The Howard Hughes Corporation will not take out a construction loan for its planned commercial development at the South Street Seaport. Instead, it is taking the unusual route of funding the entire project from its own balance sheet, the company’s CEO David Weinreb said Tuesday.
“We didn’t want to have the burden of a lender who was going to have various requirements about, you know, when you were going to be leased, the timing, etc.” Weinreb said, speaking on a panel at Weiser Mazars’ Commercial Real Estate Summit at the New York Athletic Club. “Because when you’re resuscitating an asset, often the best decisions are not signing a lease, not doing something, just being patient.”
“And when you have a lender that’s behind you, they often are pressuring you to make decisions that are not good decisions for the long term,” he added.
Weinreb told The Real Deal that the company often self-funds projects, and that it will likely bring on a lender at a later stage of the project.
Howard Hughes initially wanted to build a 52-story condo tower at the Seaport, but abandoned the plans in December amid intense local opposition. Instead, the company will build a smaller commercial building, as well as a retail building on Pier 17.
Building a large scale development without any outside financing is rare in New York’s real estate market. However, major real estate investment trusts often fund developments from their own corporate credit lines, thus avoiding mortgage recording taxes and title fees, explained Michael Stoler of Madison Realty Capital.