The Insider’s Weekly Guide to the Commercial Mortgage Industrymoweekly.commercialobserver.com/07152016.pdf · 2016. 7. 14. · hamper European securitization issuance for the remainder

1 | JULY 15, 2016

Starwood Mortgage Capital provid-ed multifamily development firm Post Brothers with $183 million in financing for the refinancing of Presidential City, a 1,018-unit apartment complex in the Wynnefield Heights neighborhood of Philadelphia, Commercial Observer Finance can first report.

Shawn Rosenthal of CBRE’s Midtown Manhattan office worked on the transaction, which carries a three-year term with two one-year extension options. The mortgage is replacing a construction loan that was syndicated by Natixis Real Estate

Capital, but the amount of previous debt was not immediately clear.

“The financing markets were extremely im-pressed with the quality of the renovations to

date, the interiors of the units and the unique and expansive amenities,” Rosenthal said in prepared remarks provided to COF. “The Pestronk brothers truly created a destination Class A multifamily asset, unmatched

in the Philadelphia area.”Philadelphia-based Post Brothers, which

Sam Chang’s McSam Hotel Group has landed a $115 million loan from Bank of the Ozarks for construction of a 28-story,

566-key hotel operated under two Marriott flags at 338 West 36th Street,

Commercial Observer Finance has learned. The construction loan is for five years, Chang said.

In August 2014, Chang picked up the building, also with an address of 334 West 36th Street, from the Postgraduate Center for Mental Health for $50.8 mil-lion, as Commercial Observer previously re-ported. Construction commenced 30 days ago, Chang said, and the Gene Kaufman-designed hotel will be completed in 21 months.

Adam Hakim and James Murad of Eastern Consolidated’s Capital Advisory

See McSam... continued on page 8See Starwood... continued on page 3

McSam Hotel Group Nabs $115M Bank of the Ozarks Construction Loan on West 36th Street

The LEAD

The Insider’s Weekly Guide to the Commercial Mortgage Industry

FINANCE WEEKLY

CBRE Arranges $183M Starwood Loan for Philly Apartment Complex Refi EXCLUSIVE

“Banks have left a really big hole in the marketplace for funding

commercial real estate.”—Stuart Boesky from Q&A on page 11

3 Rockrose Receives $65M Wells Fargo Refi for West Village Digs

5 Rockefeller Group Gets $70M Loan for NJ Flexible-Stay Community

5 Gary Barnett Lands $55M Acquisition Loan for UES Property

7 S&P: U.K. Narrowly Dodges Recession, CMBS Issuance Hampered

8 Former Eastern Union Funding CEO Joins Greystone to Oversee FHA Strategy

In This Issue

2 | JULY 15, 2016

Christina Mancini 212 713 6767 [email protected]

cushmanwakefield.com

To learn more, please contact:

Christina Mancini 212 713 6767 [email protected]

CLOSED

SENIOR & MEZZANINE ACQUISITION Residential Northern ManhattanNew York, New York

$77.5 MILLIONCLOSED

RECAPITALIZATION Development 33 Lincoln Road Brooklyn, New York

$38.0 MILLION

CLOSED

REFINANCING Retail 163-05 Archer Avenue Queens, New York

$17.1 MILLIONCLOSED

REFINANCING Multifamily 111-113 East 12th StreetNew York, New York

$12.0 MILLION

RECENT LOAN CLOSINGS

http://www.cushmanwakefield.com

3 | JULY 15, 2016

was founded by Matthew and Michael Pestronk in 2007, has been redeveloping the four-building multifamily property at 3900 City Avenue since 2014. The remodeling has been split into two phases: The first, which has been completed, included the renovation of the 180-unit Washington Tower and 265-unit Madison Tower. The second phase is current-ly underway and includes redeveloping the 331-unit Jefferson Tower and the 242-unit Adams Tower. The property is expected to be fully leased in 2017.

“We were pleased to deliver this custom-ized financing solution for the Post Brothers to fund the completion of Presidential City in Philadelphia,” Dennis Schuh, the chief origina-tion officer at Starwood, said through a spokes-man. “We believe the project is unrivaled in terms of quality and amenities in the market.”

Apartments in Presidential City range from studios to three-bedrooms, and have recessed LED overhead lighting, energy-effi-cient, carbon-free electric heating and cool-ing systems and energy star appliances. There

are currently 20 units available, with month-ly rents starting at $1,325 for a studio and $4,555 for a three-bedroom, according to the Post Brothers’ website.

“The CBRE team was able to help us obtain a loan that was commensurate with the world-class environment that we’ve created in one of Philadelphia’s most significant and histor-ical apartment communities,” Post Brothers President Matthew Pestronk said.

Real Estate Capital first reported news of the loan.—Danielle Balbi

Starwood... continued from page 1

Wells Fargo has provided the Elghanyan family-run firm Rockrose with a $65 million mortgage for 100 Jane Street, according to prop-erty records. The debt was arranged by Andrew J. Singer and Kathleen McSharry at The Singer & Bassuk Organization, and consolidates and re-places two previous notes on the building for $17.9 million and $50 million.

