Construction Lending in a Deconstructed Era

In an article published online in Daily Business Review, Partner Matthew Kramer discusses construction lending in the COVID-19 era and beyond.

“The economic distress from the pandemic continues to cause capital-market volatility, small business failures, and stranded real estate transactions in numbers that have not been seen since the global financial crisis,” Kramer writes.

Kramer explains how different sectors and industries have been impacted to differing degrees. For example, while much of the commercial sector has struggled, warehouse/industrial, self-storage, multi-family and residential housing have maintained consistent profitability.

“There is reason to be optimistic and to be an active lender,” Kramer says. “Global interest rates are near all-time lows, as central banks around the world have responded to the pandemic by providing vast amounts of liquidity, and the Federal Reserve has indicated its intent to pursue an accommodative policy for the foreseeable future. This will positively impact commercial real estate, as low borrowing costs boost investor returns on real estate as compared to other fixed-income alternatives. As a result, while there will be some sectors that are impaired, we do not expect deep declines in asset prices across every real estate sector and think there is plenty of upside as many assets see values increase.”

Subscribers may access the full article here.