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Covid-19 and the real estate market

07/24/2020

Norm Drake

By: Norm Drake
President & CEO
Legacy Development & Consulting Company, LLC

COVID-19 has created uncertainty throughout our communities, financial markets and commercial real estate. Some asset types will face significant challenges going forward. Those who experienced structural and fundamental challenges prior to COVID-19 will likely experience the greatest challenges. Asset classes with sound long-term fundamentals, such as multi-family real estate, will continue to perform well.

Legacy Development is focused on investing in fundamentally sound real estate assets. We like multi-family because it provides a life essential: shelter. Historically, multi-family investments out-perform other classes of commercial real estate during periods of economic decline and uncertainty. During the 2001 and 2008-2009 economic recessions, multi-family had lower total rent decline and more robust and rapid post-recession rent recovery than any other commercial real estate sectors.

The National Multifamily Housing Council reported that 95.1% and 95.9% of renters made their monthly payments in the months of May and June, respectively. Compare that to the hospitality sector, which experienced a decline where 24% of hotel loans packaged into commercial mortgage backed securities (CMBS) are currently delinquent, as compared to a normal range of 2% - 3% pre-COVID. Contrasted to the multi-family sector, the overall delinquency rate of U.S. multi-family is less than 1%—despite COVID, multi-family continues to perform as expected.

The multi-family performance within the Legacy portfolio continues to be strong. Rent collections for May and June were 95.8% and 95.5%, respectively. Occupancy across the portfolio continues to strong as well, achieving 96.1% occupancy in May, 96.7% in June and 95.6% in July. We continue to see strong demand for multifamily units and currently have several new construction developments in various stages.

Despite national economic uncertainties we are optimistic about the opportunities that lie ahead. We continue to believe our prudent approach to development will continue to yield excellent returns for our stakeholders and address critical housing needs in the communities we serve.