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Michael Stoler Real Estate Newsletter

05/06/2013

Greetings!

This week join Michael Stoler on the television productions of New York Real Estate TV, LLC.

Monday, May 6th  Michael Stoler's guest on "Building New York-New York Life Stories" is Miki Naftali, Chairman & CEO, Naftali Properties.

On Tuesday evening, May 7th , the topic of the Stoler Report-New York' Business Report  is "Medical Schools training the generation of health care professionals.

My guests on the broadcasts include Dr. Allen Spiegel, Dr. Edward Halperin,
Dr. Larry Smith, Dr. Dennis Charney.

The Stoler Report-New York's Business Report now airs a total of 8 times a week on CUNY TV in New York City.

Building New York: New York Life Stories, air 8 times a week in New York City and around the nation on Tuesday night on JLTV & DIRECTV.

Every Monday morning  you will receive the latest real estate article by Michael Stoler on the state of the market an information about the upcoming guests on the productions of New York Real Estate TV, LLC
Sincerely
Michael Stoler

Seems like a return to the peak years of the 2007  for construction financing

Perhaps I am dreaming, nevertheless, when I walk around the city and speak to members of the banking community, the topic of conversation is the quantity of office, residential and hospitality projects under various stages of development.  These developments are not limited to the World Trade Center or developments at or near Hudson Yards; construction is taking place throughout Manhattan, Brooklyn, Queens (especially in Long Island City and Flushing) the Bronx, and even in Staten Island.

A new generation of construction is now emerging on locations which were halted due to the recession.  Developments on midblock locations on the east and west side, as well as on former two and three story mixed use properties and parking garages are prevalent throughout the city.  As one senior lender who prefers to remain anomalous said to me "the new construction is not the high end stuff we were financing last year, but it is a new generation of small construction projects which failed to materialize prior to the recession".

"Lenders are reaching for yield and the logical place is construction financing", said, Matthew Galligan, President, Real Estate Finance, CIT. ""New York is obviously the best market in the U.S. which allows lenders to reach for yield. The economics are demonstrated by an eight year low in supply of residential units on the market. As a lender we are taking real estate and market risk and borrowers are willing to pay for it."

One lender who continued to lend during the recession is M & T Bank. Peter D'Arcy, President, New York City Region remarked "the best opportunities for the bank were available when we supported our customers during a period of limited liquidity from other lending sources. This year, it seems the landscape has changed and borrowers seem to have a lot more choices. Fortunately, our customers appreciate the constituency which we supported their credit needs. We are also seeing for projects today, there has been acute increase in land prices, and it is much difficult to finance transactions assembled in this environment for the break-even levels".

Other regional and national lenders are also bullish on the market for construction financing. "I feel it is a great time to be a construction lender in the New York metro region, despite some increased competition." said, John Gunther-Mohr, Senior Vice President, Senior Bank for Sovereign/Santander. "The loan structure discipline has been maintained to a 65% to 70%, pricing relative to asset classes is reasonable and the fundamentals of the market are very strong and under supplied.  There are still relative numbers of institutions who have expertise to finance construction financing."

"We continue to be active and interested in providing construction financing for residential rental developments in the local region" said Roy Chin, Regional Director, Commercial Real Estate Finance with TD Bank. "Nevertheless, we have not offered financing for sale condominium developments, yet based upon current trends we may enter the market in the near term."

There is also group of lenders, a number who were active prior to the recession as well as others who have decided it is time to step into the arena for financing. The ranks of lenders range from multi-billion banks which include Nataxis, CIBC, U.S. Bank, RBS Citizens, Sovereign/Santander, TD, PNC, Helaba, Deutsch Bank; as well as regional lenders Investors, Popular Community, Valley National, People's United, Bank Leumi, Cathy Bank, Doral, Builders Bank, East West Bank, TriState Capital Bank, First National Bank of Long Island.

Out of state financial institutions that have loan production and regional operations in New York City are also interested in providing financing.

Paulo Garcia, VP, New York City regional office, for Coral Gables, Florida, Mercantil Commercebank, noted "In 2006 and 2007 we financed construction for rentals and condominiums in Manhattan and Brooklyn. We continued to join in syndication of construction projects in Manhattan over the past two years, and senior management is now reviewing direct construction lending for residential and commercial properties. Nevertheless, we will only consider financing for experienced developers who have substantial equity in the project."

Chicago based, Builders Bank with a regional office in Garden City, Long Island, SVP, and Regional Manager at Shannon Eidman, said "we had the most active first quarter for new construction financing than the bank has seen since the height of the market in 2007" "We have under contract or in the pipeline more new construction loans than we did in the prior calendar year.". While our pricing has dropped due to the increase in competition, we continue to still require at least thirty percent equity for our niche of the market, loans under $6 million."

Puerto Rico, based Popular Community Bank, who has a significant presence in the metropolitan region and had entered the construction financing arena prior to the recession are once again evaluating the opportunities. Sophia Haliotis, SVP and head Commercial Banking and Commercial Real Estate told me that we had a number of successful projects in the Boroughs. Senior management is once again evaluating providing construction financing especially in the communities that the bank has a branch presence.  

