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If one takeaway came from Bisnow's New York Post-Recession Projects event this morning at the New York Bar Association, it's that New York is certainly not representative of what's going on in the rest of the US.
Greenberg Traurig global real estate chairman Rob Ivanhoe
It's still a tale of two markets, according to Greenberg Traurig global real estate chairman Rob Ivanhoe—the strong cities like New York and DC versus the rest of the country. There's $1.3 trillion of mortgage debt coming due, and we'll feel the overhang for the next five years. But lenders are still active in New York, and multifamily developers are breaking ground on projects. Although office demand will remain fairly flat until the job market improves substantially, we can expect that Brookfield Office Properties' and Related's transformation of the rail yards will change the dynamics of the leasing market.
TF Cornerstone head of acquisitions and finance Jeremy Shell
TF Cornerstone head of acquisitions and finance Jeremy Shell says his firm continues to invest and build because it operates in those strong markets. Although we'll see negative signs from the financial markets in the short term, New York will continue to be the most important market in the world for that industry. Lenders will work with you if they know you're in a market for the long term; last week, TF Cornerstone received a $265M construction loan from Wells Fargo, M&T Bank, Bank of America, and Capital One to finance 4545 Center Blvd in Long Island City, part of its 20-acre East Coast development. The market isn't as receptive to weaker-capitalized firms, he says.
Bentall Kennedy SVP Marty Standiford
If you can't put up to 35% to 40% equity, a developer may not stand a chance, echoed Bentall Kennedy SVP Marty Standiford. “There's no question that there's a bifurcated market… Things are only getting built by the Relateds and the Gothams of the world,” he says. “Everyone else is shut out.” Last month, Bentall Kennedy and MEPT announced it's developing a 35-story, 165-unit apartment building at 309 Fifth, committing over $100M in equity. He says that he believes the multifamily development market will loosen up in the future just because we need more product built.
Gotham Organization EVP of development Melissa Pianko
But the lack of financing is one of the best things that could have happened for long-term players, who now have a shot at getting land for a basis that they're willing to pay, says Gotham Organization EVP of development Melissa Pianko. Her firm is quite bullish on multifamily: NYC is a renter's town and always will be, with supply never meeting demand, she says. “Even if people leave Manhattan, it will always be backfilled.” Last month, Gotham broke ground on a $520M, 1,200-unit mixed-use residential development; the four-building project will span West 44th to 45th streets from Tenth to Eleventh avenues and include luxury and income-restricted housing.
Gibson Dunn partner Andy Lance
The security of the State and City governments is what's attractive to investors, says Gibson Dunn partner Andy Lance. Gov. Cuomo has demonstrated that the state is able to get things accomplished and execute those of critical importance. “Washington still leaves significant question marks,” he points out. This NYC administration, including Mayor Mike, has done a terrific job of revitalizing the city, Melissa adds, like rejuvenating our waterfronts and lowering crime rates. “If the next administration doesn't have the same oomph, it may have a negative effect on the city.”
LePatner & Associates founder Barry LePatner
LePatner & Associates founder Barry LePatner, who moderated, asked the panelists what they thought of the rise in foreclosures, and if investors are making a distinction between residential and commercial, considering the former is in the doldrums. Rob says he's seen a significant change on where banks are with commercial loans since last year; extend and pretend is slowing down and they're selling notes to opportunistic buyers. There's a site in Midtown about to be foreclosed, which has significant air rights issues—and the note may not be worth what lenders are trying to sell it for. Jeremy says his firm has looked at larger, complicated sites; it has seen many banks unwilling to unload at the right price.
This morning's Bisnow New York Post-Recession Projects event at the New York Bar Association.
Thanks to the 125 attendees who joined us. Check back on Monday for more coverage.