We're excited to let you know that despite the nearly 10 million jobs that have been lost over the past few weeks, owners are reporting good feedback on April rent collections. As of Wednesday San Diego owners are reporting 87-96% collections for the month of April (which is much better than the state average of 70% collections published today by the Wall St Journal). This is about a 60% increase in their delinquency level from this time last month. I have a few thoughts at this point:
- With the shutdown continuing through the end of April, I do expect that we'll see continued pressure on incomes. We're happy that April is turning out to be ok with collections but we're now focused on May as the next data point. Tenants who filed for unemployment are starting to receive their checks. We are hopeful that this will help create a safety net as we endure 3 more weeks of this shut down.
- For tenants who find they do not have the savings to continue paying rent through May due to Covid related issues, the Governor of California has rolled out guidelines for rent repayment for a period of up to 6 months after the eviction moratorium is lifted. Essentially, tenants will have 6 months after this crisis is over to get caught up on any past due rent.
- The federal government has allotted $600/week for unemployment on top of state aid. That covers the income that most of our residents would need to continue paying rents. On top of that the SBA is rolling out $350 billion of aid to businesses in an effort to get them to re-hire/retain staff even in the midst of the national shutdown. We believe that both of these will have the desired "muting" effect on the severity of the economic shutdown. Similar to how they are trying to "flatten the curve" with CV deaths, this is the economic equivalent.
- The Federal Reserve has committed to buying mortgage debt that is collateralized through Fannie/Freddie. This move has really given confidence to the real estate industry as a whole to continue moving forward. As you know, construction is a huge driver for the economy and needs continued mortgages to keep the buying activity flowing.
In summary, we're optimistic that given the actions taken by congress combined with our healthy capital reserves and strong resident base, we will weather this storm well. We're continuing to move forward carefully on the deals we have under contract and aside from any serious shocks to the revenue story, we anticipate closing them in the second quarter.
As always, feel free to reach out with any questions!
For up-to-date statistics and best practices to help battle this Covid-19 crisis please reference the CDC website.
Alexio Barbara
c (760) 419-1343
Comments