructuring current debt and delivering smart, effective solutions through a variety of loan options: commercial, hard money, SBA 504 and 7a programs, as well as SPEC Construction Financing, multifamily and commercial debt workouts. He and the other professionals at M1 Capital Corp can be reached at 866-990-9559 or info@mortgage1.com.
