New Jersey Lenders Locked in Competition for Multifamily Assignments
By Damian Ghigliotty March 26, 2013 12:00 pm
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“Multifamily is a hot asset class right now, and it’s one where, even though the margins are narrowing due to competitive pressures on the interest rates for these loans, it can be a very profitable business if you properly manage that interest rate risk,” he said.
One of the fastest-growing lenders in the New Jersey commercial real estate market is M&T Bank. In August 2012, M&T announced its plans to acquire New Jersey-based Hudson City Savings Bank and its 135 branches, 97 of them in New Jersey, for $3.7 billion. The acquisition is expected to close in the second quarter of 2013 and will more than triple M&T’s New York-area market share.
“With that acquisition, we’re going to build out an entire commercial bank on top of Hudson City’s thrift platform,” said Gino Martocci, M&T’s metro area executive.
M&T’s real estate team oversaw a $7 billion portfolio of loans in the tristate area as of December 2012, with “low- to mid-nine-figure commitments in New Jersey over the last three years,” Mr. Martocci said. “We’d like to double or triple that number in the next few years,” he added. “We plan to have a multibillion-dollar loan portfolio in New Jersey between commercial real estate, business banking and commercial and industrial lending. We’d also like to grow our client base from 40 or so to more than 400.”
Last year, the bank closed a $39 million deal with Hillier Properties for the 153-unit senior multifamily apartment building Copperwood at 300 Bunn Drive in Princeton. The property is under construction with an expected completion date in mid-2014.
“Right now we’re putting many of the bank’s resources into the New Jersey market in order to develop our business out there,” said Mr. Martocci. “We’ve been operating out of a relatively small commercial real estate office in New Jersey for about five years. We’re about to go from that office in Saddle Brook and our commercial and industrial lending office in Princeton to 97 branches and offices in the state by the second quarter of this year.”
Due to M&T’s strong focus on relationship banking, Mr. Martocci said he and his team are ready to “finance anything our clients do that makes sense for them and for us,” whether it’s multifamily, retail, industrial or office space. Multifamily will be a focal point for the bank’s New Jersey team, he said, though it will likely constitute a quarter to a third of its business.
M&T’s competitors in the state include Wells Fargo, Valley National, Investors Bank and PNC Financial Services Group, said Mr. Martocci. PNC, which oversaw $305 billion in total assets and $186 billion in total loans as of December 2012, declined to speak about its commercial real estate operations in New Jersey.
Outside of the banking arena, the commercial mortgage brokerage firms are locked in competition as well.
“We’ve been very successful in the multifamily business,” said Israel Schubert, a managing director who heads Meridian Capital Group’s New Jersey office in Iselin. Last year the firm relocated its 35-member mortgage team there to a newly built-out 10,500-square-foot office space due to a rapidly growing volume of transactions.
Meridian, one of New York’s leading commercial mortgage firms, arranged financing for 331 deals in New Jersey last year valued at $1.6 billion, up from 181 deals valued at $600 million in 2010. Over those two years, Meridian’s multifamily origination volume for the state nearly tripled, rising from $450 million to $1.2 billion.
Last year, the firm arranged $50 million in permanent financing for the recently constructed Harrison Station luxury multifamily building located at 300 Somerset Street in Harrison, N.J., as well as a $32.9 million loan for the 93-unit Berkshire at The Shipyard multifamily property located at 1401 Hudson Street in Hoboken.
“We’re always looking to grow our lending, and we’re geared up for it,” said Mr. Schubert. “We have a keen understanding of this market. We know who the players are, we know what they need, and we know how to get it.”
The rise in competition among banks and mortgage firms vying for the lion’s share of New Jersey’s multifamily market has led to more losses for many of the players involved, said Mr. Cummings of Investors Bank, who added that the bank had lost out on deals in recent years due to increased competition.
“We are currently renegotiating with one of our largest multifamily borrowers, who is looking to refinance an existing $30 million loan,” Mr. Cummings said. “The thing that is holding him up is the contractual prepayment fee. He has an offer from a conduit with Freddie Mac at a reduced 10-year rate.”
Freddie Mac is the “the 800-pound gorilla” in the room, said Mr. Didio of HFF. “They are a challenge for everybody. They can do the biggest loans, they are very competitive, and all they do is multifamily, so they know how to underwrite and they know operating expenses. They probably know operating expenses better than some of the owners do.”
Mr. Murawski of Valley National noted the breadth of competition in New Jersey among lenders—including Freddie Mac—without seeing a need to get too specific. “Every transaction we look at,” he said, “has more than one bank involved.”
