These 5 Big NYC Projects Are Using Nontraditional Lenders
If it seems like it’s mostly big-time developers getting loans these days, there’s a good reason for that. Goulston & Storrs director Bruce Meyerson, a moderator at our NY Capital Markets Forum tomorrow, says loan-to-cost for construction loans these days is in the 50% to 60% range, compared with closer to 75% or even 80% pre-recession.
Banks are getting stingy and developers are cobbling together capital stacks from more and more nontraditional lenders (or even self-financing).
On Tuesday, we were greeted with news Kushner Cos will be contributing capital as a mezzanine lender for Brooklyn’s first supertall tower. That’s just a week after Howard Hughes Corp announced its South Street Seaport project will be balance-sheet financed.
“If it’s just you or me that wants to build a little building somewhere, we’re screwed,” Bruce says.
Here’s a look at five major projects in NYC’s pipeline that have turned to nontraditional lenders.
1. 9 DeKalb & 340 Flatbush Ave Extension
Kushner Cos will act as a lender to JDS Development for this 73-story residential tower adjoining a landmarked building that'll have 140k SF of retail space and around 400 residential units, according to The Real Deal. Kushner Cos reportedly has a plan to issue mezzanine debt and preferred equity in the range of $20M to $500M with terms as long as five years, but this loan's amount and term aren't known yet. The project’s capital stack will include a $115M loan from a subsidiary of Fortress Investment Group, but the project hasn’t yet obtained construction financing, and it’s not clear whether that’s what Kushner Cos is providing.
2. 47 Hall St
RXR Realty closed on the $161M purchase of the 550k SF 47 Hall St complex near the Brooklyn Navy Yard this past March. Along with that purchase came a roughly $90M acquisition loan from Starwood Capital Group. RXR is executing a plan to upgrade the property to attract a mix of light manufacturing and creative office tenants. That repositioning is possible in part through an additional $71M loan from Starwood. RXR itself is a landlord-turned-lender, and reportedly had about $500M in debt deals in the works as of this past February.
3. 15 Hudson Yards
The Children’s Fund, a British-based hedge fund, is putting $850M in construction financing into Related Cos’ 70-story mixed-use tower at 15 Hudson Yards. News of the deal first surfaced this past fall. The project will have 285 market-rate condos and 106 affordable rental units. The affordable rental units are financed through the New York State Housing Finance Agency, which offers low-interest loans to developers who include affordable components in residential projects. The Children’s Fund, helmed by Christopher Hohn, has issued construction debt for projects by other prominent developers, such as Larry Silverstein and Harry Macklowe.
4. Industry City
SL Green is issuing a mezzanine portion as part of a $220M financing package to recapitalize existing debt on Jamestown, Angelo Gordon and Belvedere Capital’s 6M SF Industry City complex in Brooklyn. Bank of China is doling out the senior portion of the debt. Exactly how the split between the two lenders breaks down isn’t clear. The current ownership of the 16-building complex is undertaking a $1B plan to reposition it for creative office and light manufacturing use.
5. 196 Orchard St
While on the subject of SL Green, last April the REIT closed on a $97M loan to Magnum Real Estate Group and Real Estate Equities Corp to acquire and start construction on a residential project at 196 Orchard St on the Lower East Side. The acquisition cost for the site was about $75M. When Bisnow spoke with Magnum founder and president Ben Shaoul earlier this month, he said the project’s 94 units could make use of a grandfathered-in 421-a tax abatement if it makes sense for the project. The residential units are being marketed as condos, mostly in the $1M to $3M price range. Equinox has committed to a retail lease for a gym in the building.
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