In yet another testimonial that the wide eyed optimism of 2014 and 2015 is stalling, at least temporarily, some real estate developers are not able to find financing to finish their projects. The case of Long Island City’s famous Clock Tower is perhaps the most high profile example so far.
Kevin Maloney and Karan Hakim spent three years assembling properties in Long Island City. The duo planned to build a massive 914 foot tall skyscraper offering both rental and condominiums. To date they had incurred $145 million of loans for acquisition and pre-development cost. Lenders were weary of loaning more money unless the partners pumped in more equity. Faced with a foreclosure just days away the partners decided to sell to the Durst Organization for somewhere between $167 to 175 million. The Durst organization is well known for “controlling more than 13 million feet of office space in Manhattan”
Mr. Durst wants to take advantage of the relatively low cost basis to make a rental project work on the site.
““We cannot compete with condo builders on cost when acquiring land conventionally,” the firm’s CEO Douglas Durst told The Real Deal. “Acquiring distressed sites allows us to build rental and make the kinds of long-term investments that have served us well for more than 100 years.””
Like the the Durst Organization other are real estate developers are marking monies to finance project acquisition from developers who cannot finish their projects.
““One thousand percent, I see capital being set aside for this, whether it be predatory or not,” said Nicholas Mastroianni, CEO of the U.S. Immigration Fund, which helps developers raise funds through the EB-5 program.”
And while top tier household name developers can still acess monies lesser known players will have to pony up more equity. Financial brokers are warning that banks are now requiring developers to add 30 to 4o percent more equity before they consider financing.
It seems there is no shortage of projects that need to rethink their financing options. Even Extell development had to refinance their loans for their much vaunted 1,550 foot tall Central Park Tower at on “Billionaire’s Row” project at 217 W 57 Street.