The Commercial Observer: You recently extended your footprint in the Northeast last year. Can you tell me about what you’ve accomplished since then?
Mr. Freedman: We extended our footprint, yes. We’ve always been New York metropolitan based, but now we’re really exclusively operating in the New York metropolitan area and the Miami Beach area. The expansion wasn’t so much geographically as what parts of the real estate sector we’ve moved to.
So how have things changed?
We’ve really focused on our existing portfolio. We’ve been spending a lot of time on business development in a few different areas. For one, we rolled out our lending division actually earlier this year, and we’ve had some success with that. We’ve closed a number of deals there.
We’ve really been targeting smaller bridge loans and mortgages. We’ve been seeing a lot of space in that part of the market, which we’ve been able to take advantage of.
Why did you decide to get into the lending business at such an uncertain time in the economic cycle?
We saw a need from all the deal flow that was coming around. Everyone knows it’s been challenging to get deals done in the past 12 to 24 months. And we kept seeing people asking us for money—over and over and over again—and so we set up a platform to take advantage of it. It’s definitely not our core business, but it’s very synergistic with the deal flow that we’re seeing.
And we have the ability to underwrite these deals pretty easily and the capability to put our own cash in play pretty quickly, so it just seemed like a good match for us at the time. And we’ve had success with it so far this year.
What kind of assets are you dealing with in the lending division?
It’s residential and commercial in the New York metropolitan area. It’s usually sub-$20 million first mortgages. So we’ve done everything from a walk-up to a stalled development project. So we’ve run the gamut.
We’ve seen a lot of special situations that need lending, and there are a lot of interesting stories out there. People are in need of capital to get themselves through, you know, whatever their story may have been in the last cycle.
You have a large student-housing portfolio—a million square feet over five buildings, all occupied by New York University. What’s the draw for a portfolio like that?
It’s a business within the urban market that we’re very bullish on. You know, there’s a very high barrier to entry and we’re fortunate enough to have a good foothold in Manhattan in it. In our case, we have a very strong tenant and they occupy all of our buildings so it’s been a recession-proof business thus far.
Is it particularly beneficial considering New York University’s aggressive expansion plans, or would it be a good investment no matter the educational tenant?
I don’t know. There’s always demand for education, even during these times—and maybe even more so. And, in New York City, we have some of the best universities in the world here so there’s a great deal of demand for students to live here and be educated at those universities. We didn’t see the demand change regardless of which institutions were here. I think if you look at their enrollment numbers and their application numbers, they all stayed very strong.
And if you look at the supply end of the business, we all know that getting new deals done and delivering new dormitory-type products in Manhattan is challenging.
What are Corigin’s goals for the remainder of the year? Do you expect to begin new development projects or, rather, are there plans for new acquisitions?
We’ve been aggressively pursuing new development opportunities. We constantly have a few on the plate that we’re very serious about. We will get something done this year. On the development side, though, that’s strictly residential.
Considering that you’re speaking to The Commercial Observer, what about the commercial side? What’s your game plan with regard to the commercial side? I know that you’ve invested money into converting the American Can Co. facility in Jersey City into CANco Lofts and CANco Square. Tell me about the strategy with that project.
If you look at our Can Co. property in Jersey City, we have 600,000 square feet of commercial space out there that we’re in the process of leasing up. I can’t tell you that it’s our core strategy right now, that it’s our main focus, but we’re seeing leases.
Why is commercial real estate not a focus? Is it the economy, or something else?
I think it’s a few reasons: I think we have a very refined expertise in delivering homes to people, whether they are rentals or ownership. And I think we have a competitive advantage in being able to deliver the right product to different segments of the market, and we’ve done that on the value end of the market in Jersey City all the way to the luxury end of the market in the Columbus Circle area. The risk metrics to us are more digestible on the residential end of it.
While we don’t dislike the commercial trends that are happening right now, we would prefer to lose an apartment rental tenant than to lose a commercial tenant that may hold one to 10 floors in an asset. It’s just something that we’re more comfortable with.