Scott Singer, principal and co-lead of Avison Young’s Tri-State Debt & Equity Finance Team, is seeing a market in which there is debt capital available for all kinds of transactions in New York.
“Financing remains available. It is not easy, it is not cheap, but it remains the case that there is liquidity to finance and investment in projects of all types in New York,” Singer told Real Estate Capital USA.
The firm last week closed a $63 million financing on behalf of Rose Associates for an eight-property portfolio of parking, retail, and professional office condominiums. It also lined up a $28 million loan for 1430 Broadway, a 22-story office building on 40th Street for Steinberg & Pokoik and the Gural and Levy families.
The financings tell a larger story about financing assets in New York. “It still may be very challenging to finance a particular property based on the debt load or the metrics of the deal, but we are not in a broad liquidity crisis. We are in an environment where the metrics of financing have changed in a way that is uncomfortable for borrowers,” Singer said.
While there is financing broadly available, not every project will find it available at a level that is comfortable for its existing owner, Singer said. It continues to be very challenging to finance or refinance certain projects based on the debt load that exists at that property or the metrics of the deal, he added.
“One of the benefits of there having been such excessive liquidity for so many years prior to today is that even with a meaningful pullback by many parties, there remains a very substantial amount of liquidity, albeit on different terms and sizing metrics.”
Deals are easier to execute on behalf of experienced sponsors with moderate debt levels. “If you take any of those positive factors away, you create significantly more challenges,” Singer said. “As we look today at which deals make sense to bring to market, in order to achieve the lowest rate financing that is available in the market you need to have all of those positive components coming together on one deal.”
Still, for deals that are challenged in more than one way, there remains capital.
“Unfortunately, the capital will be priced at dramatically higher rates than it was necessary to borrow at over the past 10 years or so,” Singer said. “And partly as a result of other challenges in the world, the senior mortgage financing sizing is smaller than it was before.”
A key concern for sponsors is filling the gap between the proceeds of a senior loan and the equity component, with Singer noting there is a robust market for secondary financing – albeit at higher pricing.
“Whatever the size of subordinate financing needed, there is liquidity in the market to invest in those transactions. Depending on the amount of existing leverage currently owed on the property, there could be a good solution or a painful solution. When it is a painful solution, the existing owners are forced to make a decision between moving ahead or trying to buy more time.”
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