Unchartered Waters
We hope you and your families are remaining safe and healthy during these uncertain times.
Having built CALCAP out of the 2008 Great Recession, we thought we were at a point in our careers when we have seen everything. We were wrong. What started out as a health crisis that seemed far removed in Wuhan, China, has now become a major worldwide economic crisis with no previous playbook. The equity markets are down about 15- 20% from their highs and unemployment claims surpassed 30 million within a 6-week period, erasing 10 years of job growth. For the first time in history oil prices plunged below zero and currently remain at all-time lows as demand has diminished due to the almost complete worldwide shut down of commerce. More than 3 million Americans have asked for home mortgage forbearance according to the Mortgage Bankers Association, which means about 6% of home loans have currently hit the pause button.
No one knows how long this will last, and more importantly when the country will re-open for business. Even more vexing is what that re-opening will look like? From a practical perspective it appears that getting “back to normal” is going to be a prolonged and choppy experience. What some economists thought early on would be temporary slow-down and “v shaped recovery,” almost certainly now feels like it will probably resemble more of a Nike swoosh—if we’re lucky.
The entire economic system is in uncharted territory and has unique challenges. Those with the ability to adapt quickly will be able to navigate through this period. CALCAP was born in the Great Recession. We are spending considerable time stress testing our apartment and lending portfolios. In our lending business we are specifically focused on:
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Lowering LTVs and tightening our credit box
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Increasing our yields
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Ramping up Fractionalized Model
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Utilizing the CALCAP Income Fund I as a stable funding source
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Hyper-focusing on loan performance, loss mitigation, and borrower’s ability to pay
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Offering forbearance agreements to borrowers who do not have the wherewithal to pay
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Monitoring state by state restrictions on foreclosures
We feel confident that our demographically driven housing strategies combined with our historical low use of leverage will prove resilient during this unprecedented time. We remain solidly committed to our number one goal of capital preservation.
Please feel free to reach out to us with any questions. Stay safe and stay healthy.
Edward M. Aloe
President and CEO
626-229-9057
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Could COVID-19 become a driving force of Millennial homeownership?
Uncertain times could spur a desire for the stability of homeownership
Thanks to an entire industry of support services such as home sharing apps like Airbnb, communication tools like Slack, and co-working spaces like WeWork, living a remote lifestyle has become fairly accessible.
One study
found that 27% of U.S. workers said they “might become digital nomads,” and whether or not they would all make that shift, it shows a significant level of interest.
In a time of crisis, on the other hand, people want the opposite of the uncertainty of a nomadic lifestyle. The first principle of the Trauma-Informed Care model, which I have outlined in
several previous articles
and is commonly applied as a therapeutic model in crisis settings, is Safety.
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More renters are paying rent partially or not at all
Almost 60% of surveyed landlords don't have access to capital to float expenses if renters stop paying
Although some states and several large cities have
paused
evictions during the coronavirus shutdown, the geographical variances have left many renters confused, with 66% of the renters surveyed saying that they didn’t know if
their state
had paused
evictions
to begin with.
According to the Department of Housing and Urban Development’s website, “
Multifamily Housing
encourages all owners to work with impacted residents and families to adjust rent payments, enter into forbearance agreements, and lessen the impact on affected residents. At this time, no additional subsidy funding has been made available.”
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Housing starts post the biggest monthly drop in 36 years
Additional declines to come in April, says Zillow economist
“We are now seeing the true effects of the coronavirus on the housing industry,” said Bill Banfield, Quicken Loans executive vice president of capital markets. “Despite the fact that construction can continue during shelter-in-place orders, home buying demand has plummeted and builders are seeing materially lower foot traffic.”
Building permits totaled 1.353 million at a seasonally adjusted annual rate, 6.8% below February and the lowest since June. The annual pace of single-family permits dropped to 884,000, the lowest since September, and multifamily permits rose to 423,000 from 402,000 in February.
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About CALCAP
California Capital Real Estate Advisors, Inc., and its affiliate entities (CALCAP Asset Management I & II, CALCAP Properties, CALCAP Lending, and CALCAP Senior Healthcare I, collectively known as "CALCAP"), is a California based investment company founded and 2008 and headquartered in Pasadena, California. The Company sponsors alternative real estate investment opportunities focused on demographically driven housing. CALCAP has been able to consistently provide both individual and institutional investors with outstanding returns over the last 10 years. The Company's core strategies look to actively create alpha for investors while managing risk. CALCAP currently has over $300mm in Assets Under Management. To learn more visit
www.calcapadvisors.com.
Social Mission
CALCAP has created the CALCAP CARES program to encourage employees to find a way to give back to the neighborhoods where we invest. CALCAP has created "GiveTime4Autism" as its initial program which will allow employees the ability to donate unused vacation and sick days for a very worthy cause.
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LOS ANGELES
The Sanborn House
65 N. Catalina Avenue
Pasadena, CA 91106
SAN DIEGO
12626 High Bluff Drive, Suite 360
San Diego, CA 92130
PHOENIX
740 N. 52nd Suite 200
Phoenix,AZ 85008
SANTA BARBARA
1309 State Street Suite A
Santa Barbara, CA 93101
IRVINE
2603 Main Street, Suite 850
Irvine, CA 92614
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Edward M. Aloe, President & CEO
(626) 229-9057
Patrick A. Wakeman, Principal
(858) 764-4890
Drew Buccino, Principal and COO
(602) 419-3381
Greg Blix
Director of Investor Relations
(805) 896-8500
Len Israel
CEO, CALCAP Lending, LLC
949-439-1044
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Mark A. Mozilo, Principal
(626) 229-9056
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