April 2020 update


I hope you’re doing well and staying safe! If your inbox is like mine, you’ve seen COVID related updates from every company you’ve ever heard of, so thank you in advance for freeing up brain space to read this.

I’ve re-written this note several times as the pandemic unfolds and its impact on the real estate market becomes more clear. A few things I’ve noted from webinars, articles, and discussions with industry experts:

  • Housing demand has held up better than expected. On the supply side, it may take some time to see the impact the pandemic will have on construction labor and new housing / building start permits.
  • Nationally, collected rent through April 5th is at ~70%, down from ~80% from March 2020 and April 2019. The looming question is how well this holds in May, and whether people with stimulus money and unemployment checks will use those funds to continue paying rent.
  • There’s overwhelming frustration with the SBA. Business owners looking to throw their hat in the ring for small business relief funds authorized in the CARES Act are running out of patience. Just look at any SBA tweet to see an angry only mob attack like vultures. As an SBA intern during the ’09 crisis, I know they’re doing everything they can at the local levels to push these funds out. There’s an extreme disconnect between what’s being promised and communicated to the public vs. what is actually doable given their staffing levels and system constraints.

Rental portfolio update

It will take a while to understand the long term, structural impact this pandemic will have on multifamily real estate.  I’m convinced that over the long run, multifamily is the best risk (and headache) adjusted asset class. Commercial office, retail, and vacation rental investors have felt significant pain already, and I’m not sure when / if any relief will kick in.We’re fortunate to work with great property managers who took proactive measures to work with tenants and adapt quickly to the new operating environment. When we started reaching out to residents at the beginning of March, a handful even paid us early for April. Our main goal was to let them know that we empathize with the community and hope that they think of us as a partner rather than a hostile.We’re also fortunate to have a great balance sheet with healthy cash reserves. Typically this has been to address unforeseen capex issues, but apparently it works well for pandemics too! We won’t need to fire-sell assets to pay operating costs and keep the lights on. We’ll be able to service our debt and cover operating expenses for the foreseeable future. Private investors, lenders and operating partners for the rental portfolio will all be paid in full and on time.

New acquisitions will be on pause momentarily (we have one deal under contract that we’re going to extend) to focus on managing the existing portfolio.

Active development projects:

In mid-March, Mayor Walsh issued a city-wide construction ban in Boston (with a few exceptions for emergencies). Likewise, our Saratoga st. project with OnPoint Capital is on pause until the construction ban is lifted. We’re doing as much as we can to get ahead on non-construction related activities, but shovels are down for the time being.

Spencer Ave is still in “go” mode, as Chelsea has not yet banned construction. Steel production is in-progress and the modular boxes should be on site in the next few weeks. We’re seeing great results already from our social media campaign to help with pre-sales, and expect demand for these units to remain strong.

What I’m..

ReadingLiving With A Seal by Jesse Itzler (owner of the Atlanta Hawks and husband of Spanx founder Sara Blakey). With the Boston Marathon postponed, I’ve lost some (all) of my fitness motivation. This is a funny and interesting read and gives me a good jolt into working out regularly.

Listening toWhy Rent Control Doesn’t Work from Freakonomics Radio. This was recently rebroadcasted and I think an important listen in current times, where many politicians are calling for rent / eviction moratoriums and related regulatory measures. Without thinking through the downstream implications, some regulatory actions could be detrimental to renters in the long run.

Watching (other than Tiger King): John Krasinski decided to start dominating youtube with his “Some Good News” series. Episode 1 treated us with a guest appearance from Steve Carell, and is already up to ~14 million views.

Thanks for reading and please give me feedback by responding to this e-mail. What do you want more or less of? Let me know!



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