March 2020 | Investment Research
Coronavirus (“COVID-19”) fears, the collapse in oil prices, and a halt in consumer activity due to shelter in-place directives from state governments have created market turbulence and changes in the economic environment. The Dow Jones Industrial Average (“DJIA”) is down approximately 31.3% (as of market close on 03/24/2020) from it’s peak in mid-February 2020 and public REITs, a forward-looking indicator for private real estate, are also down. However, in contrast to the Great Financial Crisis of 2008, real estate is neither the cause nor the epicenter of the current economic turmoil.
As the apartment market reacts, Redwood is taking necessary measures to ensure that we remain operational and manage our employees’, investors’, partners’ and residents’ expectations as best as possible. Our Asset Management team is focused on maximizing operations at each of our properties and adapting business plans where appropriate. Proactive risk management practices are key to managing performance.
Our Property Management company is monitoring CDC and industry-recommended best practices for containment and appropriate steps in the event that a resident contracts COVID-19. Respecting privacy while caring for the surrounding neighbors is a balancing act. The implementation of new policies and procedures to lease apartment units virtually, close amenity spaces, clean more thoroughly, and create appropriate mitigation measures is a top priority. Landlords and lenders must determine how to respond to anticipated requests to provide relief to both tenants and borrowers negatively impacted by COVID-19. All parties involved in real estate transactions need to creatively consider solutions to logistical issues that arise from conducting real estate due diligence and closings while primarily working remotely and, at times, with limited resources.
The two government-sponsored enterprises, Fannie Mae and Freddie Mac, have separately announced nationwide initiatives to provide financial relief to their borrowers with tenants affected by COVID-19. They plan to allow borrowers to defer monthly payments for up to 90 days by evidencing hardship as a result of COVID-19. In exchange for payment deferral, borrowers must agree to not evict renters who are facing financial hardship due to the current health crisis.
The U.S. Congress passed a $2 trillion dollar economic stimulus package and the National Multifamily Housing Council is aggressively advocating for increased relief for multifamily housing owners and operators. Similar to renters, housing providers may potentially face impending financial challenges.
As the economic
environment continues to change, the decision to close offices, stop travel and
work remotely is one that the majority of Redwood’s competitors and peers have adopted. Redwood, along with its industry peers, is navigating
through foreign territory. Outreach and
proper lines of communication are more important than ever right now, which is
why Redwood will continue monitoring the market on a daily basis through
multiple avenues. Stay tuned, be well
and stay healthy.
About Redwood Capital Group, LCC
This report was prepared by Redwood Capital Group, LLC (“Redwood”). Redwood was established in 2007 by industry veterans
David Carlson and Mark Isaacson and is a vertically integrated investment manager targeting core/core-plus, value-add and opportunistic multifamily real estate investment opportunities throughout select markets across the United States. As of December 31, 2019, Redwood’s portfolio consists of 8,525 apartments across 29 communities throughout the United States with a gross asset valuation of approximately $1.5 billion. Redwood’s mission is to be the foremost choice for institutional and private equity in pursuit of strategic multifamily housing investment.
Redwood is headquartered in Chicago, Illinois with regional offices in Atlanta, Georgia and Dallas, Texas. For more information, please visit www.redwoodcapgroup.com.