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The big money grab
<i> A look at where real estate cash is coming from as the dust from the financial crisis settles</i>
The past year has seen a seismic upheaval of wealth. Billions of dollars evaporated during the financial crisis, and much of what’s left is changing hands at a breathtaking clip. Developer Kent Swig — the once-moneyed son of a real estate dynasty — warned, for example, that he may soon file for personal bankruptcy protection now that his beleaguered Sheffield57 condo development has been sold at a foreclosure auction to hedge fund Fortress Investment Group. Former Lehman Brothers CEO Dick Fuld, who watched his net worth all but disappear in the last months of the company’s existence, sold his 16-room Park Avenue co-op for $25.87 million in late August.
Meanwhile, banks that laid off thousands of employees last fall are now looking at record bonus seasons.
With all of this cash coming and going, The Real Deal followed the money to see who has control of the New York real estate market’s purse strings. Exactly how much of the oft-touted capital “on the sidelines” is actually out there? How will it be spent? And who will spend it?
One answer: While there are clearly large amounts of pent-up funds available, investors, lenders, homebuyers and just about anyone who is looking to spend money on real estate in New York can afford to be incredibly choosy.
Investors from all over the world, for example, have raised vast amounts of cash — by some estimates, as much as $50 billion — to purchase discounted real estate in New York. However, many haven’t yet found anything to buy, and some experts say there won’t be enough deals to go around.
Meanwhile, at a number of new condos in development, lending is finally loosening, with sponsors finding new ways to get mortgages for their buyers. To do this, many are turning to small, regional banks that avoided the worst of the mortgage crisis, and are happy to keep home loans on their books — but only for buyers with sparkling credit and hefty down payments.
Developers have discovered an unexpected pool of cash-heavy purchasers: buyers who broke their contracts during the market’s darkest days. Now that the market seems to be approaching a bottom, these boomerang buyers are reconsidering in hopes of getting their deposits back.
Last but not least, The Real Deal dissected five of New York’s priciest apartment listings, with an eye on who still has the money to buy them.