Unlike many other lenders, ACRES Capital, which carries out new builds, renovations, adaptive reuse, and rentals, researches virtually every real estate asset class.
But ACRES CEO Mark Fogel, who also recently took on the role The president, CEO, and board member of Exantas Capital Corp., a bridging lender, isn't necessarily migrating to homes, which is usually one of the safer bets in a recession.
"We have the feeling that the multi-family side is a bit overdone, but we are lending loans in this arena," says Fogel.
That does not mean that Fogel is leaving the multi-family origin. But it will likely make up a smaller percentage of its origins.
"We look at all asset classes very carefully," says Fogel. “In all honesty, I think that less and less of this will be focused on the ACRES side as we move forward. On the Exantas side, we'll continue to focus on multiple families, but maybe it will drop to 60 or 65 percent [of their loans]. There will always be a heavy weight on residential real estate. "
Instead, Fogel sees many opportunities in the hard-hit hospitality and retail sectors to support good sponsors who know their markets well and who buy real estate at the right price. "That [with a good sponsor] enables us to attract someone with a well-structured loan," says Fogel.
The hospitality and retail sectors were facing some challenges even before the COVID hit, which drove some lenders off. "Even before COVID, people were concentrating on apartment buildings and offices," says Fogel. "But the opportunities have grown in all sectors outside of apartment buildings as most lenders focus on housing."
In addition, since March, many lenders stopped taking out new loans. As these firms pull back, Fogel sees an opportunity to shut down lenders desperate to get out of hard-hit sectors like hospitality and retail. "As you'd expect, a lot of the warehouse lenders who fund some of these companies, these debt funds, and these REITs don't want hospitality and retail," says Fogel. "Borrowers and lenders are therefore looking for ways to refinance these assets so they can clean up their old portfolios and get back on loan."
There should be many opportunities to lend to the many sponsors who have built war chests to amass distressed assets. "There's a lot of equity on the sidelines waiting for opportunities," he says. "We see opportunistic buyers looking to buy buildings at the right price. Their business plans jump from this low base to a value-adding opportunity."
Overall, Fogel is optimistic that the commercial property sector will weather this storm, even if some assets need to be redefined.
"I think there are really smart people in commercial real estate who have a lot of equity behind them," says Fogel.
