Mortgage

The place Business Lenders Discover Alternatives in a Distressed Market

While some commercial mortgage lenders are being forced to retire or even leave the business as arrears rise, others like Gelt Financial will try to take advantage of the relocation.

"Once people start to worry, they tend to be more cautious than they should," said Noah Miller, vice president of the Delray Beach, Florida-based family business. "On the other hand, I think there are many." opportunistic lenders out there, we are one of them. "

Gelt borrows for his own account and keeps everything on his balance sheet. The company was founded in 1989 by Miller's father, Jack. The younger Miller came into his own last June after serving as vice president of acquisitions and finance at Pensam Capital, a private institutional multi-family owner, operator and lender in Miami.

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

Noah Miller

"I think we'll see a lot of buyers looking for distressed properties across all asset classes," said Miller. "Retail, office, and hotel will see the most [activity], but even in apartment buildings you will see some buyers looking for distressed properties, and that is something we want to be facing on the lending side."

Although crime rates in apartment buildings are low, the moratoriums on rent payments and evictions have put some small and medium-sized landlords in financial distress.

"Many owners have taken on massive debt and there isn't much room for error," Miller said. "If you take three or six months of unpaid rent into it, it's not a dollar or two, that's a lot of money. And it will quickly add up for a lot of these owners and put the market in trouble."

As a commercial lender and servicer, Gelt's business model includes serving clients with difficult properties, which gives the company an advantage in today's unpredictable market conditions, Miller said.

"For us we're used to it," Miller said. “We are never the lender someone comes to with a clean, simple, and permanent solution. Hence, we always see opportunities that are unique, whether it is a problem with a property or a problem with a borrower that we need to act quickly and have to get creative and be flexible. "

Retail is one of those credit options for Gelt.

"We do a little bit of everything, we do strip centers, we do condominiums, we do some free retail stores," he said. "People buy free retail at a big discount, and we're one of the few lenders willing to look into this while we like the story."

The election results – and planned GOP victories in the two Senate races in Georgia – will allow Gelt to continue on their current path, Miller said.

"With neither party controlling both branches, real estate investors seem to expect the market to continue as it has done in previous years," Miller said. "Asset classes like apartment buildings, self-storage and warehouses will continue to be the trendiest sectors, while office, retail and hospitality will lag behind despite the advancement of a COVID-19 vaccine."

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