“The city is like poetry: it compresses all life, all races and races, into a small island and adds music and the accompaniment of internal engines.—EB White
There is only one New York City. And there will always be only one New York City. But even Batman couldn’t save Gotham from the blows COVID-19 unleashed on its residents and real estate.
As workers left their desks in droves, the New York City trophy office – once an asset that lenders gladly sold their mothers to lend – became, seemingly overnight, an investment to be approached with extreme prudence and pessimism. As e-commerce became de rigueur, New York City’s retail business – already timidly swaying and weaving – faced a knockout. And, as the arts and culture took a swan song as the lights on Broadway went out and museums dimmed, and tourism and business travel came to a halt, hotels in New York sighed and closed their doors.
Added to this was the fact that local and state governments seemed to be looking for companies with higher taxes and more expensive environmental regulations. Suddenly, states like Florida and cities like Miami seemed much more attractive.
A year later, our beloved city is finally on the road to recovery. But what do those who hold the dollars think of financing it?
At a recent virtual event hosted by Commercial Observer, panelists were reluctant to express their views on the future of the office industry in New York in particular (“If I knew I would be a very rich man,” joked a lender), but the simple, overarching message conveyed by our conversations with Power Finance was, “Don’t count on New York City”.
“New York’s demise has been predicted many times, including this time,” said Larry Kravetz, CMBS finance manager at Barclays. “I find it hard to believe that this will be a vacant wasteland, although it may take some time before office values return to where they were in 2019.” Kravetz describes his current view as “Not bearish, but not bullish”.
“Look, we all live it,” said Scott Weiner, senior partner and global head of commercial real estate debt at Apollo Global Management. “So we see it. But we did the Silvercup studio business, and we did the office and the industry. I think the indescribable, commodity-type deal that we don’t do [is] because we don’t need it, but we’ll do business that makes sense. We certainly think New York is not going anywhere.
Throughout the pandemic, lenders have emphasized their faith in the Big Apple, funding even the largest and most complex transactions.
“At a time when there was no cash, we took out the biggest construction loan in New York at the time,” said James Millon, co-head of US large loans at CBRE. , referring to his team’s $ 973 million in construction funding. closed in May 2020 for Oxford Properties and the redevelopment of the St. John’s terminal by the Canada Pension Plan Investment Board.
The CBRE team also got to work pushing large office loans to the finish line in March 2021, with a $ 400 million loan for CIM’s 1440 Broadway and a refinance of $ 525. million dollars from Vornado Realty Trust and One Park Avenue from CPPIB, run by JPMorgan Chase and Deutsche Bank. , respectively. No easy task.
For its part, Credit Suisse has entered into a $ 255 million acquisition financing for the purchase by RFR Realty of the 575,000 square foot office building located at 522 Fifth Avenue in September 2020.
“We strongly believe in the office and in New York, and we believe that we will all return to the office eventually,” said Stefano Arethas, head of commercial real estate origination at Credit Suisse. “I don’t think there is an existential threat to the New York office market at all.
Steve Kohn, vice president and president of equities, debt and structured finance at Cushman & Wakefield, said he would never bet against New York. “I think New York just has too much to offer employers and suppliers and so on. “, did he declare. “We are starting to see more and more people buying apartments and also renting apartments. The office sector will likely be lagging behind, but hopefully not too far we will have some really positive office uptake growth.
From Kohn’s lips to God’s ears.
Doubling their commitment to the city, instead of heading for the hills, some of our award winners sat down well and never left – including Dustin Stolly and Jordan Roeschlaub’s team. They stayed in their New York office, making deals. “As citizens of this great city, we never gave up hope or hesitated in the face of adversity as we were on a mission to serve our partners and families,” said Stolly.
There is no doubt that real estate in New York has taken a hit in the past year. But we bet he’s going to come up right away and keep hitting.
After all, as EB White also said: “It is without a doubt the highest of cities. He even managed to reach the highest point in the sky at the lowest point of the depression. “