THE credit crunch is hitting the big time as bankers inhale more equity from buyers.
One broker reports the buyer on a $100 million deal copped out after talking with “40 banks” because he couldn’t put down 40 percent – i.e. $40 million – for equity.
“Eighteen months ago, you could put down 10 percent on a $50 million deal and treat it like a split level ranch in Westchester and borrow 90 percent or more,” said the broker.
“You can’t do that now. Now the equity required will be closer to 40 to 70 percent of the value.”
Another broker noted, “There is still credit available, but you are tripling the amount of equity you have to put up.”
Some bankers tell borrowers they are taking a breather until after Labor Day when they believe everything will be fine.
“They are saying, ‘Let’s back off for a few weeks,’ ” another broker explained.
Many investment banks are now sitting on the sidelines because the loan spreads are “all over the place and they can’t give a quote that will be there in a few weeks.”
But offshore banks and life insurance companies are meeting the market on the spreads.
“If people know they can’t get the loan or equity, they are being honest with themselves and not bidding – so they aren’t spending the money to go through the due diligence,” said one investment broker.
That means the pool of buyers, which has been getting thinner as portfolios and projects thicken, is being culled.
We now wonder, with less competition and more expensive money, will prices come down and capitalization rates come up?
Meanwhile, Commercial Mortgage Alert is worried that Macklowe Properties might be $1 billion short for a refinancing and could lose the GM Building next spring.
However, Macklowe Properties doesn’t share the newsletter’s worry, insisting some of the information is wrong.
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Murray Hill Properties and David Werner just signed a contract to buy 1414 Avenue of the Americas for $870 a foot, bringing the price for the building to about $121.8 million.
The final number went just over the target set by marketers Darcy Stacom and Bill Shanahan of CB Richard Ellis – effectively doubling the original purchase price of $60.2 million for sellers APF Realty.
We hear that the buyers will sit on the property, which contains multiple small offices, for a few years while the market shakes out. Then perhaps they can reshuffle the 58th Street blockfront into a residential tower or convert it back to its original hotel use.
A re-skinning could also be in order to bulk up those Central Park views.
Neither CBRE nor Murray Hill Properties’ Norman Sturner returned calls for comment.
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Keep in mind that with Fortunoff downsizing to 3 W. 57th St., its current store at 681 Fifth Ave., between 53rd and 54th Streets, is now available.
Building owner Robert Siegel of Metropole Realty Advisors – who also found Fortunoff its new location in Kamran Hakim‘s building – has quietly bought out all the office leases above the current store. A total of 15 floors and 65,000 feet will be open starting in January.
