Never Bet Against NYC: The Lenders Putting Their Money Where Their Mouth Is

New York City took some blows during COVID, but even a global pandemic can't dull its everlasting shine


“The city is like poetry: it compresses all life, all races and breeds, into a small island and adds music and the accompaniment of internal engines.”—E.B. White

There’s only one New York City. And there always will be only one New York City. But even Batman couldn’t save Gotham from the battering that COVID-19 unleashed on its residents, and on its real estate.

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As workers left offices in droves, the New York City trophy office — once an asset that lenders would happily sell their mother to lend on — became, seemingly overnight, an investment to be approached with extreme caution and pessimism. As e-commerce became de rigueur, New York City retail — already timidly bobbing and weaving — faced a knockout. And, as arts and culture took a swan song as the lights of Broadway dimmed and museums went dark, and both tourism and business travel halted, New York hotels sighed and closed their doors.

Added to this was the fact that local and state government seemed to be gunning for businesses with greater taxes and more expensive environmental regulation. Suddenly, states like Florida and cities like Miami were looking much more attractive.

One year later, our treasured city is finally on the road to recovery. How do those holding the dollars feel about financing it, though?

During a recent virtual event held by Commercial Observer, panelists were hesitant to commit to their views on the future of the New York office sector in particular (“If I knew that I would be a very rich man,” quipped one lender) but the simple, overarching message conveyed through our Power Finance interviews has been, “Don’t count out New York City.”

“The demise of New York has been predicted multiple times, including this time,” Larry Kravetz, head of CMBS finance at Barclays, said. “I find it hard to believe that it’s going to be a vacant wasteland by any means, although it could take some time before office values return to where they were in 2019.” Kravetz describes his current view as “not bearish, but not bullish.”

“Look, we’re all living it,” Scott Weiner, Senior Partner and Global Head of Commercial Real Estate Debt at Apollo Global Management, said. “So, we see it. But we did the Silvercup studio deal, and we’ve done some office and industrial. I think the nondescript, commodity-type deal we aren’t doing [is] because we don’t need to, but we’ll do deals that make sense. We certainly think New York isn’t going anywhere.”

Throughout the pandemic, lenders have underscored their faith in the Big Apple, financing even the largest, most complex deals.

“At a time when there was no liquidity, we closed the largest construction loan in New York at the time,” James Millon, co-head of large loans in the U.S. at CBRE (CBRE), said, referring to the $973 million construction financing his team closed in May 2020 for Oxford Properties and the Canadian Pension Plan Investment Board’s redevelopment of St. John’s Terminal.

The CBRE team also got to work pushing big office loans over the finish line in March 2021, with a $400 million loan for CIM’s 1440 Broadway and a $525 million refinance of Vornado Realty Trust and CPPIB’s One Park Avenue, led by JPMorgan Chase and Deutsche Bank, respectively. No mean feat.

For its part, Credit Suisse closed $255 million in acquisition financing for RFR Realty’s purchase of the 575,000-square-foot office building at 522 Fifth Avenue in September 2020.

“We are a firm believer in office and a believer in New York City, and we believe that we are all going back to the office eventually,” Stefano Arethas, head of commercial real estate origination at Credit Suisse, said. “I don’t think there is an existential threat to the New York City office market at all.

Steve Kohn, Cushman & Wakefield (CWK)’s vice chairman and president of equity, debt and structured finance, said he would never bet against New York. “I think New York just has way too much to offer employers and vendors, etc,” he said. “We’re starting to see more people buying apartments and also renting apartments. The office sector probably will lag a little bit, but, hopefully, not too far out, we’ll have some really positive growth in office absorption.”

From Kohn’s lips to God’s ears.

Doubling down on their commitment to the city, instead of heading for the hills, some of our honorees sat tight and never left —  including Dustin Stolly and Jordan Roeschlaub’s team. They remained in their New York City office, closing deals. “As citizens of this great city, we never gave up hope or wavered in the face of adversity as we were on a mission to serve our partners, and our families,” Stolly said.

There’s no disputing that New York City real estate has taken some hard blows over the past year. But we’re betting it will get right back up, and keep on punching.

After all, as E.B. White also said, “It is by all odds the loftiest of cities. It even managed to reach the highest point in the sky at the lowest moment of the depression.”