May 26, 2020

Mastermind: What Are Top Investors Doing During This Crisis (Multiple Asset Classes)

19 minutes

This is our second mastermind call with a group of experienced investors to understand where each investor is, and how they are dealing with the Covid-19 quarantine and its consequences on their properties. We had nearly 200 years of real estate investing experience in the call.

You can read this entire episode here: https://montecarlorei.com/multiple-asset-classes-mastermind-what-are-top-investors-doing-during-this-crisis/

Mixed Use, Construction, Senior Housing, Multi-family, Short Term Rental Investor

Even though businesses are starting to reopen, that doesn’t mean that we have conquered Covid-19. From the capital perspective, for new construction loans, out of the 15 insurance companies that lend in the real estate space, 13 have stopped altogether. The largest one laid off the entire loan origination staff. They don’t plan to get back to loan originations for a while. Capital for construction is almost non-existent unless it’s with HUD. If you go with a bridge lender it’s expensive: Libor + 9 + floor on Libor rate, which is what was happening in 2008/2009.

There is not a lot of appetite for new deals unless they’re deeply distressed, it will take time for deals to start to emerge. People that are trying to do deals now look desperate and lacking in perspective of where the market is really heading. He would be patient.

Passive Investor (since 2002)

This guest invests in stabilized assets. He said that it takes time for prices to come down, and from his experience, it can take 1-2 yrs for things to hit bottom. He has been sitting on the sidelines until prices drop since late 2016 across all asset classes. He pushed his operators to sell in 17, 18, 19. He thinks that rents will be down, vacancies will go up and cap rates will go up. He is skeptical at looking for things this year, unless it’s very unique. He will be waiting for vacancy levels, market rents, and market prices and will see if cap rates will adjust. Even if the cap rate is better, we don’t know what the NOI will be in one or two years, it may be lower then.

He has been hearing that syndicators are getting about 1/3 of the normal responses for deals, another syndicator dropped his minimum investment for the first time ever. He will be on the sidelines regardless of what’s happening to the economy in the short term, but more because the election that is coming up, and how this may have an impact in real estate.

Diversified Portfolio Investor

Their multi-family properties are performing well (B-class), in April and May they performed better than anticipated. Some of the people that lost their jobs have higher income now with unemployment.

Medical office: they reached out to tenants and offered rent relief proactively, about 50% of tenants took them up on it. Their properties are in areas that are now reopening, they will reach out to the tenants in June and find out what is happening and if they need any further assistance.

NNN properties: they are performing very well. Some investors still need to place their cash somewhere. Looking forward to understanding where’s the most pain for the most extreme distressed properties. Pricing hasn’t changed yet, price expectations from sellers haven’t come down to meet price expectations from buyers yet.

Multi-family Investor and Broker

The 2 deals that he was working on during the pandemic actually ended up closing, despite the fact that banks asked for more reserves. The sellers gave concessions, about 8% concession on the price, the seller also put up escrow money and provided insurance on the income over the next 6 mos.

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By Steffany Boldrini

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