Interviews Andy Weiss, Director, Gantry's NYC.

0:00 Speaker 1 Good morning. This is Mike Stolar for the Stolar Real Estate Report. What’s happening with financing today for real estate? Is there money available for financing? What effect does some of the new programs like the City of Yes, the forty five and other programs have on the effect of financing in New York and around the nation. So today

0:20 I have a director at Dantree, Andy Wise, who’s going to tell us about the financing market in New York City and around the nation. Thanks for being here.

0:28 Speaker 2 Thanks for having me, Michael. I really appreciate it, and it’s an honor to be on your show.

0:32 Speaker 1 So let’s talk about where this money for dealers.

0:37 Speaker 2 Sure sure, So it’s a broad answer, I’d say, but let’s start out with the banking market and balance.

0:44 Speaker 1 The traditional commercial bank.

0:46 Speaker 2 Sure sure, we’ll do traditional commercial banks, I would say. In my view, and what I’ve seen and my colleagues have seen is the smaller local banks, both in New York and around the country, they still have money to lend, right, and they’re still actingly lending, and they’re under i’d say a little less of a scrutinious eye from the regulators,

1:07 but a lot of regional banks are off the table, and so you know, there’s not an exact number. And this business is not it’s not a science, it’s it’s an art in any ways. But let’s say, as you start going in the ten to thirty million dollars space, you start phasing out a lot of bank balance sheet capital,

1:23 and I specify bank and we’ll touch on the life co side of things in a bit, but you start phasing out a lot of bank lenders there. And you know, particularly in New York, the boys who would would dominate that space, the nyc B, the signatures and in some case for a lot of families First Republic traditionally in

1:43 New York City, those guys are are not in the market. Either they’re gone or or they are severely hamstrung by their portfolio and aren’t actively lending. So there’s there, there’s definitely a hole there, and we can get into, you know, how that’s being plugged and in what ways that’s being plugged.

2:02 Speaker 1 That’s try to get into how it’s being plugged.

2:04 Speaker 2 Sure, sure, so you know the CNBS markets, I’d say for multifamily in New York there’s definitely an uptick an agency as well. So let’s let’s bucket that as securitized capital off balance sheet financing, large bondholders in the institutional capital markets are ultimately holding that capital, and it’s not held on any one, any one particular banking institution’s balance sheet.

2:29 And so those those those lenders are are very aggressively lending New York and around the country multi family, of course, and agencies only lend on multifamily cnbs, though in spaces where agencies may not be able to originate let’s say there’s not trailing history on new construction, CNBS is filling that void. But also I would I would add, you’re

2:53 seeing a lot of people with cnbs. It’s a wider spread than an agency loan on a multi family deal. They’re never going to be a tight but they can size to a more aggressive debt service coverage ratio or i’d really say, a more aggressive debt yield, which is a function of your payment constant on a loan and

3:11 and a debt service coverage ratio. But because they can size to let’s say a one twenty five debt service on an interest only payment, right, they can size much more aggressively than an agency. In addition to the fact that you can buy down a rate on a CMBs loan significantly as well. It’s the optimal financing solution for

3:31 many of these guys who are squeezed and trying to make sure they put in as little cash as possible because they’re overlevered for whatever reason they may be at this point. There’s a variety of factors in New York City why people are overlevered, but that to me, has been a shift in the market.

3:50 Speaker 1 Let’s talk about construction lending. I noticed that thank you of those are who is a major players cutting down their exposure on construction financing.

3:59 Speaker 2 Yeah, you know, I would say in general, banks are still lending on construction financing. Uh I was talking with a gentleman, you know, looking for twenty to sixty five million dollars construction loans on the bank side. But over the last few years, you know, private lenders have come to dominate that space more and more. And obviously they’re

4:22 they’re not charging as low of an interest rate, right, there’s a there’s a premium and sometimes a significant premium in terms of rate and points on that. But when you’re when you think about when you think about the maximum amount of leverage and the ability to get non recourse financing, which certain sponsors require. It’s not just a preference,

4:42 but they require because of how they’re capital structured, and and also just the ease of use, right like the draws And you know what we’ll hear from mister Weiss here in a few moments when when you’re dealing with with a lender who’s nimble and who’s gonna be pushing a project with you, you know that could be a lot

5:00 of dollars when you think about a few months of interest payments and dealing with just a few extra months of your project being ongoing and not turning a cash flow as soon as possible. So that that that, I’d say, is why a lot more people have been going private, but there’s definitely still people.

5:20 Speaker 1 Now, what’s the pricing private versus traditional?

