The money spigot opens

<i>A breakdown of some of the banks busy funding NYC acquisitions, refis and (gasp!) even developments </i>

It isn’t a flood just yet. But observers say the flow of funds from the money spigot for New York real estate deals has intensified in recent months.

And this new stream of lending — which is enabling mostly refinancings, but some developments and acquisitions, too — is coming from many directions, according to bankers, brokers and developers.

Brand-name national banks like Wells Fargo and Bank of America are finally taking risks on a range of projects again. And overseas lenders are even more active than their domestic counterparts.

Money is also coming from government agencies, local banks and insurance companies. In addition, as The Real Deal has reported, commercial mortgage-backed securities, or CMBS, which were shunned by investors through 2009, also appear to be helping projects cross the finish line.

“I will tell you that there is more money around than I have seen in many years,” said Andrew Singer, chairman of the Singer & Bassuk Organization, a Manhattan-based real estate finance and brokerage firm. Singer & Bassuk has secured loans for seven New York office-building refinancings in the past nine months for a total of about $750 million, he said. Over the same time period in 2009, he added, he did no office refis.

Singer said banks are starting to come around because deal proposals from landlords are finally starting to make sense. While during the boom landlords were basing deal terms on projected rents, which were unrealistic, today they’re calculating cash flow based on actual rents, he explained.

Below is a breakdown of some of the more traditional lenders that are among the busiest right now when it comes to funding New York deals.

Bank of China

In 2010, China’s oldest bank seemed not so much to open up its purse strings as to dump the entire contents of its purse, as it parted with more than $1 billion for real estate projects, with many on local soil.

Chief among those deals was an $800 million investment in a refi of 245 Park Avenue, which suggests the bank’s preference for marquee buildings. The 1960s, 48-story tower is owned by a well-capitalized landlord, Brookfield Office Properties.

The building packs in blue-chip tenants like JPMorgan Chase and Major League Baseball, as well as Société Générale, the French financial firm, which is poised to take 500,000 feet there after a December lease signing.

Bank of China’s other loans are connected to a Who’s Who of Class A Midtown buildings. For SL Green, the bank provided refinancings at 1515 Broadway and 600 Lexington Avenue, for $475 million and $120 million, respectively. Earlier last year, it also lent $120 million to George Comfort & Sons to buy 63 Madison Avenue, a glassy high-rise on East 27th Street.

Yet smaller players shouldn’t get too excited about finding a receptive ear at the Bank of China, said Dustin Stolly, a vice president at Jones Lang LaSalle.

“They want very large trophy assets,” Stolly said. “And they will continue to play there, and beat others with pretty compelling terms.”

Industrial and Commercial Bank of China

Like Bank of China, ICBC — another state-owned bank and the world’s largest in market value — has notably ramped up its presence in the New York loan market since 2009.

It has announced plans for “large loans” of $100 million, but is also doling out mega-loans on the order of $500 million — a size many lenders are shying away from these days.

In June, ICBC teamed up with Wells Fargo to refinance 650 Madison Avenue. The $355 million deal apparently allowed the building’s co-owners, Ashkenazy Acquisition Corp. and the Carlyle Group, to retire more than $200 million in mezzanine debt, left over from 2008, when the pair picked up the tower from Hiro, the Japanese firm.

Like Bank of China, ICBC seems risk-averse in terms of property type. The 27-story Madison Avenue building, at East 59th Street, is basically at Midtown’s epicenter, hardly a vulnerable location. And about half of the 500,000-square-foot building is home to the headquarters for fashion giant Ralph Lauren, which re-upped its lease two years ago.

The new Chinese lending comes as foreign loans are surging in the U.S. In 2010, international banks like ICBC issued 13 percent of all commercial loans nationally, up from 7 percent in 2009, according a year-end study by Real Capital Analytics.

While foreign banks still only have a tiny piece of the national pie, the average size of their loans, $41 million, blows away the competition. In a distant second place were insurance companies, with an average loan size of $27 million nationally (New York figures were not available).

Borrowers embrace Chinese banks such as ICBC because “they make loans held for their own account,” said attorney Jeffrey Lenobel of Schulte Roth & Zabel, who has worked on deals involving Chinese banks.

New York Community Bank

Convinced that local banks got so burned by failed construction projects that they’re now out of the game? Guess again.

Steadily chugging through the downturn, in 2009 this bank wrote $2.5 billion in loans. In 2010, that figure jumped to $3.2 billion, said James Carpenter, the bank’s chief lending officer. Each of those loans averaged between $5 million and $40 million, he noted, but added that the bank has done deals — either in the city, Long Island, Westchester or Northern New Jersey — in excess of $100 million, too.

