While COVID-19 has brought life as we know it to a halt in Los Angeles, members of the multifamily industry have not been able to stop for a breath. I have personally been quite surprised by the fact that we are still closing deals at a solid clip—but I have never been happier to be busy!
In this market, our clients have seized the opportunity to take advantage of interest rates that, truly, have never been lower. Largely, these refinancing deals are status-quo: property owners are focused on cash flow and term—looking to refinance to cover costs and future capital expenditures. However, these unprecedented interest rates are certainly incentivizing this influx of activity.
How Deals are Getting Done
While we are still closing deals, some of the ways in which we are facilitating these transactions in Los Angeles as multifamily advisors have shifted as the result of COVID-19. For example, property inspections have changed immensely in the past few months, as the agencies have begun accepting virtual inspections via video chat.
If this continues and we are able to satisfy fundamental deal necessities virtually, then we might open up a world in which we could facilitate client needs in new, resourceful ways, without compromising quality, value or certainty of execution.
Despite this relative ease in adjusting deal closing processes, one challenge we are seeing is in fostering the same personal connections that traditional “handshake” deals often require. While we are not able to meet in-person, we have begun finding new ways to connect face-to-face. In fact, I just “hosted” a virtual closing dinner for one of my clients in another state.
Normally, I would fly out to visit the client and celebrate with them in person. Instead, we had food delivered to everyone’s homes and held the dinner via online video conferencing. One wonderful benefit from this new type of celebration was that we all sat down and had a meal with each other’s children and spouses—this integration of family brought us personally closer than we had gotten in a multi-year business relationship.
The Shifting Role of The Advisor
Part of this experience that makes it so unique is that there is, unfortunately, no opportunity for any in-person interaction. At the same time, I would say that the silver lining is this breaking of barriers between personal and professional life which has both bonded us in a way I’m not sure we knew was possible and shifted how we conduct business.
In the past few weeks, I have found myself giving more and more personal advice and recommendations to clients and colleagues than I ever have before—everything from virtual family games, to where to order the best nationally-deliverable Chicago-style pizza (Lou Malnati’s if you are anticipating a craving), to the most recent online retailers with handmade masks and hand sanitizer in-stock. As we all look for support, both personally and professionally, it really feels like our role has become more about anticipating and answering any need, not just ones that could facilitate business.
Working from home in general has also brought a more familial element into our work. Not only am I now able to have breakfast and lunch with my family, but I am also able to see them more during the day—a reality which I really do treasure. Remote work itself was not unfamiliar to me—a few years ago my wife, Brenda, underwent breast cancer treatments, and I was fortunate enough to be able to work from our home to help care for both her and our newborn during that time.
From this, I now find myself able to help advise both my clients and colleagues on the lessons I learned when I was working from home before—namely that communication is still key, meaning that the almost endless phone and video conversation are really quite essential to being able to collaborate effectively.
In the months and years ahead, the largest question mark that sticks out for me from a commercial real estate market perspective is collections performance. In the past, Los Angeles has been largely focused on rent control and tenant protection. In fact, the county is planning on rolling out a program in the next month or two that would provide tenants who qualify with a monthly rent stipend of $1,000 a month for the next 3 months to help with pandemic-related financial issues.
Landlords have already begun forgiving late-fees in favor of mid-to-late month rental collections in order to accommodate tenants paying as they can afford. In the long-term, however, there is uncertainty of collections performance—my hope is that this initiative should also help keep collections at a reasonable level, at least in the LA-area.
Overall, we won’t be back to normal until the world gets back to normal—but even then, normal will be different. Particularly, as companies reevaluate their true needs, and what that could look like for brick-and-mortar businesses (like offices or retailers) remains unclear. Even with this uncertainty in mind, I know we make it out of this together.
At Berkadia, we always talk about “taking the long-view,” and I know that, in this instance, the long-view will help us to emerge from under this dark cloud. We just have to keep our eyes on that finish line.
– Allan Freedman, Managing Director