5:23 Speaker 2 Yeah, So, so banks are typically pricing somewhere around prime, right, And so they may tell you, hey, i’m sulfur with a spread at primes at eight percent. Sulfur’s four to eighty three, right, So three twenty five to four to twenty five over for most banks, and I’d say maybe even four seventy five for some high octane banks. That’s

5:43 going to be that’s going to fluctuate, typically based on sponsorship and leverage. In most cases, right, more risk, more reward for the bank. You know, when I think about private construction lending, five hundred to seven hundred over seems right with with with Additionally, with two points in typically right as opposed to one for a bank. In terms

6:07 of origination, maybe it’s one in one out. But what I’d say on the on the private side, particularly pertaining to condo lending, right, they can more aggressively and they do more aggressively underwrite the loan proceeds, and particularly in a city with a high a high basis market like let’s say New York City, where your condos are in

6:28 some cases two three, four times what a market rate deal value would be, right, the sellout would be four to one. Let’s say, right, you’re you’re building making enough. Tali’s building fantastic product on the Upper East Side. You know he needs a lender who understands that sellout and says, I’m comfortable being above what a fallback would be on

6:48 a rental product in that marketplace at one thousand a foot, and I’ll lend this guy fifteen hundred two grand a foot, and I’m okay with that basis because I trust that this guy’s going to deliver. But for that, you’re going to pay. And I’m not saying that Mickey is leveraging these guys, and he may have a bank that does

7:07 that for him. Right, He’s a unique story, but on average, right, you need to be going to a private guy who understands and buys into that marketplace.

7:15 Speaker 1 Let’s talk about life insurance companies.

7:17 Speaker 2 I would be very happy to So you mentioned my firm, Gantry. I recently moved over here a month and a half ago, and we are the largest independently held mortgage banking firm in the country. We’re a partner owned firm. We’re fifty producers, twenty five of which are partners. We’re across the country West coast, Midwest, East coast, and you know, I got

7:39 brought on because New York is actually our fifth largest state in terms of our servicing book. We service twenty billion dollars a week. We correspond for thirty plus life insurance companies, which is the widest stable across the country of correspondent life insurance companies.

7:54 Speaker 1 So what did life insurance compus want to lend on.

7:56 Speaker 2 Sure life insurance companies all else equal, they want to lend on the best quality real estate, right and for that they’re going to give you the best pricing. Right. So, in general, right now, we are doing a ton of industrial assets across the country. We’re doing grocery anchor shopping centers, a lot of self storage. Life insurance companies

8:17 we’ve gotten them on board. They love self storage, and so you know, what they’re able to provide are terms that that banks in many cases can’t provide in today’s marketplace. And we mentioned earlier that void. We’re we’re filling that right now. And life insurance companies are always actively lending, right what are.

8:35 Speaker 1 They charging these days? Sure?

8:36 Speaker 2 So we see loans right now typically one fifty to two twenty five over and that’s for anywhere that’s over a corresponding treasury, right. And life insurance companies are incredibly nimble and can really match to whatever term you’re looking for depending on the deal. And typically you’re dealing with a thirty year a m and non recourse lending, which

8:56 you know when you’re dealing with a strip center or a grossery anchor shopping center. Sometimes banks can’t be that aggressive, particularly on amortization and non recourse. In addition, in today’s market, i’d say to being at a tight enough spread. We signed up a deal two weeks ago grocery anchor shopping center out in California. Trader Joe’s was the anchor. Was

9:17 at one seventy five over the treasury for a ten year deal, right, non recourse, thirty year am no structure, and no bank is touching that, right.

9:26 Speaker 1 What about the hospitality.

9:28 Speaker 2 So hospitality, So we’ve actually been signing up a few smaller hospitality loans with some local lenders. But typically if you’re looking to get leverage on hospitality loan in today’s marketplace, you got to be on CMBs, right, Like, banks aren’t going to push leverage on that stuff. And that stuff prices around a twelve debt yield, which is more or

9:48 less eight and a half times your net operating income. That’s a starting point, right, So maybe it’s a little bit less than that.

9:54 Speaker 1 And what are agencies charging on the multifamily.

9:57 Speaker 2 Yeah, so for conventional financing, I would I would say anywhere from one fifty to two fifty over, depending on what market you’re in. But we were definitely seeing when when when treasuries were dipping in the three and a half range, like we were seeing some deals getting signed up hovering around five percent, just under five percent. So

10:15 for strong sponsors, strong market right like you can be in that lower bucket. I’d say that in my mind, small balance is typically going to lag that and small anything under seven and a half million by about fifty basis points. So you know, add another fifty onto that one fifty to two fifty range and we’ll call that

10:33 a day.

10:34 Speaker 1 So as I would say there is money out for real estate financing, I think I have to have a right associate to find a few. That’s what I’d like to thank Andy Weis for being here and I’ll speak to you next week.

10:45 Speaker 2 Thank you, Michael, really appreciate it.