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3650 REIT tees up $500m lending pipeline

The company is looking for loans in the industrial, office, self-storage, multifamily and necessity retail sectors

By Samantha Rowan

3650 REIT, a commercial real estate originator and servicer, has put together a roughly $500m pipeline of new commercial real estate loans as the US market emerges from the Covid-19 pandemic.

The company, which invests on behalf of institutional players that include the California State Teachers Employees’ Retirement System, recently finished up a $31m loan on a portfolio of self-storage properties in and around Memphis, according to Toby Cobb, its co-founder. 3650 REIT also funded another $25m loan last week.

The loans are in various stages of closing, with Cobb telling REFI US that the company’s structure and investor base has allowed it to continue to be actively lending. “We knew that we had capital and that we were not in a retreat mode,” he said. “Once things started to stabilize, we were able to start originating and it’s nice to be open and operating again.”

The company is looking for loans in the industrial, office, self-storage, multifamily and necessity retail sectors. “There’s some necessity retail that’s dominated during the current downturn,” Cobb said, citing properties with Target, Dollar General and grocery stores. “These properties have been performing very well.”

3650 REIT has been tracking some changes in the lending market, including lower leverage, greater interest reserves, and higher debt-service-coverage ratios. “Pre-Covid-19, DSCR ratios were in the 120x range and are now in the 140x range,” Cobb added.

There’s a general sense in the market that Covid-19 has accelerated trends that were already in place, particularly in the retail and industrial sectors. Additionally, a population migration from blue states to red states may also be accelerating.

“I think that migration has less to do with Covid-19 and more to do with people who live in the New York metro area and are frustrated with the tax environment and cost of living,” Cobb said. “For many people, this could be the last straw. New York is in deep trouble right now and markets like Miami and Orlando will be the beneficiaries.”

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