Considerations For Construction Lenders In Loan Modifications

The extent of the dire economic consequences of the COVID-19 pandemic remain to be determined. Executive Order 202.6 issued by New York State Governor Andrew M. Cuomo in March, which prohibits non-essential construction, has placed additional pressure on lenders as delays increase risk and deplete the capital of developers who have to carry costs for a longer timeline (taxes, debt service, insurance and other expenses). When work is permitted to commence again, these developers can expect to be faced with increased remobilization costs, as well as the additional time and expense of implementing worker distancing and other safety measures to mitigate against the risk of re-invigorating the spread of the virus. Developers can also expect increased costs of materials due to shortages in the supply chain. In turn, the timelines and budgets for construction increase, requiring the approval of the developers' lenders. Some projects may end up being scaled back and/or undergo