The loans typically support rent-regulated apartment buildings with ground-floor retail. All told, of its $22 billion portfolio of properties, $17 billion worth are multifamily, Carpenter said.

Part of the reason the bank didn’t get burned during the recession is that it is a portfolio lender, so it doesn’t need to sell securities to generate cash. Strict underwriting standards also helped the bank to have among the smallest portfolios of nonperforming loans in the nation, according to Carpenter. “Knock wood, we’ve done very well,” he said.

Carpenter wouldn’t discuss individual deals. He does, however, seem willing to break with some traditions and go outside the multifamily apartment building asset class. He helped fund last year’s $400 million acquisition by RXR Realty of 1330 Sixth Avenue, a 40-story office building that Harry Macklowe lost to foreclosure a year earlier, according to brokers close to the deal. They declined to say how much New York Community Bank contributed.


As The Real Deal reported last month, insurers have drastically accelerated their real estate investing in the last year. Indeed, in 2010, insurers were the third-most-active investors nationally, after banks and government agencies.

MetLife and Prudential together have accounted for roughly half of the total loan volume for insurers, with MetLife, the largest life insurer in the country, racking up about $2 billion in total deals nationally.

Most were refis, but diversity rules the roost. The company has invested in retail, residential and office deals.

Last year, according to Real Capital, MetLife lent $213 million to developer Joseph Moinian for a refi of One West Street, a condo in the Financial District. It also refinanced part of the $345 million loan to 125 West 55th Street, a Boston Properties office tower with 23 stories that spans a full block and is home to Air France.

“The life [insurance] companies haven’t been encumbered by lots of legacy issues [addressing bad loans], which has allowed them to re-engage with the market in a more significant way,” said Sam Chandan, chief economist for Real Capital.


Like rival MetLife, this New Jersey-based insurance titan has jumped into the game while other investors have sat on the sidelines.

In the last year, it helped refi the $400 million debt on 345 Park Avenue, an office building owned by the Rudin Organization. In April, it also financed the $193 million purchase of 600 Lexington Avenue, also known as Manhattan Tower, by SL Green from Hines Interests. In a sign of how much leveraged cash can be tapped for certain kinds of deals, SL Green turned to the Bank of China just a few months later to refinance the property.

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That deal was not without risks. While almost all of the 36-story tower, which has about 300,000 square feet, is now leased, about half of that space is coming up for renewal soon, according to news reports.

But overall, tighter rules apply for lenders now.

Five percent equity stakes on the part of developers won’t cut it anymore; developers need to contribute up to 25 percent of a building’s cost, said Howard Michaels, chairman of the Carlton Group, a financial advisory firm.

“[Prudential] has money, and they are looking to invest, but they remember what happened in the last couple years,” said Michaels, who isn’t working with Prudential, but does follow the company. That said, Prudential also likes to partner with other lenders, even if the insurance company prefers a senior position, he noted.

“It’s not like the old days, when you would go into Wachovia, or Lehman, or Bear [Stearns] and get all your needs met in one place,” Michaels added.

Deutsche Bank

Of course, the big investment banks have also been busy during this latest run-up. And Deutsche Bank has been among the most aggressive of this group. Its masterstroke of late was its double-dip deal at 3 Columbus Circle, where Stephen Ross of the Related Companies and Moinian recently went head-to-head.

At first, the bank was with Ross, who was seeking to take over the 26-story 1920s office building from Moinian. Backed by Deutsche, Ross snapped up the $250 million mortgage on the property and threatened to foreclose over a lack of payments. Moinian ultimately paid his tab, but his delays cost him. That $250 million mortgage suddenly ballooned to $278 million, giving Deutsche its first victory in the deal. Then, the bank backed Moinian’s purchase of the debt from Ross, giving it a stake in the building, which is alternately known as 1775 Broadway. Analysts say that Deutsche is also leading the charge back in CMBS, which had been written off for dead 12 months ago.

Now, however, “there’s a healthy demand [for CMBS because] the deals are written the right way,” said Shawn Rosenthal, a principal of the Ackman-Ziff Real Estate Group, a financial advisory group in Manhattan.

Freddie Mac/Fannie Mae

Calls from the political right to slash government spending, as well as to rethink the role these quasi-governmental agencies should play in the housing markets, may have taken a toll.

As a share of national real estate investing, these agencies in general saw a drop from 2009 to 2010, from 37 percent to 22 percent of total spending.

