Investors are coming for your distressed RE

Some firms are already building a war chest in anticipation of a CRE slowdown

New York /
Aug.August 29, 2017 12:56 PM

The trend has already been playing out in New York for some time, where some of the city’s most prominent developers have stepped in to grab properties from developers who bit off more than they could chew and couldn’t land construction financing.

Late last year, the Durst Organization took over the Clock Tower site in Long Island City from Property Markets Group and the Hakim Organization, paying $175 million. Durst also worked out a deal to take over a distressed site from Ian Bruce Eichner in Harlem for just over $90 million.

“We cannot compete with condo builders on cost when acquiring land conventionally,” the firm’s CEO Douglas Durst told The Real Deal in January. “Acquiring distressed sites allows us to build rental and make the kinds of long-term investments that have served us well for more than 100 years.”

Other investors like Delshah Capital, Madison Realty Capital and a partnership between Steve Witkoff and Michael Asher have set up funds to focus on acquiring distressed properties.

Analysts aren’t predicting a downturn of the same magnitude as the financial crisis, but some think a correction to the the commercial property market is inevitable, according to the Wall Street Journal. The rate of owners behind on loan payments went up this year, and Moody’s delinquency tracker of mortgage-backed security is at 6.7 percent this year, up from 6 percent from the end of last year, according to the Journal.

As TRD previously reported, 2017 could be a reckoning for New York City developers who bought at the top of the market in 2014 and 2015.

“Some deals were put together in very heady times and with a belief that the market was going to remain as lofty as it was at the time,” Michael Lefkowitz, a real estate attorney at Rosenberg & Estis, said in January.

A number of notable developers are also taking advantage of the drought in construction financing by providing mezzanine loans.  [WSJ] Miriam Hall


Related Articles

arrow_forward_ios
A photo illustration of Related Companies' Jeff Blau (Getty)
Related proposes 1,500-room resort in Hudson Yards casino bid
Related proposes 1,500-room resort in Hudson Yards casino bid
Jared Kushner and 666 Fifth Avenue (Getty, David Shankbone, CC BY 2.5 - via Wikimedia Commons)
Congress probes Jared Kushner’s dealings amid 666 Fifth Avenue sale
Congress probes Jared Kushner’s dealings amid 666 Fifth Avenue sale
Council member Pierina Ana Sanchez and RSA’s Joseph Strasburg (Getty; Twitter)
Citing Bronx fire, Council pushes building violation crackdown
Citing Bronx fire, Council pushes building violation crackdown
SB Development’s Joseph Stern and Northwind’s Ran Eliasaf with rendering of Nova (LinkedIn, NOVA)
SB Development, Hazelton Capital score $62M loan for LIC condo tower
SB Development, Hazelton Capital score $62M loan for LIC condo tower
Illustration of Mayor Eric Adams (Getty; Illustration by Kevin Rebong for The Real Deal)
Oh, rats! Eric Adams contests summons for infestation
Oh, rats! Eric Adams contests summons for infestation
Brookfield's Bruce Flatt with 1100 Newark Turnpike (Loopnet, Brookfield)
Brookfield buys CSX industrial site in Northern New Jersey for $67M
Brookfield buys CSX industrial site in Northern New Jersey for $67M
198 Scholes Street, 65 Kent Avenue, 506 DeKalb Avenue and 11 Gunther Place (Illustration by the Real Deal with Getty, Google Maps)
Avi Philipson deal to acquire All Year portfolio is back on
Avi Philipson deal to acquire All Year portfolio is back on
From left: McSam Hotel Group's Sam Chang and SL Green's Marc Holliday with 711 Seventh Avenue  (Getty, Google Mpas, SL Green)
Times Square hotel developer sues neighbors over delayed demolition
Times Square hotel developer sues neighbors over delayed demolition
arrow_forward_ios

The Deal's newsletters give you the latest scoops, fresh headlines, marketing data, and things to know within the industry.

Loading...