NYC Real Estate Lending Dropped 17% In 2016

I write about real estate– amazing homes, market trends and cities.

New York City Mayor Bill de Blasio at a ground-breaking ceremony for One Vanderbilt Avenue in October. One Vanderbilt will be the second tallest office tower in the city. In 2016, the developers received a $1.5 billion loan with Wells Fargo as the lead syndicate. That was the largest commercial real estate loan in NYC last year. (AP Photo/Bebeto Matthews)

Lending for New York City real estate projects was down in 2016, particularly in the multifamily sector as the rental apartment market wavers. Nevertheless, some big players are increasing their bets in the Big Apple.

Commercial real estate data startup CrediFi analyzed $180 billion in annual commercial lending for New York City and found that Deutsche Bank was the largest commercial real estate lender in 2016. Germany’s biggest bank inked between $5.5 billion and $6 billion in NYC loans last year. Among Deutsche’s major deals of 2016 was the origination of a $396 million loan to Related Companies to refinance 85 10th Ave.—former Oreo factory, current Google office.

The bank doled out 37% more dollars toward NYC real estate projects in 2016 than in 2015. The increase was due to a larger number of deals, not higher loan value, since Deutsche Bank’s median loan decreased to $45 million last year from $74 million in 2015.

Top 10 lenders 2016.

CrediFi

Top 10 lenders 2016.

Of the top ten New York City lenders of 2016, Citigroup had the highest growth, giving out 111% more loan value than in 2015 for a total of $1.5 billion to $2 million. The growth catapulted the bank to the number seven spot from 21st on CrediFi’s list a year earlier. Another big gainer was Blackstone, which took the number eight spot after not even cracking the top 100 in 2015. The private equity giant’s climb reflects non-bank-lenders’ increasing role in this market.

“Alternative lenders’ increasing interest in the commercial real estate market appears to indicate they are taking over some lending from traditional banks and picking up some of the slack from the slowdown in CMBS lending,” notes CrediFi in the report.

Overall NYC commercial real estate lending was down 17% last year. That’s a drop from $99 billion in 2015 to $82 billion last year. Four of the top 10 lenders clocked declines in either dollar amount origination—no. 9 Morgan Stanley and no. 10 M&T Bank—or loan origination—NYCB and no. 2 Signature Bank—from 2015 to 2016.

The biggest drop was from New York Community Bancorp. A 53% decline in loan amount caused the bank to slip from the top of the list in 2015 to number five. In 2016 the bank gave out between $3 billion and $3.5 billion.

NYCB’s lower lending volume may reflect an effort to keep its total assets bellow $50 billion, posits CrediFi, since that would make it a systemically important financial institution under the Dodd-Frank Act and lead to greater regulatory scrutiny. “If the SIFI threshold is raised, as some have suggested doing, NYCB lending may well head back up,” writes CrediFi.

NYCB’s decline is also a symptom of a broader slowdown in multifamily lending, the local bank’s bread and butter. Signature Bank’s 13% drop in loan amount also reflects that decline. Lending for multifamily projects declined 23% last year from $38 billion to $29 million. Regulatory caution surrounding the speed of multifamily lending is in part to blame for the decline.

That caution may be wise. Average net rental prices in Manhattan have declined for seven consecutive months, according to appraisal firm Miller Samuel. Landlords have been offering concessions, on average 1.2 months free, to lure renters and without eroding the underlying value of the building. According to Miller Samuel the average rent with concession was $3,260 in February, compared to $4,118 before concessions.

Gabby Warshawer, head of research at CityRealty, notes that one reason for the concessions “is that if a landlord has higher rents on the books, it makes the property more valuable in general, thus increasing the value when the landlord looks to sell or refinance.”

–source”cnbc”