Doug Stern had a real estate dream. In his early 40s, after years in private equity and managing his family’s commercial real estate properties, he longed for a career change and a development project on his own. His mission became clear in Bayonne, N.J., where, he said, he fell in love with the former headquarters of the intimate apparel company Maidenform. Located two blocks from the Hudson-Bergen light rail 22nd Street station, the four-story, 94,000-square-foot brick complex—over 100 years old—was familiar to generations of Bayonne residents, many of whom had worked there until the company moved to Iselin, N.J. in 2007. Mr. Stern saw the potential for the historic, vacant property into a Brooklyn-style 99-unit residential building.
Although he could buy the building, he figured that he needed upward of $20 million in construction financing to redevelop it.
For summer 2012, financing has returned for many real estate investors. And borrowers are able to secure it at record low interest rates, especially if the asset is a residential rental property. Pricing for a five-year, fixed-rate loan is as low as 3 percent, with a 25- to 40-year amortization, and in certain instances interest only for the first two to 10 years of the mortgage.
Financing for certain asset classes, including construction financing, has also become much more readily available to well-capitalized, experienced borrowers, who are having an easier time securing record loan rates for mixed-use retail, residential, office, urban retail and industrial assets. Yet financing for unique assets, which may include hospitality, golf courses, health clubs, restaurants, bars, student housing and vacant land is available from to only a small group of borrowers. When it is available under these circumstances, the terms and conditions require higher interest rates, shorter amortization and—in nearly all instances—the borrower must personally guarantee the loan.