6 weeks in - What are you seeing?

[Chris Seveney]

So we are essentially six weeks into the "quarantine". For my portfolio, April did not take a hit from borrowers who were performing. May is coming and we will see what impacts that has. From a pricing perspective, I have seen a lot more assets out on the streets for sale but the pricing on them appears to have had little adjustments. One seller I spoke with noted they were seeing a 10-15% reduction in pricing - but for me, based on some offers I have made, I have not seen much discount (which just means I am not buying if my price is not right).

I am curious on how other active note investors have seen the market so far. 

[Don Konipol]

@Chris Seveney

I’m coming from a commercial perceptive.

We are seeing many borrowers telling us how they don’t have money to pay the note payment. When we offer to allow them to pay either interest only, or half payments, we also tell them that we will extend the note term because if principal is not reduced, and the payments when resumed are not increased, then the number of payments are increased in order to repay the principal. Boy, you’d think commercial borrowers would be more sophisticated. After taking about a week to sink in that they aren’t getting “free” mortgage payment credit, over half decide that they could and will make the full payment! Seems like all this “stimulus money”, reduced rent payments, etc has got these borrowers in a mindset of what can I get from the lender. As for the borrowers who really are in trouble, because either their owner occupied business is inoperable, or their tenants aren’t paying, they have taken our offer of drastically reduced payments deferred to note end as a lifeline.

Our portfolio is currently 21 notes with average unpaid balance of just under $1.7 million. 16 are fully current, 2 are on partial payments, and 3 are in default.

I no longer hold any residential notes in the portfolio, but I do personally own 5 high end condos I rent out. All rent payments have been made on time with no lates or problems. However, one tenant asked to be let out of her lease, which I agreed to. However, after having not found the great discount deal she anticipated, she just signed a new 12 month lease ( at her request).

As for the 20,000 square foot retail center we own, as well as the 40,000 foot office warehouse property, things are not going as well. Out of 7 tenants in the retail center, only three have paid rent. The industrial property has two smaller tenants that moved out, well before lease end, and another who told us he can’t pay.