Propmodo Technology

By Travis Barrington · Feb. 21, 2024

Greetings!

In a world of economic uncertainty, commercial real estate asset managers can't afford to overlook the power of strong lender relationships. These strategic partnerships are key to navigating challenges, maximizing returns, and thriving even in toughest times.

This week, Propmodo Technology is exploring Asset & Investment Management, including the surprisingly difficult task of organizing real estate data and a look at how Berkadia is using AI to help its employees.

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Asset Managers Can't Weather Economic Storms Without Strong Lender Relationships

In commercial real estate, asset managers constantly strive to maximize returns while minimizing risk. Building a strong relationship with lenders is a crucial, but often overlooked, factor in achieving success. This goes way beyond just signing loan documents, the right lender can be a strategic partner, helping you navigate challenges and seize opportunities.

In a volatile market, the ability to work with lenders to secure financing quickly can be the difference between staying in business or handing over the keys. This type of collaboration was common during the pandemic, with lenders often stepping up to support struggling mall owners like Pyramid Management Group's restructuring of its loan on the Poughkeepsie Galleria. Over time, established trust can streamline loan processes and lead to faster funding. Plus, investors with a history of successful ventures may even get better interest rates, flexible loan terms, and reduced fees—all things that add to your bottom line.

Lenders also have deep industry knowledge, understanding market trends and regulations. This can be invaluable for asset managers making strategic decisions. The hospitality industry offers a clear example; during and after the pandemic, lenders worked with hotel owners to modify loans or temporarily suspend payments. Ashford Hospitality Trust refinanced two hotel loans into one, securing extended maturities and favorable interest-only terms. Lenders with enough trust to give this kind of flexibility will help us navigate through the current market headwinds.

A major lingering effect of the pandemic of course is office vacancy with office buildings accounting for 41% of distressed property value. Lenders are actively managing this situation. Many prefer to work with existing landlords, offering loan extensions or modifications in exchange for property upgrades, delaying foreclosure as long as possible.

Banks are building up reserves to prepare for potential losses on commercial loans. Larger banks are better positioned to handle this than smaller ones. Some smaller, mostly regional banks are offloading loan portfolios or even halting lending on commercial real estate altogether. Others are cautiously waiting to see if economic conditions improve. Borrowers are buying rate caps on floating rate commercial mortgages and extending loans that are coming due, hoping to refinance when the lending environment improves.

Lenders understand that real estate can be unpredictable. A lender who sees potential in your long-term success might be open to restructuring if things get tough due to changing markets or tenant issues. We saw this during the pandemic when stalled development projects and retail closures got back on track thanks to flexible lenders. And hopefully we will see it in the office sector.

Of course, building this kind of relationship takes effort on both sides. Being transparent, providing timely reporting, and having a good track record help. It's also important to find lenders who understand and share your investment goals. By focusing on communication, collaboration, and mutual trust, asset managers can leverage lender relationships to help weather these economic storms.

Bytes

🌱 Generous: Generative AI has already started to shape industries like media but now asset managers are starting to put it to use for their portfolios.

👋 Anywho: After posting disappointing earnings Anywhere Real Estate has undergone a change in leadership and appointed a Chief Technology Officer.

💰 New money: Simetric, an automation technology for CFOs, has raised $55 million in a Series B round led by Goldman Sachs.

Asset & Investment Management

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Propmodo Technology is written and edited by Franco Faraudo and Travis Barrington with contributions from readers like you and the Propmodo team.

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