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National Mortgage News: Where commercial lenders may find opportunity in a distressed market

By Brad Finkelstein

While some commercial mortgage lenders will have to pull back or even exit the business as delinquencies rise, others like Gelt Financial will be looking to take advantage of the displacement.

"As soon as people get worried, they tend to be more cautious than they should," said Noah Miller, vice president of the family-owned firm based in Delray Beach, Fla. "On the other hand, I think there's a lot of opportunistic lenders out there, us being one of them."

Gelt lends for its own account and keeps everything on its balance sheet. The company was founded by Miller's father Jack back in 1989. The younger Miller joined Gelt this past June after serving as vice president of acquisitions and finance at Pensam Capital, a private institutional multifamily owner, operator and lender in Miami.

While Gelt has become a "little more conservative" in its underwriting due to the coronavirus, the company is willing to do deals involving distressed properties, Miller said.

"I think we're going to see a lot of buyers going after distressed properties in all asset classes," said Miller. "Retail, office and hotel will see the most [activity], but even in multifamily, you'll see some buyers going after distressed properties and that's something we want to be in front of on the lending side."

Although multifamily delinquency rates are low, moratoriums on rent payments and evictions have left quite a few small and midsized landlords financially pinched.

"A lot of owners have taken on massive amounts of debt and there's not a lot of room for error," Miller said. "If you take three months or six months of nonpaid rent, that's not one or two dollars, that's a lot of money. And it's going to add up quickly for a lot of these owners and bring some distress to the market."

As a commercial lender and servicer, Gelt's business model includes serving customers with troubled properties, which puts the company at an advantage amid the unpredictable market conditions of today, Miller said.

"For us, we're used to that," said Miller. “We're never the lender someone's coming to with a clean, easy permanent solution, so we are always seeing opportunities that are unique, whether it's an issue with a property or an issue with a borrower, where we have to act quickly and have to get creative and be flexible."

Retail is one of those lending opportunities for Gelt.

"We do a little of everything, we do strip centers, we do owner-occupied, we've done some vacant retail," he said. "People are buying vacant retail at a great discount and we're one of the few lenders that's willing to look at that, as long as we like the story."

The election results — and the projected GOP wins in the two Georgia runoff senate races — will allow Gelt's opportunities to continue along their current path, Miller said.

"With neither party controlling both branches, it seems that real estate investors are expecting the market to continue as it has for the previous few years," Miller said. "Asset classes like multifamily, self-storage and warehouse will continue to be the hot sectors, while office, retail and hospitality will lag behind, even with the advancement of a COVID-19 vaccine."


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