Changes in finance market inspire creative solutions.While development of residential real estate projects in New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of continues at a strong pace, financing for new condominium condominium In modern property law, individual ownership of one dwelling unit within a multidwelling building. Unit owners have undivided ownership interest in the land and those portions of the building shared in common. projects has become more difficult to procure To cause something to happen; to find and obtain something or someone. Procure refers to commencing a proceeding; bringing about a result; persuading, inducing, or causing a person to do a particular act; obtaining possession or control over an item; or making a person as lending institutions Noun 1. lending institution - a financial institution that makes loans financial institution, financial organisation, financial organization - an institution (public or private) that collects funds (from the public or other institutions) and invests them in tighten requirements in order to mitigate mit·i·gate v. To moderate in force or intensity. mit  i·ga tion n. risks in a changing real estate
market. Lenders are being more selective--looking for the best projects
in the best locations by the best developers. Developers have responded
by proceeding with more creative economic structures that include
providing additional income-producing uses in their projects in addition
to straight condo development to reduce lender risk.
As such, we are seeing more projects that call for development on leased land in the cond-op format; developers stretching to increase the development potential of their sites through air rights purchases and inclusionary housing; and a greater focus on mixed-use mixed-use adj. Containing or zoned for commercial and residential facilities or development: a 40-story mixed-use tower; a mixed-use parcel of land. projects with more base retail, hotel components, residential rentals and even storage facilities and schools. All of these efforts are designed to bring down the construction lender's break-even point break-even point - In the process of implementing a new computer language, the point at which the language is sufficiently effective that one can implement the language in itself. on its loan and reduce the risk associated with the residential condominium portion of the project. In a changing financing market such as this, it is more important than ever for developers to do their homework before seeking construction financing. As lenders tighten their criteria and interest rates rise, it is also more important than ever to consult with a qualified mortgage brokerage and advisory firm. While quality developers may be able to secure financing through existing lender relationships, experienced financial consultants can save their clients substantial fees and interest by making available different sources of capital and by building competition among a broad spectrum of lenders. On average, The Singer & Bassuk Organization enters into discussions with approximately 25 lending institutions per project, creating substantial value four our clients by obtaining optimal terms, highly competitive pricing and structure, and insight into project dynamics. Now more than ever, this can make the difference in whether a project obtains the financing it requires. Condominium development is overwhelmingly the project type of choice in New York City New York City: see New York, city. New York City City (pop., 2000: 8,008,278), southeastern New York, at the mouth of the Hudson River. The largest city in the U.S. for lenders today. Residential conversions in a good location are still very attractive to lenders, as they start with an existing structure, thereby reducing construction risk. Marketing and construction time is shorter so they save on construction costs and interest. This year approximately 1,500 rental units will come to market, which is down 70% from levels several years ago. The lack of supply in rental housing is driving up rents to levels where these projects will again become feasible. Three years ago, I financed a rental project where the land cost per square foot was approximately $100. Today, in the same location, I recently financed another project where the land cost was $350 psf. Construction costs three years ago were $175 psf. Today it's it's 1. Contraction of it is. 2. Contraction of it has. See Usage Note at its. it's it is or it has it's be ~have $400. During this period, while rents have increased, they have not increased to a level to cover higher construction and land costs. Three years ago, 75% of my financing assignments were rentals, 25% condos; today it is 90% condos, 10% rentals. Interest rates are rising, but at today's levels they are not a factor that will make or break the financing for a project. If they increased another 200 basis points, it would then start to be a factor. While lenders are being more stringent in their requirements, the capital markets still view New York very favorably fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. . BY RICHARD BASSUK, PRESIDENT, SINGER & BASSUK ORGANIZATION |
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