NEW YORK CITY—Rob Cord joined Coldwell Banker Commercial Advisors in 2015, as president of its asset services. He tripled its portfolio of properties under management to 21 million square feet in less than one year.
“If you are creative, you can create value. You can do that anywhere, but it’s the density, the dynamic, the energy, the drive, the momentum that exists in this city,” he says. “If you can’t do deals here—you shouldn’t be in the business.”
Cord is moderating the RealShare conference session titled “Traditional Lenders Continue to Rule While Non-traditional Lenders Help Evolve Investor’s Portfolios.” Traditional sources of capital include typical lending institutions, such as banks and insurance companies. Non-traditional sources include private equity, debt funds, REITs, and groups of individuals pooling their money. As the high cost of New York City real estate is causing conventional lenders to pull back, the real estate industry is shifting to other sources of capital.
“We manage and lease for a number of large institutions that are typically very active,” says Cord. “What I’m hearing is there is a disconnect between the purchase price and the underlying fundamentals of what a tenant is willing to pay on credit.”
Panelists will discuss which sources of non-traditional capital are gaining momentum and the trends in capital markets. Cord notes although the panelists come from different backgrounds, all experienced similar trends in lending but had different nuances in their responses. “What’s interesting about the panel is the differences in how they structured deals and how they worked around a credit issue or how they addressed structuring their mezzanine financing based on some issue that was taking place on their property,” he says.
The speakers will include Alan Scholnick, managing director of capital markets, Silverback Development; John S. Hamilton, senior vice president, acquisitions and business development, Pyramid Hotel Group; David Blatt, CEO, CapStack Partners; David Hochfelder, EVP, acquisitions, the Naftali Group.
Cord points to how Naftali’s and Pyramid’s work with capital markets will differ, based not only on the product, size and scope of specific projects but also the nature of their businesses. The panelists’ real estate encompasses mixed-use, multifamily, ground floor retail and hotel property.
One of the panelists had chosen to sit out of the market for a couple of years, and now has reentered, after the pricing of assets stabilized. Cord will inquire what were the indications causing the company to hold back and what did it see in the market that made re-entrance desirable?
Cord also will ask what the speakers consider as gateway markets for debt funds, mezzanine debt, and new lines of lending. Where are the properties, locations and product types?
It is now an interesting time in real estate with the movement of tenants in the city and the impact that has on the capital markets for Manhattan. Cord provides a scenario of a “Super A” tenant vacating a Midtown building to relocate to Hudson Yards. This creates an opportunity by the tenant’s vacating a high-quality building, having the desire to relocate to the very newest building. Now, a B-building tenant moves into the A-building in Midtown. A C-building tenant could then move into the B-building. Such movements can create issues concerning property financing. Questions could arise if a building loan is maturing and requires refinancing. If the banks and insurance companies refuse to provide funding, will the owner need to turn to other sources to raise capital for the mortgage?
Regional banks have returned to real estate with an increase in popularity of smaller loans. Ramifications of the market crash in 2008 still affect real estate. With concerns over Dodd-Frank and risk retention requirements due to legislation, smaller loans are easier to underwrite and close. Cord is seeing regional players and those from outside the area wanting to take risks in Manhattan. They will find debt they feel comfortable with and with capital on the sidelines have simply paid cash. For high net-worth individuals in larger institutions, investment in New York offers prudent portfolio diversification.
With foreign capital, Cord observes a slowdown from South Korea. His experience with China is investors are looking for value and are very closely scrutinizing investments, making deals harder than they had been in the past. He points to the uncertainty of how President Donald Trump will affect foreign investment. As an example, he notes the recent move to impose tariffs on Canadian-made jetliners could incur a trade backlash.
Capital markets intelligence requires information on how deals are being structured, why conventional, non-traditional, regional and foreign investments are made, and why people enter the market. The panelists will delve into these issues to provide additional perspectives.
Cord appreciates how CRE professionals take educated risks in doing business in New York City. “The deals are bigger. They are faster and they happen to be very creative,” he says