Managing the Risks of a Changing Lower Manhattan, Post 9/11

Across a wider range of property and ownership quality, lenders are signaling less risk in Downtown apartments than in office. For comparable assets and terms, year-to-date average interest rates on lower Manhattan apartment loans are 6 basis points below the greater Manhattan average, essentially undifferentiated from peer neighborhoods. In the office sector, however, lower Manhattan lending rates are 36 basis points higher than for Manhattan overall. Other elements of office loan sizing and pricing also suggest a heightened sensitivity to cash flow stability.

The observation of marginally stronger risk mitigation in Lower Manhattan office lending is no surprise. The next few years’ supply-side expansion anticipates the market’s full potential. Like any ambitious undertaking, it looks forward and resolves that the risks are worth taking.
dsc@chandan.com