Money available for 'good' NYC real estate projects

The Real Deal

2011-06-10

Michael Stoler

It is hard to fathom that it was less than two years ago when lenders were silent as the conversation turned to financing commercial real estate.

Fast forward to this spring, when my unofficial survey of more than 25 national, international, regional and local financial institutions (gleaned during personal phone calls) determined that lenders are, for the most part, actively seeking to provide financing for commercial real estate.

But in many instances, those lenders are all chasing the same deals.

For example, more than 15 lenders have issued term sheets to finance the construction of Gotham Organization’s apartment complex that spans 44th to 45th streets, from 11th to12th avenues on the Far West Side.

Wells Fargo was selected as the lead lender to close the syndication of a $520 million letter of credit backing up the construction of that 1,240-unit rental project, Commercial Mortgage Alert reported last Friday. This transaction is perhaps the largest in dollar size for a new residential development in New York City in the past three years.

In the past year, major lenders have been providing construction financing to well-capitalized lenders like Durst Fetner Residential, which is doing a total gut renovation and redevelopment of the classic building at 1212 Fifth Avenue at 102nd Street, as well as for the Litwin Organization’s projects on the West Side including Lincoln Center.

The Gotham loan was secured because of its financial strength — it recently sold the residential component of the Upper West Side’s Corner to TIAA-CREF for $209 million — plus a lack of new inventory for Manhattan rental units and tax-exempt financing.

“When you find a deal with strong sponsorship, excellent location and business plan, it is not surprising to hear that there is significant amount of interest in the lending community,” said Ronnie Levine, managing director at Manhattan-based commercial mortgage brokerage firm Meridian Capital Group. “It is the projects in secondary locations, with inexperienced sponsorship which continue to struggle to attract financing.”

Lenders were also lining up to provide financing to another well-capitalized borrower, RXR Realty, for its recent acquisition of the Starrett-Lehigh Building, located at 601 West 26th Street. In April, RXR Realty, who earlier in the year purchased 1330 Sixth Avenue, agreed to pay $900 million for the 2.2 million-square-foot building. More than 10 lenders including Wall Street investment banks and insurance companies were interested in providing financing for the project. According to sources, Long Island-based New York Community Bank will be the providing a $500 million fixed-rate loan on this development.