Weekend Interview: Northwind Group Founder Ran Eliasaf On Funding 125 Greenwich And Steadfast Faith In NYC's Condo Market

This series gets into the heads of the decision-makers of CRE, the people shaping the industry by setting investment strategy, workplace design, diversity initiatives and more.

Last month, the long-stalled condominium skyscraper 125 Greenwich in New York’s Financial District got back on track thanks to the developers locking down more than $300M in new construction financing.

The lender that allowed the builders to resume work on the 273-unit luxury tower, designed by the late Rafael Viñoly was Northwind Group, a private equity firm with $3B of equity and debt investments across residential, commercial, senior living and healthcare properties.

The property at 125 Greenwich has been mired in lawsuits and foreclosures — but Northwind founder Ran Eliasaf told Bisnow he feels completely confident in the project and the borrowers’ ability to repay, now that Fortress Investment Group is involved in the deal.

It is not the only bet Eliasaf’s firm is making on New York City’s luxury condo market; last year it provided $62M to the developers behind NOVA, a condo development in Long Island City, and a $162M loan to Michael Shvo, who is building the Mandarin Oriental Residences, Fifth Avenue. In this interview, Eliasaf talks over how he assesses loan deals and why he thinks there is plenty of demand for more condos in New York City.

This interview has been lightly edited for length and clarity.

Bisnow: So, just looking at some of the loans that you've provided recently, they've been loans to projects that many would consider high risk. How would you describe your lending strategy in the current market?

Eliasaf: I wouldn't consider them high risk at all. We're lending on a very attractive basis, to very good sponsors on high-quality assets. If you look at 125 Greenwich, for example, that we just closed, I mean, Fortress is an amazing sponsor. They have significant equity in the deal. You look at our loan basis, I think it's situated at a very healthy place and the building will get finished.

We actually look at the market right now, we're seeing very low amount of inventory, historically speaking. There's I think about 4,000 units on the market right now.

Bisnow: That loan that you provided to 125 Greenwich, it's a high-end condominium project. And as you say, the sponsors are very well known, but it has been stalled for years and it was caught up in foreclosure threats. What made you want to put money into something like that, that has had problems for such a long time?

Eliasaf: The issues you are referring to are in the past, relating to the prior lender, prior sponsor.

Our loan, and the deal Fortress has struck, has solved those issues and created a very clear path for completion of the project. It's actually pretty straightforward. So as long as there's financing, as long as there's all the approvals, there's nothing standing in the way of this project being completed now. Sometimes projects get kind of a bad reputation when things go south, but a lot of the times, the solutions are pretty simple, if you have the right capital and the right partners step in.

Bisnow: What did you do for due diligence on something like this? Did you have to go back through all the old issues or did you just look at what the pathway forward is?

Eliasaf: Well, you look back mostly on to make sure there's no more liens. Second thing you want to look at is if everything that's been installed is still covered by the warranties and that it will be in good working order, and that's covered by everybody that installed it. So that's looking back. Looking forward, you want to make sure that the budget is right, that the team that's on the ground has capabilities to do it.

The thing about this project is that everything, for the most part, has already been bought. So you don't need to go out and start over. The due diligence was very thorough.

Bisnow: Were you attracted to this particular deal because of its complexities? It was at one point the buzziest project downtown, it was like downtown's answer to a 432 Park. Is there something that attracts you to being part of that, in a way?

Eliasaf: We just look at, 'Does it make sense?' And the answer was yes. We look at the project, we look at our basis, we look at the sponsor, and we look at the market. And I think these units will be very well received by the market. A lot of one-bedrooms make up a significant part of this portion, that's not units that are gonna get sold at $4M, $5M, $6M, $7M. It's a lot of units that will be sold at, you know, what we call middle-market pricing, which is a very deep market.

Bisnow: It's not the first bet that you've made on New York's condo market. Last year, you provided $62M to the developers of NOVA, which is a big condo development in Long Island City. You also provided a loan of $162M to Michael Shvo, who's building the Mandarin Oriental up on Fifth Avenue. So tell me a little bit about your faith in the market, considering it has been described as a glut in recent years and it has been the cause of some borrower distress. Why are you so sure that the loans will perform?

Eliasaf: We actually think the situation right now is exactly the opposite of a glut. There is a shortage of supply. No one really built new products in the last three years since Covid. All these projects you mentioned, and others, have all started pre-Covid, shovels hit the ground pre-Covid. So when you look at the supply of condos in Manhattan right now, we're looking at all-time, almost historical low amount of supply of new product out there. We think the next three years are going to stay that way. So the next three years looks pretty attractive on the supply side.

Obviously right now, we're seeing a diminishing demand because of the higher interest rate environment and general uncertainty in the market. So demand went down a bit, but you haven't seen prices go down. So we're actually very bullish right now on the Manhattan market, especially on the condo side, especially on the middle-market condo.

I think at least half of our business is going to be supplying loans to those type of projects, multifamily as well. There's a shortage of supply in multifamily units too, since they stopped 421-a and that's why we're seeing rents the last three years went up incredibly. It's all because of shortage of supply.

Bisnow: When you say middle-market, what does that mean to you? What sort of price point are you looking at?

Eliasaf: 1 to 3 million.

Bisnow: And you believe that that is an area of great interest — of great growth — for the consumer?

Eliasaf: It's just the fact that there's a wider pool of buyers for those price ranges. That's the biggest part of the market and the types of people who can actually afford to buy.

Bisnow: So most of it's going to be on properties that are under $4M. That's nowhere near luxury in the New York market.

Eliasaf: Right, and if you look at the demand, even at the Mandarin Oriental, which we financed, if you look at the type of units there, there's also a lot of units there that are priced under $4M. That is a super-high-end, super-luxury building.

