April showers bring May flowers
The record rainfall in March followed by the rain showers in April will provide beautiful flowers this month. The same seems to be the case when it comes to the appetite of local financial institutions to offer very attractive multi-family financing, primarily in the Garden State.
Well-capitalized and smaller institutions, including Investors Savings Bank, NVE Bank, Kearney Federal, North Jersey Community Bank and Oritani Bank, are actively sourcing new transactions.
In April, Investors Bancorp, the parent company of Investors Savings Bank, purchased $575 million of deposits and 17 branches of Millennium bcpbank. The bank, which has been quite active in providing multi-family financing over the past 18 months, continues to be bullish for these loans.
Kevin Cummings, the president & CEO of Investors Savings Bank, said on my television show last month that this year the bank intends to provide at least $1 billion in mortgage financing with the majority in New York City multi-family residential market.
Last week, a commercial loan officer at mutual bank NVE Bank, operating since the 1880s, sent out an e-mail to brokers and owners of residential buildings that they are interested in providing five-year fixed-rate multi-family residential loans in New Jersey at a 5.5 percent rate with a 25-year term and amortization. The bank’s maximum loan is $10 million, with a sweet spot of $3 to $5 million. The loans would be underwritten with a loan-to-value ratio of 75 percent requiring debt service coverage of 1.25.
On the same day, a New Jersey mortgage broker sent out an e-mail announcing that a New Jersey-based lender has now offered fully leveraged loans at a rate of 5.25 percent for transactions below $5 million. The memo says that the bank has internal pressure from their investors to lend heavily on real estate in New York and New Jersey. “There is a lot of flexibility in their terms as their mission has been not to lose a single deal in this dollar range,” the e-mail says.
According to sources, Sovereign Bank, a subsidiary of Santander Bank of Spain, is interested in lending $3 billion in multi-family financing. Those sources indicate that the bank is offering five-year loans at pricing between 4.75 to 4.95 percent for low leverage transactions.
The $42 billion New York Community Bancorp, considered one of the preeminent lenders for multi-family financing, hopes to lend up to $5 billion in 2010.
Other active banks that are pursuing multi-family financing include Dime Savings Bank of Williamsburgh, M & T, Capital One, Apple, Ridgewood, Flushing and Signature Bank.
The competition is keen for this business especially since the local banks have to have to compete with the government service enterprises, Fannie Mae and Freddie Mac, which provided more than 70 percent of multi-family financing nationwide in 2009, and continues to be active in the tri-state area.
Needless to say, let’s not forget that insurance companies plan to increase their production in 2010 and are expected to be very interested in lending for this asset class.
One thing is certain, the desire to provide financing will definitely have an effect on investment sales.
Peter Von Der Ahe, vice president of investments at Marcus & Millichap, said. He said his company signed 26 contracts this March, which is “more than double the number of contracts for the March 2009.” He added: “The pace of sales activity has dramatically improved this year if you track contract signings. The closing of the gap between buyers and sellers has been helped by the very attractive sub-6 percent financing which remains available for NYC multi-family residential buildings. The local banks all want to be in the game at today’s prices.”
Michael Stoler is a columnist for The Real Deal and host of real estate programs “The Stoler Report” and “Building New York” on CUNY TV and on WEGTV in East Hampton. His radio show, “The Michael Stoler Real Estate Report,” airs on 1010 WINS on Saturdays and Sundays. Stoler is a director at Madison Realty Capital as well as an adjunct professor at NYU Real Estate Institute, and a former contributing editor and columnist for the New York Sun.