Covid-19 has brought turmoil to the commercial real estate industry, with rent payments
becoming more uncertain and unreliable, unemployment at staggering levels, unstable capital
markets, and now, destructive riots in cities across the country. These factors have resulted in
significantly reduced activity in the real estate lending markets as lenders are facing pressure
from unpaid loans while banks are demanding more cash collateral. In addition, commercial
mortgage-backed securities have plummeted and are seen as very risky due to the uncertain
future of many real estate buildings currently as investors are uncertain about whether office life
will return to normal by the end of the year.

Banks have been especially careful as lenders due to extended forbearance for many
borrowers and they are transacting in larger quantities with under-leveraged borrowers.
However, this mayhem has yielded an opportunity for private lenders to offer short-term high
rate loans. In the current climate, well-positioned borrowers who are able to find lenders are
able to take advantage of cheaper capital.

Author: ​Andrew Fu

View my profile on LinkedIn

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