This is a Perfect Time to Get Your, Commercial Real Estate, Ducks in a Row
Amidst the economic turmoil and uncertainty of recent times, many people have become increasingly concerned about the stability of their financial institutions. Some have even expressed fears that banks may fail en masse, triggering a catastrophic global financial crisis. However, such concerns are largely unfounded, and there is ample evidence to suggest that most banks are well-equipped to weather the storm.
In the wake of the FDIC being appointed as a receiver for Silicon Valley Bank's (SVB), and creating a “bridge bank”, many people have expressed concerns about the stability of banks and the potential for a widespread financial crisis. However, it is also important to remember that Silicon Valley Bank was a unique institution, serving a niche market of tech startups and other emerging businesses. Also, they did not follow the fundamentals of finance, which is to diversify.
The facts are quickly evolving and I received direct information from a close friend and CFO at a private equity firm that utilizes SVB for all of their financial needs. She recommend the following links to stick to the facts; Cadwalader Quick Take and Cadwalader Friday.
Two days after the SVB take over, New York Department of Financial Services appointed the FDIC as receiver for Signature Bank, a commercial real estate lender with a major presence in the New York City market. They also created a “bridge bank”. The bank’s demise was fueled by its heavy exposure in cryptocurrency. These two banks do not necessarily reflect the health of the broader banking industry, and there is plenty of evidence to suggest that most banks are prepared.
I cannot provide investment advice or guarantee the stability of individual banks or the financial system. However, it is true that concerns about the stability of the banking industry and potential financial crises should be balanced against evidence of the strong fundamentals of many banks, their commitment to fiduciary responsibility, and their efforts to manage risk and diversify their asset risks and funding sources.
COMMERCIAL REAL ESTATE ASSETS – GETTING YOUR DUCKS IN A ROW
Commercial real estate capital values, being pressured by a tight and limited credit market, have begun to fall. I have been working with clients to assure their “ducks are in row”, or to ensure all of the small details and fundamentals are accounted for, and in their proper positions before embarking on a new purchase.
Additionally, for those interested in commercial real estate investing, it is important to carefully analyze and plan for potential risks and challenges in the market, including;
Maturing loans,
Low DSCR,
Underwriting review, and
Market conditions.
Strategic partnerships with property management, construction services, loan workout specialists, and attorneys may also be helpful in navigating potential challenges.
It is important to carefully consider potential risks and challenges in the market and to work with knowledgeable professionals to navigate these challenges. Additionally, while concerns about the stability of individual banks or the financial system as a whole should be taken seriously, evidence suggests that many banks are well-equipped to weather potential economic storms, and it is not reasonable to assume that all banks are at risk of failing.
It is not time to halt commercial real estate investing, but rather to analyze and plan.