FEATURE
The New Normal in Commercial Real Estate Lending By Nema Daghbandan, Esq., Geraci LLP
C
ommercial Real Estate (CRE) continues to be an asset class filled with uncertainties.
Initially,
state
lockdown
orders
decimated many CRE sectors. Unlike residential
assets,
government
financial
assistance
mostly
overlooked
commercial
assets,
leading to higher default rates and forbearances with certain assets. The SBA PPP loans were instrumental in keeping many commercial real estate owners afloat during the worst of the
retailers
the
To some extent, retail owners will
those
have to absorb some of the financial
that do not have online revenue
burdens borne by tenants; however,
current
struggling crisis,
before
especially
streams, are growing. Retail entities demonstrating resilience, and even strength, are those equipped with in-line retail anchored by essential goods including grocery, discount,
the sponsors best positioned to weather the pandemic will be those proactively collaborating with all stakeholders, and
including
investors.
lenders
Commercial
real
and pharmaceutical providers.
estate lenders are continuing to
The CARES Act offered some degree
sector
provide funding options in the retail
of support for rent payments owed by small businesses. As retailers
provided
developers
and
tenants have a viable strategy for sustained revenue.
COVID crisis. Government stimulus
shuttered operations, landlords and
has mostly stopped and CRE lenders
lenders have been actively discussing
must now adapt to making CRE
payment options such as rent relief
mortgage loans in the “new normal.�
and
leases,
The industrial sector is expected to
To get a pulse of what it was like to
and addressing lease provisions to
outperform other asset classes as it
be a CRE lender, I interviewed three
prevent tenants from vacating their
becomes more essential for supply
significant CRE mortgage lenders to
lease obligations. CBRE released
chains, e-commerce, and food and
get their take on mortgage lending in
early
that
beverage suppliers. Distribution and
times of uncertainty. Below are a few
approximately 50% to 70% of April
manufacturing facilities are less
questions and observations of the
retail rents were paid on average
prone to business interruptions than
currently state of the CRE market.
at grocery-anchored centers, 20%
other commercial real estate classes
deferrals,
estimates
modifying
indicating
What Types of CRE assets Are Still Attractive?
to 40% in non-grocery anchored
because these entities are typically
Is Retail Truly Dead?
centers, and only 10% to 20% in
less crowded and are located in
As anticipated, the challenges for
malls and outlet centers.
suburban locations.
30
