Construction lending surges in July to $2.3B, total lending at $9.9B

By Adam Pincus

The volume of recorded construction loans surged in New York City in July, led by affordable housing developments, according to a PincusCo analysis of commercial loans recorded last month. Lenders recorded $2.3 billion in construction loans, triple the monthly average over the prior 12 months of $750 million.

Lending overall was higher than the monthly average, reaching $9.9 billion in recorded loans, which was more than 50 percent higher than the 12-month average of $6 billion, but down from June which was $11.4 billion.

Lenders are executing loans in part because sales remain muted. Of the top 20 loans, only two were for acquisitions.

“Low rates are of course driving a lot of refi’s because values aren’t there for sales but I don’t think that’s a new story since the pandemic started,” said Yaniv Cohen of Leviathan Capital, a capital advisory firm.

The top loan of any type was Stellar Management’s refinancing of One Soho Square, at 233 Spring Street and 161 Sixth Avenue, with a $785 first mortgage provided by Goldman Sachs, Deutsche Bank and Bank of Montreal. The top construction loan was $385 million provided by Wells Fargo to TF Cornerstone for its project in Prospect Heights, Brooklyn, at 595 Dean Street.

Construction lending is up in part because developers are advancing projects with 421a tax benefits. The tax benefit is set to expire in June 2022, which creates uncertainty as developers wait to see if it is renewed and if so, how is it altered.

“Right now most developers we know (and we know a lot), are not buying any more lots due to the uncertainty of the 421a,” Cohen said.

The city financed eight loans totaling $858 million for affordable housing projects of the $2.3 billion of the top 20 loans. No private lender came close.

Most of the top loans of all types were given to veteran New York City developers, reflecting in part the difficulty in obtaining property in the city, but also that it is easier for them to complete deals in an environment with headwinds.

“The largest loans are being made almost exclusively to established, financially-strong, locally-based major owners, and the remainder of the large loan list is primarily affordable housing which is so obviously in great demand,” said Scott Singer, president of the Singer & Bassuk Organization, which brokers commercial loans.

“If we can get more people vaccinated and beat back Delta, then I would expect your large loan lists to expand each month starting in October.”