Commercial real estate and triple net lease lenders are trying their utmost to grapple with the
implosion of two large banks in recent days. Both failures – SVB and Signature – had up to
50% on their loans backed by commercial real estate, in addition to holding oversized crypto
risk.
Who else is at risk and what are they doing? Small, mid-size, regional and super-regional and community banks, especially those with relatively large CRE loan portfolios are re-evaluating everything. When one door is closing, another one opens. NNN and other CRE investors are now seeing increased access to alternative capital from private equity and hedge funds so that net lease and commercial real estate business models remain as intact as possible.
Many experts believe that these failures are going to significantly affect loan underwriting,
especially for lines of credit. Add to this heady situation, the uptrend in interest rates
accompanied by an increasingly recessionary environment, and NNN investors can see where this is going. Debt for net lease and other commercial real estate investments, will definitely become harder to get and more expensive.
While the federal government’s decision to shield SVB and Signature’s triple net lease and such clients has stabilized markets a bit, this very action has been a double edged sword. The shield, i.e. the federal government’s new programs allowing banks to lend by using their loans as collateral, rather than selling assets to increase capital ratios – has reduced (and increased) market volatility!
Savvy triple net investors are beginning to realize that the current state of uncertainty is more uncertain than prior times. The Federal Reserve can judiciously act to repair economic
“dampness” by raising or reducing interest rates, and equally, it may see fit to add or reduce
liquidity in the financial system. This sort of vacillating calibration requires NNN investors to
become very deft in maneuvering their financing options and keep ready a greater variety of
alternates than ever before.
Much of the net lease investors’ attention stays focused on the Federal Reserve’s series of
meetings. There seems to be this latent hope that the Fed will largely keep a steady hand on
interest rate policy.
Robert Gamzeh and his team of experts at the Triple Net Investment Group are ready to guide your efforts to keep suitably financed your stream of NNN properties. They’ve seen enough real estate finance history to be your beacon in these uncertain economic times.
Call or write today.
