Over the last three months, there has been a solidarity andunderstanding between lenders and borrowers. In many cases, lendershave taken this as an opportunity to partner with impactedborrowers, and the partnerships have helped to create stability.Lenders on a webinar hosted by George SmithPartners last week discussed the moves that they have madeto partner with borrowers, assess risk and open back up forbusiness.

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"We tried to re-underwriter everything as quickly as possible sothat we had our heads around where the potential problems were,"Rachel Hunter of Apollo Global ManagementLLC said on the webinar. "We had our head around it prettyquickly, and I think that we did the right think both as a stewardof capital and as being a partner to our sponsors. We are not goingto sit back and let our sponsors take a lot of the heat because alot of this is clearly not their fault. We wanted to work with themand try to come up with a plan to get through this unprecedentedperiod."

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Tammy Jones of Basis InvestmentGroup also assessed the firm's risk and exposure to themarket dislocation. "For me, an exogenous shock really has to makeyou rethink everything that you are doing. At basis, we quicklywent into triage-mode and we really tried to focus on where ourexposure was. As stewards of capital, we came up with our downsideanalysis so that you can see where the uncertainty will be," shesaid in the conversation.

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In addition, Jones looked at options and tools to help borrowersmake it through the market dislocation. "We were able to providerescue equity to the sponsors. We offered to everyone in our fundto basically top off reserves," she added. "We basically said: wewant you to use your capital to run the property and because youdidn't cause this, we want to figure out a way to provide somecapital. The program was well received, and it allowed ourborrowers to stay current and us to stay current. It was really acharacteristic of the 'we are in this together' idea. It gave ourborrowers relief."

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Today—more than three months into the crisis—both companies areactively funding deals. For Jones, participation has focused onequity and structured capital. "We are looking at deals across ourcapital stack. Since COVID, we have put out $100 million in equity,which is about $400 million in deal flow," she said. "The deals arein what I will call the secondary markets, which is where we focus.Our underwriting is more conservative on year one and year two, butmany of our borrowers were doing the same. We are all in theunknown and hopeful that in the next couple of years, there will besome normalcy. In terms of leverage, we do dequity, so we arelooking at structured equity positions."

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For debt, Jones has scaled back activity. "On the bridge side,lending has dialed back a bit and we want to make sure that we areallocating capital accordingly," she explained. For Hunter on theother hand, the firm is providing debt in certain asset classes."As the corporate bond market has rallied and we are back to52-week averages, we are very much open and think that real estatefits within that risk-adjusted return," she said. "I think that youare seeing a lot of life companies, including us, get back into thespace. It wasn't necessarily not wanting to invest, but it wasbeing good stewards of capital. We are following what a lot ofother life companies are doing. We are looking at multifamily,industrial and office. We are not doing hotels and retail is veryselective. Between the food groups of multifamily, industrial andoffice, we can stay very busy and put a lot of capital towork."

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Kelsi Maree Borland

Kelsi Maree Borland is a freelance journalist and magazine writer based in Los Angeles, California. For more than 5 years, she has extensively reported on the commercial real estate industry, covering major deals across all commercial asset classes, investment strategy and capital markets trends, market commentary, economic trends and new technologies disrupting and revolutionizing the industry. Her work appears daily on GlobeSt.com and regularly in Real Estate Forum Magazine. As a magazine writer, she covers lifestyle and travel trends. Her work has appeared in Angeleno, Los Angeles Magazine, Travel and Leisure and more.