With 150 Charles Street and Now 10 Madison Square West, Steven Witkoff May Be the King of Condo Financing
By Damian Ghigliotty May 1, 2013 8:00 am
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Between 2007 and 2012, there were virtually no construction loans from commercial banks for new condo developments as construction financing “effectively dried up,” said Jonathan Miller, president and chief executive of the real estate appraisal firm Miller Samuel Inc. As the lending market for condo construction in the city shows signs of improvement, nearly all of the latest developments in the works, including 150 Charles Street and 10 Madison Square West, are at the top 10 percent of the market, he said.
“There are a lot more condo developments in the pipeline over the next two years,” Mr. Miller said. “But the types of projects being lent on now are far different than what we saw during the last boom. I like to say 3,000 is the new 1,500, in terms of square footage. The majority of new condo developments in New York are all varying degrees of luxury pricing, which starts at around $3 million a unit. The reason for that, primarily, is because land prices and construction costs right now only make it feasible to go after the upper end of the market.”
This recent trend of luxury condos being in the works doesn’t mean that the banks only want to lend at the upper end of the market, Mr. Miller noted. “That’s just what they’re being presented with,” he said.
Peter D’Arcy, regional president for the New York metropolitan area at M&T Bank (MTB), acknowledged that financing for non-luxury condos is still hard to come by, though smaller banks and nonbank lenders are coming in to fill the void. “A greater number of banks are open to financing condo deals today,” Mr. D’Arcy, who played a key role in helping finance 150 Charles Street, told The Mortgage Observer. “The larger, more established banks are still sticking to the name-brand developers, but 2013 has seen smaller banks increase the overall money available to finance condos.”
Mr. Witkoff, who owns about 30 properties in the United States and London, once had a strong financing relationship with Lehman Brothers, among the other big lenders he works with today. But that relationship ended when the financial giant filed for bankruptcy in 2008. The connection with M&T and Wells Fargo (WFC) proved to be longer-lasting.
“When you’re dealing with familiar faces, you know they’re going to be there at the closing table and if, God forbid, there’s a glitch along the way, you know you can talk to them,” said the developer, whose sociable nature is expressed without the aid of a computer. His office, in fact, doesn’t have one, and he uses a BlackBerry for business and personal calls and emails. An iPad he owns sits somewhere, unused.
Mr. Witkoff’s relationship with M&T goes back to the early 1990s, a few years after he and his partner at the time, Laurence Gluck, left their lawyer jobs at the former New York City firm Dreyer & Traub and dove headfirst into the real estate business. Back when the two took regular trips to Harlem and Washington Heights and Mr. Witkoff wore a licensed handgun on his ankle for protection, M&T helped finance some of their first residential purchases in upper Manhattan.
“In the early days of us operating, every time we went in for a loan, it was another ‘proctology’ report and interview on how we were going to do things,” Mr. Witkoff said with a laugh. “The president of M&T’s New York City division at the time was John Cook, and I remember walking into his office sometime around 1996, when we were buying 1 Broadway for $15 million.”
“Back then we didn’t have the kind of liquidity we have today, and that’s just the way it was,” Mr. Witkoff remembered. “Everything was a question, and at times that was frustrating—but it was fair.”
