Lender sees opportunity in hospitality and retail

Unlike many lenders, ACRES Capital, which does new construction, renovations, adaptive reuses and rentals, looks at just about every real estate asset class.

But ACRES CEO Mark Fogel who also recently took on the role of the president, chief executive and member of the board of directors of Exantas Capital Corp., a bridge lender, does not necessarily migrate to apartments, which are generally one of the safest bets in a recession.

“We feel like the multi-family side is a bit of a stretch, but we’re lending in that area,” Fogel says.

That doesn’t mean Fogel is leaving the multi-family origin. But that will probably make up a smaller percentage of his creations.

“We look at all asset classes quite extensively,” says Fogel. “Quite frankly, I think less and less of the multifamily business will be focused on the ACRES side as we move forward. On the Exantas side, we will continue to focus on the multifamily, but maybe it will fall at 60 or 65%. [of their loans]. It will still be heavily weighted to residential assets.

Instead, Fogel sees plenty of opportunities in the hard-hit hospitality and retail sectors to support good sponsors who know their markets well and buy properties at the right price. “This [having a good sponsor] allows us to step in and support someone as part of a well-constructed loan,” says Fogel.

The hospitality and retail sectors were facing challenges even before COVID hit, driving some lenders away. “People were focused on multifamily and the office even before COVID,” says Fogel. “But the opportunity set has grown in all sectors outside of multifamily because most lenders are focused on apartments.”

Additionally, many lenders have stopped making new loans since March. As those companies pull back, Fogel sees an opportunity to pull lenders desperate to get out of hard-hit sectors like hospitality and retail. “As you might expect, a lot of warehouse lenders who are funding some of these companies, these debt funds and these REITs, don’t want hospitality and don’t want retail on their lines,” Fogel says. . “So borrowers and lenders are looking for ways to refinance those assets so they can clean up their legacy portfolio and go out and lend again.”

There should be plenty of opportunities to lend to the many sponsors who have been building war chests to accumulate distressed assets. “There’s a lot of equity waiting for opportunities,” he says. “We see opportunistic buyers who want to buy buildings at the right price. Their business plans are a stepping stone from this weak base to an opportunity to create value. »

Overall, Fogel is optimistic about the ability of the commercial real estate sector to weather this storm, even if some assets need to be redesigned.

“I think there are some really smart people in commercial real estate with a lot of equity behind them,” Fogel says.

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