When he was planning for 2020,Tom Shapiro, President, founder and CIO at GTIS, expected a lot ofheadwinds. What he (and everyone else) got was a full-blownpandemic that has some people mentioning the worddepression.

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"Nobody could have predictedCOVID and a complete shutdown of the country," Shapiro says. "Butthere were a lot of clear signs of an economic slowdown, includingpricing starting to decelerate in a lot of areas. We saw a lot ofdata points that the economy was slowing down."

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While the economic situation hasdeteriorated in a way that few imagined, Shapiro thinks hispreparation has helped GTIS Partners, a New York-based real estateprivate equity firm, with about $4.5 billion in commercial andresidential assets both in the US and Brazil, stayafloat. 

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For starters, the company reducedrisks by slowing development. 

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"We were really just dialing downrisks in a lot of ways," Shapiro says. "We were more conservativeand really focused on growth markets, which we felt would endureeven in downturns. That has paid off really, really well for us inour US portfolio."

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GTIS also pushed sales as much asit could in existing projects by offering concessions or reducingprices.

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"We wanted to reduce ourinventory," Shapiro says. "We started to get lower in the capitalstack, and we started to take a lot less risk."

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So far, Shapiro says sales haveremained strong in GTIS' home building projects, even in Houston,which has become a hotspot for Coronavirusoutbreaks. 

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"Interest rates have dropped tohistorically low levels, and buyers are taking advantage of that,"Shapiro says. "The home sale market has been very good."

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The rental housing portion ofGTIS' portfolio has also held up well. "Both our single-familyrental homes, which we've been active in, as well as multifamily,have done really well," Shapiro says.

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Shapiro says the company hasn'tneeded to start giving large scale concessions in its rentalproperties. So far, occupancy is holding up.

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"We looked at the [concessions],but we never implemented them," Shapiro says. "We saw ourcollections end up being dramatically better than what weanticipated."

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While Shapiro says his revenueshave grown to this point because of a healthy home building,apartment and even office (collections are at 100 percent in hissmall portfolio) performance. His portfolio is mainly A and Bassets, which wasn't hit as hard.

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The government's support of theeconomy during COVID-19 with The CARES Act was alsoinvaluable.

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"There was so much defense playedthrough the government stimulus programs that mitigated whatprobably would have been a devastating effect throughout ours andeveryone's portfolios," Shapiro says.

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Still, Shapiro thinks moregovernment action will be needed goingforward. 

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"I think it [the level ofdistress] has a lot to do with what happens to unemploymentbenefits and where we sit with unemployment," Shapiro says. "If wedon't do anything, our unemployment numbers are going to be wellinto the double digits. What I worry about is small business. Halfof the people in America work for small businesses. If thegovernment doesn't keep providing unemployment benefits, I thinkwe're going to see a very different level of collections on ago-forward basis."

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Leslie Shaver

Les Shaver has been covering commercial and residential real estate for almost 20 years. His work has appeared in Multifamily Executive, Builder, units, Arlington Magazine in addition to GlobeSt.com and Real Estate Forum.