Stalled condominium projects in Brooklyn are becoming a thing of the past as lending loosens in the borough. According to Real Estate Weekly, construction lending is making a comeback in Brooklyn because rental and condo prices are rising at a faster rate than land costs.
Rents in Brooklyn grew at a higher pace than those in Manhattan, yet development costs are often $200 per square foot cheaper than the $320 a foot average in Manhattan. That makes smaller deals, under $50 million, easier to find and ultimately easier to finance. REW cited two projects Mission Capital Advisors closed on in Williamsburg and Park Slope for $20 million and $23 million, respectively, where they were able to secure loans of $12.6 million and $14.5 million.
“The deals (in Brooklyn) make sense from a return on cost perspective, whereas it wouldn’t in places like Manhattan where there’s just no land,” said Jordan Ray, managing director of Mission Capital, who sees 9 percent return on cost ratios in the borough.
Though competition among lenders is increasing, and some investors said there is more interest today in Brooklyn than ever before, there’s still one major difference between the lending environment today and the one during the 2004-2007 boom. Underwriters are choosing borrowers carefully, wanting to make sure they have liquidity and good track records. First-time developers simply won’t get the huge loans they were able to secure six or seven years ago. [REW]