With debt markets booming and interest rates at record lows, you would think developers have an easy time raising funds. But industry leaders still lament that securing financing is a challenge – at least for giant projects like Hudson Yards or the World Trade Center.
“Financing is not easy. These are really ridiculous numbers,” Silverstein CEO Marty Burger said at Thursday’s Capital Markets conference hosted by NYU’s Schack Institute of Real Estate. He shared the stage with Ric Clark, Brookfield’s head of real estate; Related Cos. CEO Jeff Blau; and Kushner Cos. CEO Jared Kushner.
Burger explained that Silverstein is currently seeking to close on a $2.2 billion construction loan for its planned office tower 2 World Trade Center, on top of $500 million it is looking to raise through EB-5 investors.
The company struggled to land a construction loan for another office development at the site — 3 World Trade Center — and last year decided to raise the necessary cash through a $1.6 billion bond issuance instead.
At Hudson Yards, Related has also been working to scrape together funds for its $20 billion project. “Getting constructing financing has been very difficult,” Jeff Blau said. He argued that increased regulatory pressure makes it hard for banks to originate billion-dollar construction loans. “Wherever we can grab it outside the banking system, it’s more expensive, but also more flexible,” Blau added.
Related recently secured a $850 million construction loan for Hudson Yards from the Children’s Investment Fund, a U.K.-based hedge fund that also financed condo towers 30 Park Place, 432 Park Avenue and and 520 Park Avenue. It also agreed to borrow $1.5 billion from a syndicate led by Bank of China and Deutsche Bank.
A big source of non-bank funding for Hudson Yards has been foreign investment under the EB-5 program.
“EB-5 has been a tremendous help for us because it allowed us to put in early infrastructure before construction,” Blau said. The federal program, which offers visas to foreigners in exchange for investment, is currently fighting for survival in Congress, and Blau said he is “working hard” to keep it alive.