Pittsburgh based bank, TriState Capital Bank is also entertaining commercial real estate transactions and construction financing. "Robert Gambitsky, SVP, Relationship Manager, said, "we recently financed an Astoria based multi-family development, recently completed construction for more than $10 million, and approved a construction loan in Long Island City for a rental development".

Michael Wengroff, principal, "WF Capital Advisors". There is resurgence in construction lending for new and renovated residential and mixed use properties in the Bronx. People are realizing the value opportunities in the areas. Small region lenders which include Flushing, Alma Bank and Putnam County Savings Bank as well as certain credit unions are looking to lend to borrowers who have been active in the community."

Concurring with many of these lenders, long time intermediary, Barry Stein, principal, Rohman & Stein Associates, said "With the construction financing picking up, there will more money available for the experienced developers who have financial means ,  global cash flows, and   who have been able to survive the last few recession."

Even in the suburbs of Long Island, lenders who stayed away for new home residential development are now evaluation financing for single family homes. Construction financing is also available for Transit Oriented Developments in communities which are adjacent to the Long Island Railroad. Lending teams from financial institutions which include Bridgehampton National Bank, TD Bank, First National Bank of Long Island as well as Valley National Bank are entertaining construction financing requests.

With interest rates continuing to be at record lows, combined with the need for rental and reasonable priced condominium developments expect this trend to continue for the forceable future.

Will local hospitals and medical centers open healthy grocery stores in the metropolitan region?

The Metropolitan region is the home of the world's finest hospitals and healthcare centers. These institutions have been leaders in the innovation and latest developments in this industry. Medical Research Centers, State of the Art healthcare facilities, day surgery centers, Proton Beam are just a few of the advances of these centers of excellence.

Perhaps in the near term, one or more of the healthcare systems in the metropolitan region will decide to open a healthy goods grocery store. Can you imagine, a grocery store to compete with Whole Food and Fairway market,  following the lead this year of a Kansas City, Missouri medical center that is opening a grocery store with a local partner.

Truman Medical Centers, (TMC) a two hospital system based in Kansas City is set to embark on an innovative community project to offer health food options. The Medical center and the Hospital Hill Economic Development Corporation, a local organization focused on urban economic development, completed a transfer of land from the City of Kansas City where they will build the $11.5 million, 35,000 square foot grocery store.

It all started three years ago when TMC began running a farmer's market at its Hospital Hill and Lakewood locations in Kansas City. The market is open once a week from April until November and sells up to 4,000 pounds of fruits and vegetables from local farmers to 600 local customers each week, said John Bluford, president and CEO of TMC.

Then last summer, TMC began running a weekly mobile produce market, called the Healthy Harvest Mobile Market, out of a specially-outfitted and revamped Kansas City Area Transportation Authority bus. The bus stops at several specific sites across the city, such as at the public library and several community centers, at designated times, and sells fresh fruit and vegetables.

TMC's grocery store will offer produce, meats and dairy items, as well as ethnic foods, from an array of local businesses, urban farmers and community gardens. Hospital executives said the project is one step toward eliminating food deserts and combating obesity and chronic diseases.

"An inherent focus of the grocery store project will be to positively impact the incidences of diabetes, hypertension, congestive heart failure and obesity within its service community," John Bluford, TMC President and CEO, said in a news release. "TMC has worked to expand access to high-quality healthcare, and now through the HHEDC, we will expand access to a healthy eating lifestyle for people.

"This all started as a concept for our organization because most of our patients come from urban areas with high levels of chronic conditions, which a lot of this is food-related or related to economic issues, and what could we do to change that?" said Charlie Shields, Chief Operating Officer of TMC. "It became apparent to us that this was one thing we could do - improve health and the economy in the area."

TMC plans on keeping the costs of the food down so that shopping there will be affordable for everyone, Bluford said. "...even if we are only making a 1 percent margin, that's enough for us.

The medical center plans to break ground by the fall and anticipates opening the store in early summer 2014.  

  Healthcare real estate investment trusts continue to excel

For a number of years, Healthcare REITs have been among the top performing REIT sectors and that trend continued through the first quarter of 2012 as the segment produced the highest returns in the Global REIT index, revealed a recent S & P Dow Jones Global Real Estate Report.

The Healthcare segment of the S&P Global REIT index gained nearly 14.4% for the quarter, outpacing the other indices.

The S & P Dow Jones Global Real Estate Report for the First Quarter

Category                                  Quarterly          1 year

Diversified                                8.05%              22.40%

Hotel/Resort/Leisure                14.32%           14.45%

Industrial                                  10.87%             26.42%

Office Space                            12.49%             20.91%

Healthcare                               14.38%             34.43%

Retail                                        4.62%              21.57%

Storage                                    6.16%              19.27%

Specialty                                  9.80%              17.73%

Residential                               2.65%              3.09%

Not only has the Healthcare sector outperformed the other eight indices on a quarterly basis; it has also produced higher returns on a year-over-year basis. 

"Over the past 12 months, the Healthcare segment is up more than 34%, while the S&P Global REIT has gained 20.3%,"

The S&P Global REIT Indices are subsets of the S&P Global Property including only REIT and REIT-like securities.

05/06/2013 - 08:14

Source

Stoler Report

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