COVID-19’s impact on commercial real estate in Canada is still one of the pandemic’s greatest unknowns. Non-eviction orders and government stimulus can’t last forever. When both expire, there could be some serious disruption coming to the commercial space, including a rash of panic sales.
But pouncing on those opportunities will still require buyers to put up serious coin in the form of deposits. Developers or investors strapped for cash – and there is no shortage of either group these days – may find banks, who have themselves been stretched thin during COVID-19, unwilling to loan them these critically needed deposit funds.
Mickey Baratz says it’s a problem that existed for commercial developers and investors long before COVID-19 started pistol-whipping the Canadian economy in March.
“Developers don’t always have that liquidity lying around that they can tap into,” Baratz says. “They may have a line of credit with a bank, but it’s usually earmarked for specific hard or soft costs.”
That’s why Baratz and a team of former and current leaders at Manulife, Venturon L.P., and Westmount Guarantee Services launched their new venture, FULECap: To provide refundable deposit financing to commercially-focused entities during a transaction’s due diligence period.