Bisnow: So you can get a unit in the Mandarin Oriental for less than $4M?

Eliasaf: Yeah, on the lower floor and a smaller unit, but the answer is yes.

Bisnow: You did file to foreclose on the Sinhala Development rental in Nomad. What's the latest there? And do you expect to be doing more foreclosures?

Eliasaf: I can't discuss ongoing foreclosure and litigation. But I can tell you that we're working hand in hand with all borrowers, even borrowers that couldn't meet loan criteria and and working together to try and find a solution that works.

Bisnow: Do you have many borrowers that aren't meeting their obligations at the moment?

Eliasaf: No. No, that's the only one.

Bisnow: Do you predict there could be more though, considering what we're seeing in the market at the moment, so much uncertainty?

Eliasaf: I would say that, because the interest rates have risen, which means the loans are more expensive because they're all floating-rate loans. So definitely borrowers need to come up with more cash to support the loan, and I think that's happening across the country across all asset classes.

And, as in any case, any borrower who took leverage and doesn't have the ability to service it, there's going to be trouble. And it's going to start with smaller developers, smaller owners that are syndicated maybe to a smaller group of investors. When they need to do a capital call to support the debt, or when the debt is going to come up and reaching maturity and they're going to try and refinance, they'll find that the new lending environment is much more expensive.

They're going to have to bring more capital, and those that won't be able to do it will have issues. 

Bisnow: How would you approach those issues? Are you expecting to provide more time or are you expecting to have to be tough?

Eliasaf: It's all about the relationship. If the borrower is being transparent and honest, working together, coming up with ideas, solutions and listening, then yes, our tendency would be always work to provide more time and help them see through the other side. When the other party is not cooperating, not being transparent, it's sometimes tougher.

Bisnow: What sorts of ideas can people come up with in this sort of moment when really they're out of money and they're out of time?

Eliasaf: It starts from, OK, maybe add a little bit of recourse, right? Mostly loans are nonrecourse but maybe add a piece of recourse and that would help. Maybe there's a mutual piece of collateral. Maybe you know, sell faster and kind of give up on the dream of making 2x on your capital and just adapt to the market and sell faster in a lower environment. Or maybe bring a partner and then capitalize the project. There are various solutions.

Bisnow: Obviously, you're not expecting this to happen at all with the loans you've provided on condos in the last year and a half. But what if they can't pay and you have to take them back? Would you start selling the properties yourselves? You obviously have to work from a worst-case scenario. What is the worst-case scenario and how would you approach it?

Eliasaf: Oh, worst-case scenario. First of all, you know, if you're diligent as a lender, you recognize the red flags, enough time in advance to actually solve the issues before they actually become an issue. And I think seldom are the cases where you just wake up and, 'Oh, I'm being handed the keys right to the property.' Usually you see it a mile away.

We're the type of lender that tries to avoid getting to the property. It's actually something we work very hard for the borrower to not get to the property and find the solution, find an extension. So most of the times, we would get replaced by a different lender or provide an extension.

Bisnow: Are there other sort of stalled deals in a similar scenario to 125 Greenwich that you're looking at around the city that have needed capital that haven't had access to capital — and now that you're looking for opportunities that you might be approaching?

Eliasaf: Yes. We're having the busiest time right now that we had since we launched the debt funds, we have almost a billion-dollar pipeline right now that we plan to close. Every deal is different. So I wouldn't say every deal like 125 Greenwich. But a lot of similarities that you know, require the same type of solution that is replacing different lender and coming up with the capital structure to enable these projects to get to the finish.

Bisnow: And now these condos in New York, largely?

Eliasaf: Some are rentals, some are condos.

Bisnow: But mainly residential?

Eliasaf: Right now for us, it's all residential. Mostly in New York. We are working on a deal in Philly and we're looking at deals and other parts of the country, but only major kind of gateway cities.

Bisnow: Would you touch office? I've heard that the office asset is un-financeable at the moment. Do you agree?

Eliasaf: I read that's what the banks are saying. For us, we will definitely consider office at the right location, basis, sponsor. I think offices just need to adjust. The office market will start to find a new equilibrium, but it's going to take time — it could take two or three years. Eventually, you will see supply kind of disappear and get converted to residential. Plus, for an office deal to make sense now, it has to be pretty low basis.

Bisnow: Are people approaching you yet?

Eliasaf: Honestly, not yet. I haven't seen any significant office deals in the last few months. I think everybody is maybe a bit shellshocked still. But I'm sure in the next quarter, we're going to start. We have seen mezz loans on office buildings, but we chose right now to avoid them.

Bisnow: Give us a bold prediction for the rest of the year.

Eliasaf: I think banks will stay a bit out of the game in the next quarter or two, and you're gonna see more and more loans get done by debt funds like ours. I think the resi market is gonna surprise people and its resiliency in New York City. And I think people will be disappointed, the prices are not going down as they expected. And I think on the other hand on commercial real estate transactions ... I think there's no more [3% cap rate], there's definitely even no more 4-cap. It's all going to be edging towards the 5-cap range and higher.

Bisnow: What is your weekend routine or favorite weekend activity?

Eliasaf: Spending quality time with the kids. I coach my son's soccer team and I recently started coaching my daughter's soccer. And figuring out the fun family activities.

Bisnow: Do you live in the city? 

Eliasaf: No, I actually live in New Jersey.

Bisnow: So you're big on the New York resi but you're not living in New York at the moment?

Eliasaf: I'm in New York every day. Our office is on 42nd and Fifth. We have a dog and two cats, we can't live in the city.