Financing, neighborhoods and quantitative easing were all on the agenda at this month’s breakfast meeting of the Real Estate Networking & Transactions group (RENT), which featured a panel of local developers.
Lenders are making more money available for development, according to Ryan Nelson of Sherwood Equities, who said the availability of financing from mortgage REITs and other “big players” may have reached the point of eliminating the need for joint venture partnerships.
“You’re starting to see the 80-to-85 percent loan-to-value guys coming in, totally non-recourse, but pricing will hit eight percent and start to push up,” he said. “That’s new to us, and we’re starting to see it a lot more.”
Ken Colao, president of the construction and development services firm CNY Group LLC, said that larger construction loans are more difficult to find.
“On the small and mid-sized side there seems to be more lenders in play, however recently on two very large projects where construction loans have exceeded $600 million, our clients are very nervous, saying that there’s only two players in the market — Wells and Deutsche Bank — and they’re not going to be there forever,” he said. “They have design teams working 24/7 … before those level of loans disappear.”
In response to a question on the prospect of the Federal Reserve ending its program of quantitative easing, Elysa Goldman of Triangle Equities explained that the move would cause interest rates to rise.
“The real estate prices are going to have to go down a drop because of your interest rates going up,” she said. Triangle is working on projects in Staten Island and the South Bronx with the EDC, and Goldman predicted that St George, on the northern end of Staten Island, will become one of the city’s next hot neighborhoods.
In addition to Tirangle’s 500,000 s/f mixed use project at the ferry terminal, dubbed Lighthouse Point, the neighborhood is slated to soon become the home of the world’s largest Ferris wheel.
“There over two million people now, who take the ferry as tourists, and that’s only going to double with the Ferris wheel,” she said. “It’s free — people take it just to take it — and we want to give them a reason to come off the ferry and stay a while.”
One question the panelist were not ready to answer was a request for their perspective on the mayoral race. But Goldman did share one effect that the change of administration has on city-sponsored development projects.
“They rush to get everything done before the end of the administration,” she said. “The pressure we’re under to get these projects into the ground is incredible.”