Still, they are practically tied with national banks as a lending source. And, their borrowers aren’t just the single-family homeowners they’re often associated with.

Fannie and Freddie have also increased their investments in multifamily rental buildings as they’ve adjusted their strategies and moved to help make up for a dip in private loan activity, brokers say.

Citywide, Freddie Mac provided a $104 million first mortgage last fall so the Jack Parker Corporation could develop Truffles Tribeca, a two-building, 300-unit luxury rental.

Also in 2010, Fannie Mae lent $83 million to Arbor, a mortgage company, for a refi of the Sand Castle Apartments in Far Rockaway, Queens. The cluster of high-rises, which are on the beach, feature 917 studios to two-bedrooms, priced at $950 to $2,400 a month, according to the complex’s website.

“It remains unclear what [Fannie and Freddie’s] long-term role will be under the Treasury Department’s current proposal, which suggests winding down the two agencies in the next couple years,” Chandan said.

Wells Fargo

Another national player that local deal-makers are finding receptive these days is Wells Fargo. The lender backed Himmel + Meringoff’s recent purchase of 158 West 27th Street, a 12-story building between Sixth and Seventh avenues, from Louis Dreyfus Property Group for $25 million, according to sources close to the deal.

Managing partner Leslie Himmel would not talk specifically about her backers because of confidentiality agreements. But she said her lenders acted quickly, and that she was able to close on the building in two weeks — a timeline that would have been unheard of even a year ago. She also suggested that the terms of the loan were favorable.

“I didn’t have time to bring this to the market [of commercial lenders],” Himmel said of the building, which sits near Manhattan’s newly trendy NoMad district and is packed with media and design tenants.

Wells Fargo, which symbolically continues to expand in its 100 Park Avenue home, and which maintains a sizable retail banking presence because of its takeover of Wachovia, is also betting on affordable properties.

This year, it joined forces with the developer Arker Companies and Freddie Mac to rehab Concord Seaside, a 430-unit rental complex on Staten Island. As its reach grows, Wells Fargo is also cozying up to overseas banks, like ICBC, to help refinance Class A properties like 650 Madison Avenue.

M&T Bank

One of the country’s 20 largest banks, this Buffalo-based company upped its commercial lending from $200 million in 2009 nationally to more than $1.5 billion in 2010, with the majority of that coming in the fourth quarter, according to a company spokesperson.

Among the deals was a $55 million loan to underwrite the $94 million purchase of 100-104 Fifth Avenue, an office building at West 15th Street, by a partnership of Invesco Real Estate, a Texas firm, and the New York-based Kaufman Organization.

And as part of that ramp-up, the bank has seemed bullish on local rental properties, especially new construction projects, which for many lenders had been a no-go.

Gary Jacob, executive vice president of Glenwood Management, a builder of luxury units across the city, has been a firsthand beneficiary. The bank backed Jacob, who sits on its mortgage advisory board, at two large Manhattan towers: Emerald Green, which he said is leased up, and Crystal Green, which is under construction on West 39th Street, off Eighth Avenue. Crystal Green’s 205 apartments are expected to be ready by summer 2012.

M&T might also be tapped for funding for a 340-unit apartment building that Glenwood has planned at Amsterdam Avenue and West 62nd Street, which is yet unnamed, Jacob added.

Because M&T invests mostly locally, analysts say it was not hit as hard during the downturn as it would have been if it was invested in markets that were more severely impacted, like Miami. Also, rather than long-term loans, it prefers two- to five-year deals, giving it an exit strategy. And, “their advisory board is filled with very smart real estate people,” like Jacob, who steer them in a safe direction, Singer of the Singer & Bassuk Organization said.

DekaBank Group

While some overseas banks — like HSH Nordbank, Hypo Real Estate Holding, and Anglo Irish Bank — have basically stopped writing mortgages after taking their lumps during the downturn, others continue to be a reliable source of capital.

In addition to the above-mentioned Chinese banks, Deka from Germany is one of those funding sources. In November, it backed a $180 million loan to the Paramount Group made in conjunction with Britain’s HSBC, for 745 Fifth Avenue, a 34-story Art Deco office building with Central Park views.

Going forward in 2011, broadly speaking, Deka and other foreign lenders, like the French Natixis, are expected to funnel up to $65 billion in loans, up from about $12 billion in 2010, said Steve Kohn, president of Cushman & Wakefield Sonnenblick Goldman, which lines up financing for landlords.

Though that may seem like a startling turnaround, Kohn suggested that it’s proportional to the crash. “I think the drop was more severe than anyone expected,” he said.