After more than 50 years in the real estate business, Craig Hall has gone through markets good and bad. Even in the down times, he has found opportunities.
He’s already scouting for deals that will result from the current pandemic. “There will be a lot of opportunities, and there is room for a lot of players,” Hall said.
Rather than buying properties, his Dallas-based Hall Group is gearing up to buy problem debt from lenders.
“Banks don’t want to deal with property workouts,” Hall said. “They don’t want to be in bankruptcies and foreclosures. A lot of banks would rather sell a portfolio of mortgages. We think that is going to be a good opportunity for us.”
As much as 20% of investment properties financed with commercial mortgage-backed securities are expected to wind up in default.
Hall expects to see some bargains in the hotel market, which has been hardest hit by the pandemic and economic shutdown.
But right now, he said, it’s too early to try to buy most properties outright.
“Nobody knows how to price it,” Hall said. “There’s a disconnect between what a seller wants to get out of it and what a buyer is willing to pay, and there’s no real financing market.”
Hall said that the economic downturn brought on by the pandemic will create property market conditions close to what he saw in the 1980s real estate crash.
“I don’t think this is a quick recovery,” he said. “I think it will be worse than 2008 and 2009 by a long margin.”
Investors have to decide just how bad the economic shakeout from COVID-19 will be, Hall said.
“If you believe this is going to be a 1930s-style depression, this is not a good time to buy because you have another 10 to 12 years of misery,” he said. “If you believe that at some point in the next three or four years we are going to come out of this and likely there is going to be significant inflation because of what the government is doing, buying is going to be a significant opportunity.”
That’s what Hall sees ahead.
Other property investors are also watching for buys that surface during the current instability.
“We are definitely keeping an eye out for new deals,” said Chad Cook, founder of Dallas’ Quadrant Investment Properties. “We have capital that can move quickly and close all cash for the right opportunities, but we do believe the window of opportunity in Dallas, specifically, could be relatively short compared to past cycles.”
In the short term, he said, many new commercial property purchases may be on hold.
“Today, and likely for the next quarter, the capital markets are virtually closed outside of deep value opportunities,” Cook said. “There are still opportunities with noninstitutional sellers, and we expect the capital markets to come back relatively quickly.”
Dallas-based real estate investor and developer Champion Partners bought buildings coming out of the Great Recession that it later sold for substantial profits. The company is gearing up for a similar play after the pandemic.
“We do anticipate being very aggressive this year as this disruption is likely to provide some excellent investment opportunities for those that have access to capital and can move quickly,” Champion Partners’ Steve Modory said.
One of the Dallas area’s biggest property buyers before the pandemic was developer Centurion American Development Group.
CEO Mehrdad Moayedi said he has several major purchases scheduled to close soon and is looking for more buys.
“The only time we have actually made real serious money is in the bad times,” Moayedi said. “When times are good, everyone and their brother are trying to buy.
“The property prices got so high the last few years you could hardly make any money.”
Moayedi said he just locked up a land purchase he’d been chasing for four years. “The guy wouldn’t budge on the price, and he finally came down,” he said.
Real estate investors by nature are optimistic about the future, so they aren’t being chased off by the pandemic.