Steven Schnall issues mortgages to immigrants and builds luxury condos on the side, but can he keep it going in a tough market?

The Quontic CEO issues mortgages to immigrants and builds luxury condos on the side, but can he keep growing both businesses in a tougher market?

Steven Schnall
Steven Schnall

About a year ago, Taylor Swift’s security team knocked on the door of Steven Schnall’s Tribeca home with an unusual request. Swift, who lives in a penthouse next door, didn’t have indoor parking, which made her vulnerable to paparazzi waiting to snap her photo whenever she stepped out of a car and onto the curb.

The security team wanted to know if Schnall would be willing to sell his garage.

The 50-year-old, who occupies a townhouse unit that’s part of the nine-story condominium he co-built at 15 Leonard Street, demurred. So Swift’s team asked if they could buy the building’s penthouse instead. Didn’t that come with a garage spot? And wouldn’t they be able to blast a hole in the basement to connect the two buildings, allowing the pop singer to get from a car to her apartment completely out of sight?

“I’m like, well, the only problem with that is between her basement and my basement is this lap pool that I have in my apartment,” Schnall recalled. “And they’re like, ‘What if we shorten your lap pool?’ I said, ‘That’s a big ask’.”

In the end, no agreement was reached, and Swift bought a townhouse at 153 Franklin Street, which also neighbors her home.

Like any Tribeca condo developer, Schnall is used to dealing with celebrities by now. But his usual clientele is a little different: middle-class immigrant mortgage borrowers in Queens.

The building at 15 Leonard Street — which Schnall built with his wife, Sherri, Romy Gold’s Gold Development and investor Ron Moelis of L+M Development Partners — was a side project. Schnall’s full-time job is heading Quontic Bank, the Astoria-based community lender he bought and rebranded in 2009.

Quontic, which issues between $350 and $400 million in residential loans a year, is among a handful of New York City banks catering to immigrants. About half the bank’s borrowers are foreign-born and 25 percent are Chinese, Schnall estimated.

Immigrants make up a growing share of New York homebuyers, but they often face challenges when it comes to landing a mortgage. Language, cultural barriers and the complexity of the U.S. banking system can create serious hurdles, said Christopher Kui, the former executive director of Asian Americans for Equality — an advocacy group that serves immigrant New Yorkers, both Asian and non-Asian.

“We don’t have the same mortgage system here,” Kui told The Real Deal for a story on New York’s Chinese real estate market that ran in October 2016. “In China, lenders underwrite a mortgage based on the value of an asset. Income is less important.”

Moreover, many first-generation Chinese Americans pool their down payment through gifts from relatives — a practice that can disqualify them from conventional mortgages, according to sources.

“Most banks won’t allow all the down payment to be gifted,” said Schnall, who was sitting in Quontic’s orange-painted headquarters in February. “We understand that that’s how it works in this community.”

He noted that focusing on immigrant borrowers was a byproduct of operating in Queens, the city’s most diverse borough. “I can’t say that it was intentional, but it was inevitable,” he said.

Quontic had $351.9 million in assets at the end of 2017, up from $239.3 million a year earlier and $179.9 million in late 2015, according to figures from the bank. And observers say the lucrative market it serves is bound to keep expanding.

“The immigrant population in New York is growing,” said Jessie Lee, the managing director of Renaissance Economic Development Corporation, which helps immigrants land small-business loans. “The American dream is owning their own home, right?”

15 Leonard Street

Quontic — one of five banks in NYC certified as a community development financial institution by the U.S. Treasury Department — also lends on unconventional commercial properties, including both churches and strip clubs.

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Schnall grew up in Clearwater, Florida, and moved to New York in 1989 at age 22. After a brief stint as an accountant at PricewaterhouseCoopers, he fell into the mortgage business and co-founded his own debt brokerage, New York Mortgage Corp., in 1992.

Six years later, the company branched out into originating loans, and in 2004, it went public under the name New York Mortgage Trust. But as the housing market showed the first signs of unraveling in 2007, Schnall sold the company to IndyMac Bank for $13.4 million.

New York Mortgage’s other co-founder, David Akre, who now heads the residential loan advisory firm Whole Loan Capital, described Schnall as a “good salesperson” and efficient worker. “He can get more done in two hours than most do in a day,” Akre said.

After leaving New York Mortgage, Schnall said he was “quasi-retired” for about two years until he came across Golden First Bank — a Great Neck-based community lender that was about to go under in the wake of the financial crisis. Schnall, his partner and former employee George Lazaridis, and a group of investors bought the bank for an undisclosed price, moved it to Astoria and renamed it Quontic.

“The institution was in disarray,” Lazaridis recalled. “The challenge was to fix the mess.” It helped that the bank’s previous owner agreed to take on the institution’s bad loans as part of the deal, he added.

By that time, the Schnalls had already become part-time developers. Their first project was 2 North Moore Street, the conversion of a two-story commercial property in Tribeca into an elaborate mansion. They bought the property in 2005, redeveloped it and sold it for $24 million in 2010 — at the time a record price for a downtown townhouse.

Then in 2012, Schnall and his wife announced plans for the six-unit Tribeca condo project at 15 Leonard Street. Sherri had found the property, which was home to two garages, by walking through Tribeca and knocking on doors.

Through an acquaintance, they were introduced to Moelis and BFC Partners’ Don Capoccia, who both agreed to invest in the project (though Capoccia was later bought out.) Gold Development also received a small stake, on top of a project management fee, and became the property’s hands-on developer.

After the Landmarks Preservation Commission approved the project in July 2012, it took almost four years to get built and faced several hurdles along the way. In early 2015, Christopher Rolf, the owner of the neighboring property at 17 Leonard sued the developers, alleging that the construction was causing damage to his building, and Schnall claims the lawsuit cost the developers a year. The suit is ongoing, court records show.

And that wasn’t the only obstacle. Amid a glut of new construction, workers were hard to find, delaying the project. “Steven got caught up in the labor shortage crisis,” said Andrew Heiberger, whose brokerage, Town Residential, handled sales at the property.

In the end, the developers sold four of the six units for $27 million. Moelis took the penthouse — which he briefly listed for sale but ultimately kept as a rental — and the Schnalls took the attached townhouse.

Now, the bank executive and sporadic developer is focused on another emerging market for those in the real estate game: Harlem.

Seven years ago, he and another partner, Howard Lev, began snapping up distressed properties in Bedford-Stuyvesant and St. Albans, Queens. “The market was still weak, but people started to feel there was upside,” Schnall recalled.

After buying, renovating and selling more than two dozen homes in those outer-borough neighborhoods, the partners turned to Upper Manhattan, where they are working on several projects in 2018.

Those include the conversion of two townhouses into condos and a handful of single-room-occupancy buildings into rental apartments, as well as a 15-unit ground-up rental apartment and retail development on the corner of Amsterdam Avenue and 158th Street.

Despite the condo conversions, the partners’ ultimate strategy is to buy and hold, according to Schnall.

“Those houses that we sold for $800,000 or $850,000 are already worth almost $2 million today,” Schnall said. “So, the lesson it taught me was that adage you hear: The billionaires in real estate don’t sell anything, ever. That’s how you accumulate a fortune.”