Buying Distressed Commercial Property During The Pandemic
For amateur and experienced developers alike, looking to purchase a property during the pandemic, requires buyers to beware. With the stay-at-home orders and subsequent bankruptcies of some long time brands, it’s been difficult for commercial property owners to collect rents according to Manuel Fishman of the Los Angles based Buchalter Law Firm, a real estate development, and acquisition firm.
Developers, speculators, and investors need to know the history of the property, their vision for the future of the property, and their numbers before hitting send on that email to the bank or owner of said property. Knowing which projects are stalled, have run into money issues [such as mechanics' liens] and where work has stopped, can save valuable time and money. This is where having good relationships with commercial brokers, law firms, county/city clerks in the housing division can be invaluable resources.
Knowing what to look for when taking calls from stressed owners seeking to get out of over-leveraged deals that were dependent on pre-COVID-19 “rent proformas”, could be a problem, especially since many of the sectors they are coming from are the ones hardest hit by the pandemic, i.e. hospitality, retail, and restaurants.
The post coronavirus commercial development landscape is facing many systemic changes in behavioral habits, including how we use offices, where we choose to live, and shop.
According to Fishman, “most observers think industrial, which has been buoyed by the online shopping boom, will be a clear winner as well as multifamily rental units (apartments) should hold up well, as long as rent payments don’t lag into the back half of 2021 and into 2022.”
Developers and investors with a long-term vision for their projects can do well in this new post-COVID-19 world. But it takes out of the box thinking on how to retrofit old strip malls for new outdoor shopping centers, or how to take large stand-alone box store shells and turn them into schools, entertainment centers, or apartments. Those with vision will find that there are numerous opportunities to shine!
 Buying Distressed Assets: Should You Acquire the Property or Its Debt? Published July 13, 2020, on Loopnet.com, https://www.loopnet.com/learn/buying-distressed-assets-should-you-acquire-the-property-or-its-debt/1827033556/