Competition up with $5B of NYC 3Q construction loans; Bank Leumi top private lender
By Adam Pincus
The number of lenders competing to provide construction loans rose as construction lending volume for deals recorded in the third quarter of 2021 was the highest level since the onset of the Covid-19 pandemic. Lender provided $5.16 billion in first mortgage construction debt through 106 individual deals of $5 million or more in New York City.
Competition for deals increased as the number of lenders grew from 36 in the third quarter of 2020 to 49 lenders in the same period this year.
Construction loan volume neared the level recorded in the first quarter of 2020, which saw $5.7 billion in 80 transactions. PincusCo is reporting on loan volume by recorded date, and for the first quarter of 2020, many of those deals were closed in December 2019 but recorded in January and February of 2020. The analysis includes only debt recorded in Acris, and combines land loans, building and project loans.
The most active private lender by dollar volume last quarter was Bank Leumi, with $414 million lent through six transactions. The next top lenders were Blackstone Group through its Blackstone Mortgage Trust with one loan totaling $400 million and Madison Realty Capital, with its own $400 million transaction.
The leader last quarter by volume of deals was Valley National Bank, with seven deals totaling $127.5 million. Valley National announced in September it would acquire Bank Leumi USA, the American subsidiary of the Israel-based Bank Leumi Le-Israel B.M., in a merger valued at $1.1 billion. That transaction is set to close in the first half of 2022.
The most active lender overall was New York City, which through various agencies provided financing for 13 construction projects totaling $931 million.
With the increase in loans came an increase in competition for the deals, insiders said.
“In the last few quarters the real estate market in the city is going much better, and lenders are reentering and we see more competition as of late,” said Chris Gregg, national head of real estate for Bank Leumi USA.
“The construction lending market is always pretty active, though it ebbs and flows. We see competition from all the regional banks, the debt funds, private equity, credit unions, the money center banks. It depends on the sponsor, the level of experience. In almost all cases someone is bidding against us on a deal,” Gregg said.
The bank’s top loans recorded last quarter were $130 provided to Izaki Group Investments for its 68-unit condominium project at 310 East 86th Street on the Upper East Side, with a $255 million sell out; a $90 million loan given to Artimus; and a $69 million to Clipper Realty.
In the city overall, Brooklyn had the most construction loans. There were 39 loans totaling $2.46 billion in the borough, lead by two $400 million loans for multifamily projects. Both those loans were from private lenders, Blackstone Group and Madison Realty Capital. Of the Brooklyn loans, $1.1 billion was from private lenders.
By comparison, there was very little construction financing last quarter in Manhattan, with just 16 loans totaling $813.7 million. The bulk of those were provided by private banks totaling $538 million.
There were 34 loans totaling $1.35 billion in the Bronx. Although the majority of the loans were for multifamily construction, the top three loans, totaling $604.6 million, were not. The most valuable loan was $381 million for a 1 million square foot distribution center being developed by Dune Real Estate Partners and Turnbridge Equities provided by Kohlberg Kravis Roberts & Co., or KKR. The second and third loans were given by Zions Bancorporation totaling $223 million, for construction of two charter schools.
In Queens, in contrast, there were only $528 million in loans through 17 deals.
Of the 106 loans construction loans provided last quarter, 66 were provided by banks totaling $2.3 billion, 26 loans were given by private lenders totaling $1.7 billion, and government entities financed 16 loans totaling $1 billion. Only one loan was provided by an insurance company, which was AIG providing $52 million to Clipper Realty.
One of the most-active lenders in prior construction cycles, Bank OZK, recorded no New York City construction loans in the third quarter, even as the lender hit its highest level since 2017, with $2.21 billion in new originations through its Real Estate Specialties Group nationally, The Real Deal reported last week.
In fact, the bank has only recorded two construction loans in the city in all of 2021, which were a $182 million loan for Innovo Property Group in the Bronx, and $70 million given to JD Carlisle Development in Nomad, which was debt following up a larger tranche from 2019.
The city through its Housing Preservation and Development and the Housing Development Corporation provided 11 loans totaling $848 million. Top borrowers included Phipps Houses, L+M Development Partners, Park Tower Group, Sumner Senior Partners and Xenolith Partners.
The city also financed the construction of two schools for a total of $83 million through its Build NYC Resources Corporation.
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