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
 JLL CEO of capital markets Richard Bloxam and Roofstock CEO Gary Beasley (JLL, Roofstock, iStock)
JLL gets in rental home business
JLL gets in rental home business
Mack-Cali Realty CEO Mahbod Nia and MaryAnne Gilmartin (Photos via Mack-Cali Realty)
Mack-Cali Realty names Mahbod Nia as CEO
Mack-Cali Realty names Mahbod Nia as CEO
The comedy club argues that if SNL can operate, then they should be allowed to operate too. (Getty)
Manhattan comedy club sues Cuomo over pandemic closures
Manhattan comedy club sues Cuomo over pandemic closures
(iStock)
These were Manhattan’s best office submarkets in Q4
These were Manhattan’s best office submarkets in Q4
(iStock/Illustration by Alexis Manrodt for The Real Deal)
Order up: Real estate investors line up to buy drive-throughs
Order up: Real estate investors line up to buy drive-throughs
Mayor Bill de Blasio (Getty, iStock)
NYC to revive $17B in public construction projects
NYC to revive $17B in public construction projects
Houston House at 298 East 2nd Street and Matt Lee (Houston House, LinkedIn)
Developer Matt Lee to auction off East Village condo
Developer Matt Lee to auction off East Village condo
(Getty)
Hotel stocks went bonkers in February
Hotel stocks went bonkers in February
arrow_forward_ios

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

Loading...