Clearly the global pandemic is, and will have, profound effects on our economy. For the foreseeable future “business as usual” is no longer a relevant term. However, for real estate owners and investors, many of the basic fundamentals remain in place although clearly adjustments will need to be made in the near term. Investments in retail, multi-tenant office buildings, land and ground-up speculative development may see the greatest adverse effect, while industrial, multi-family, life science, and medical manufacturing assets may actual see an increase in value. Lenders will be appropriately conservative, but interest rates should remain low although more restrictive covenants may be imposed including lower LTV ratios, more personal guarantees, and higher cash reserve requirements. Companies needing liquidity may be able to execute sale/leasebacks presenting investment opportunities; owners may consider providing seller financing in order to facilitate a sale, and we may see family/trust owned real estate consider selling assets with debt maturing, or require substantial capital improvement. While investment real estate may see a near term decrease in value if cash flows diminish, and closed-end funds that need to sell at a date specific may lose value, core assets anchored by fundamentally sound businesses still present solid long-term investment opportunities.
Menu