Outside Looking In: Strength of Manhattan Real Estate Market Draws New Lenders to Big Apple
Garrett Thelander, an executive at Massey Knakal who leads the company’s capital services group, was fielding offers for a financing deal he was recently arranging when he noticed many of the banks lining up to compete weren’t ones he was used to working with.
“There were a lot of players from out of town that you usually don’t see here that were competing and they were competing hard,” he said, describing it as a roughly $8 million deal for a commercial building that was owned by the building’s occupant.
People’s United, a Connecticut-based bank, wound up making the loan.
Because it was a low-leverage deal, Mr. Thelander said the bank differentiated itself by pushing hard to lower its rates. Regional and local banks have the flexibility to undercut competitors on interest rates because of a roughly 200 basis point spread between what banks themselves can borrow at and what they charge customers for loans.
“They were competing against the bigger banks and they got very aggressive and they stood out because of that and also because they were willing to close very quickly,” Mr. Thelander said. “I think you can tell from that their interest in pushing into this market in a bigger way.”
Given the strength the Manhattan real estate market, lenders have long vied with one another to place debt, especially in transactions that would appear to have solid fundamentals or conservative leverage levels. But with many real estate markets still sputtering or flat around the rest of the country, more banks, especially regional players who in the past may have done only a sprinkling of deals, are seeking to lend in the city.
“I do think that more regional lenders are trying to do deals here,” said Howard Applebaum, an executive vice president and chief lending officer at Sterling National Bank, a longtime local bank in the city.
“It’s the strongest market in the country and it was barely wounded over the last three years. The vacancy rate in residential buildings is less than 1 percent. It’s a very strong market and you’re going to get a lot of players coming here,” he said.
Kevin Santacroce, an executive vice president and chief lending officer for the Long Island local bank Bridgehampton National Bank, has himself been trying to position his bank’s entry into the city.
“We’re really focused on the East End of Long Island but we have been growing in the city, primarily through the relationships we have with clients,” Mr. Santacroce said. “There is such a strong tie with the Hamptons and Manhattan that we’ve been able to do a few deals there. It’s just a market that we, like a lot of lenders, want to be in.”