Construction lending sees green shoots

Recent financing for ground-up developments include a $750m loan funded by Otera Capital for the first phase of Tishman Speyer’s Harvard University Enterprise Research Campus.

Construction lending appears to be rebounding in the US commercial real estate market, with banks, debt funds, insurance companies and other lenders providing substantial financing packages for ground-up developments.

Among the financings completed was a $750 million construction loan funded by Otera Capital to fund the first phase of Tishman Speyer’s Harvard University Enterprise Research Campus. The loan, announced on June 16, is the largest construction financing to be completed this year and will allow the New York manager to complete the project over the next three years. Tishman Speyer also lined up $150 million of construction financing for a Washington, DC retail renovation.

Other financings included a $114 million construction loan funded by Apollo Global Management for Aurora Capital Associates, which is building a ground-up condominium property at 140 Jane Street in New York, and a $425 million loan funded by a consortium of banks that included M&T Bank, US Bank and Bank of China for BLDG Management Company. That loan will be used to construct a 69-story, mixed-use residential tower in Queens, New York.

New lending platforms

At the same time, Real Estate Capital USA tracked a number of newly launched or expanded lending platforms. Los Angeles-based Dekel Capital launched a $100 million real estate credit platform and aims to originate preferred equity deals of $2 million-$10 million. 

Shlomi Ronen, founder and managing partner of the merchant bank, says the firm prefers opportunities in the $3 million to $8 million range. “The dislocation in the capital markets has placed a severe burden on today’s real estate owners, especially those who are exiting construction loans or facing maturing senior debt and are not in a position to sell,” Ronen says. “With lower LTVs, increasing operating costs, and pressures of covenant compliance, lenders are requiring owners to come up with more equity or risk losing financing – or worse, their asset.” 

Meanwhile, Fidelity Bancorp Funding is gearing up to expand its small-balance bridge lending platform. 

“A lot of the bridge loans present themselves because there is some sort of transitional period, which is what we are trying to solve for,” says Charlie Woo, president of the firm’s bridge lending platform.

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Source: Cushman & Wakefield