More Uncertainty Means Lenders, Developers Need More Partners To Get Deals Closed

The pace of dealmaking for building financiers has slowed dramatically as the Federal Reserve has continued to pile one 75-basis point rate hike on top of the next. Sales have also slowed as a result, as buyers have a harder time making the math work on valuations largely predicated on pre-rate spike assumptions.

“We've definitely seen a slowdown in acquisitions. It's more difficult to make things work. And anytime there's a fast market movement, there's a larger gap between bid and ask with sellers,” Meridian Capital Group Senior Managing Director Morris Betesh said. “The longer this interest rate environment hangs around, the more likely they'll come around to reality.”

But sellers hoping they can wait out market volatility might find their properties are worth less than in previous years, according to Fairstead Managing Director David Murstein.

“Appraisals right now are still looking back into a period of time where markets were strong,” he said. "But once more distressed or realistic trades start happening, you're going to see appraised values come down, loans come down … it's going to make it hard to refinance.”

In the meantime, experts said, financing deals are getting harder to come by, and projects that are getting loans approved increasingly belong to big-name developers.

“From the commercial debt side, I’ve seen a real slowdown on the commercial bank side,” Naftali Credit Partners CEO Glenn Grimaldi said. “Many of my own colleagues that I've actually recently been in touch with in the commercial bank finance side, they are quote-unquote, 'hitting the pause button.' That's the phrase du jour.”

Of the sparse collection of deals that have gone through in recent months, a Bisnow analysis found that most have featured well-established names in NYC — names like A&E Real Estate, Extell Development, Toll Brothers, the Vanbarton Group and RXR.

MetLife is one of the firms poised to benefit from the demand for established players, said Sara Queen, the firm’s head of real estate equity.

“On the buy side, one of the things that is helpful about being such a large institutional player is that as other deals fall out, we're getting calls about, ‘Hey, do you want to step into this deal?’” she said at the event. “So we're starting to see some opportunities that way.”