Financiers Step Up For Downtown Development
Despite the apprehensive noises from many observers with regard to
the future of Downtown Manhattan, capital providers seem more eager
than ever to place their money there. Nobody wants to over-commit,
and thus Downtown transactions tend to be rather complicated—and
more time-consuming than formerly—but the money’s there for the
right projects.
Richard Bassuk, president of the Singer & Bassuk Organization and
chairman and CEO of the Bassuk Organization, remarks that financing
Downtown remains challenging, competitive and interesting.
“Credit Suisse First Boston led the financing of the Moinian Group’s
development at 123 Washington St., which amounted to $305 million,”
he reports, “and they brought in two other providers of senior debt and
a whole slew of mezzanine lenders, creating a very complicated deal
with various tranches involved. That was a hybrid financing deal and
we had to do a lot of slicing and dicing to bring it off.”
A deal like that is usually a balance sheet transaction, “since it’ll be
paid off in three years,” says Bassuk. “Construction lenders are usually domestic and foreign banks, and specialty lenders.”
Bassuk is now starting to put together permanent financing for
the Moinian Group’s 95 Wall St., a residential conversion where initial leases are going out at $70 per sf. He’s also refinancing the
Ocean, another Moinian residential project at 17 Battery Pl. for
which he provided the original financing 10 years ago, and he’s
adding to the mortgage at 90 Washington St., which had been under
Liberty Bond financing.
“Refinancing is very competitive now,” he says. “Most New York City
owners like to hold their properties, so they’re constantly refinancing.
You build a project, stabilize it and put a mortgage on it, and it’ll support
additional financing over time as the net operating income rises.”
The big challenge Downtown, Bassuk says, is finding a tax abatement to replace the Section 421g program, which expired in June 2006.
“That program abated your taxes for eight years, then exempted
your taxes for improvements for 10 years,” he explains. “We’re working with the Housing Finance Agency and the Housing Preservation
and Development Corp. to replace 421g, and we’re making good strides.
If you can eliminate real estate taxes to the tune of $10 to $12 per sf in
the early years of the project, that’s a tremendous leg up.”
Knowing how to take advantage of such programs, Bassuk says,
is the key to success Downtown, especially as more lenders overcome their longstanding fears of Lower Manhattan and create more
competition.
“Some lenders still will just not go Downtown,” he says, “but that
prejudice is far less prevalent now than it was 20 years ago. Institutional lenders now see Downtown not as the outskirts of civilization,
but as an area with a large infrastructure and a large mass of people.
They want to have a presence in permanent financing down there.”
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