The red brick property sits on a cobbled

street at the intersection of the West Village and the Meatpacking District and has 148 rent-al residences. Its amenities include a fitness center, a roof deck and an interior courtyard. It’s not the first time that the Manhattan-based developer transacted with Wells Fargo. The lender led the $270 million financing for 43-25 Hunter Street in Long Island City last summer, as Commercial Observer Finance

previously reported. Additionally, Singer & Bassuk has been arranging loans for Rockrose for over 40 years, as previously reported by CO. The transactions including a $60 million Fannie Mae loan to refinance 110-114 Horatio Street, also in the West Village, in May 2015.

Officials at Rockrose and Wells Fargo did not respond to requests for comment. —Cathy Cunningham

Rockrose Receives $65M Wells Fargo Refi for West Village Digs

100 Jane Street in the West Village.

4 | JULY 15, 2016

http://www.emeraldcreekcapital.com

5 | JULY 15, 2016

Capital One has provided a $70 mil-lion construction loan to The Rockefeller Group for the development of AVE

Florham Park, a 256-unit, long-term stay community, Commercial

Observer Finance has learned. New Jersey-based Deerwood Real

Estate Capital brokered the financing, which carries a three-year term with two one-year extension options. Capital One syndicated the mortgage, carrying 40 per-cent on its balance sheet and giving the rest to New Jersey-based Provident Bank, ac-cording to a source with close knowledge of the deal. (A representative from Provident did not reply to a request for comment.)

Rockefeller Group is developing the 450,000-square-foot building with its joint-venture partner and residential de-veloper Korman Communities. The firms are catering to extended-stay busi-ness professionals and individuals who are relocating.

“It’s always a pleasure to work with so-phisticated developers such as Korman Communities and The Rockefeller Group, particularly on a high-profile project such as AVE Florham Park,” said Bill Booth, a senior vice president at Capital One Bank who led the transaction. “AVE Florham Park is ideal-ly situated in a vibrant and growing commu-nity that includes corporate headquarters, healthcare facilities and even the training complex for the New York Jets. We look for-ward to seeing the project take off.”

Construction on the site started in July 2015 and the property is located with-in the Rockefeller Group’s 268-acre mas-ter-planned community, The Green at

Florham Park, in Florham Park, N.J. Tenants at The Green include the New York Jets, BASF North American Headquarters and Summit Medical Center.

“This financing is reflective of The Rockefeller Group’s strong corporate bal-ance sheet and renowned expertise in New Jersey, both of which allowed our team to effectively negotiate the terms of the loan,” Sam Pallotta, a vice president and the trea-surer in Rockefeller Group’s internal trea-sury department, said in prepared remarks. “Those factors, among others, led to investor confidence and ultimately resulted in the es-tablishment of a new relationship between The Rockefeller Group and Capital One.”

Once completed in 2017, AVE will have both furnished and unfurnished units, as well as 40,000 square feet in outdoor ame-nities, including courtyards, chess stations, a pool, a sundeck, a ping-pong table, a bocce ball court, a movie screen, fire pits and a kitchen with a barbecue area. There will also be 24,000 square feet of indoor amen-ity space, including a café, an indoor media theater, conference suites, a fitness center and a spa.

“AVE Florham Park is unlike anything else that is currently available in the Morris County area,” said Clark Machemer, a  senior vice president and the regional development officer for Rockefeller Group’s New Jersey/Pennsylvania office. “The many unique features of the AVE properties, including the flexible-stay options offered, are what attracted us to this project, and we look forward to delivering AVE Florham Park to the market next year.”

A representative for Capital One was not available for comment.—D.B.

Rockefeller Group Gets $70M Construction Loan for NJ Flexible-Stay Community

350 East 86th Street.

A rendering of AVE Florham Park.

EXCLUSIVE

Gary Barnett Lands $55M Acquisition Loan for Former Gristedes on the Upper East Side

First York Associates sold the 128,250-square-foot site at 350 East 86th Street, with JLL’s Richard Baxter and Glenn Tolchin brokering the sale. Both purchase and financing closed on July 1.

Gristedes occupied the entire one-sto-ry building, which was constructed in 1960. Hyperlocal news site DNAinfo reported that the grocer was closing early this year as the su-permarket industry has been contracting.

John Catsimatidis, who runs the Gristedes chain under Red Apple Group, told Commercial Observer last December that his firm only grosses approximately $200 million annually from its grocery stores and loses “a few million” a year after operating costs. If Red Apple Group wasn’t diversified in its in-vestments (the firm also owns and develops real estate) Catsimatidis said he would have had to close Gristedes.

“We’re able [to survive], but only because we want to,” he said at the time. “If the super-market business was the only business that we did, we would be out of business.”

Catsimatidis was not available to comment for this story.

First York acquired the site in September 1997 for $238,693, according to property records.

The property, between First and Second Avenues, is part of a land assemblage that Barnett has been piecing together to make way for a more than 200-unit, 210-foot-tall condominium tower, as has previously been reported. The neighboring parcels of land that are slated for condo development are located between East 85th and East 86th Streets, with frontage on First Avenue.

Catsimatidis had previously bid $80 million for the site, but Extell beat him out last year, ac-cording to published reports.

Representatives for Extell, JLL and Bank of the Ozarks did not respond to a request for comment. First York could not immediately be reached for comment.—D.B.

6 | JULY 15, 2016

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POWERING YOUR PROSPERITYEric DraegerBerkshire GroupAvid Golfer and Northwestern FanWalker & Dunlop borrower since 2006

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7 | JULY 15, 2016

The aftermath of the Brexit vote will hamper European securitization issuance for the remainder of the year, said analysts at Standard & Poor’s during an industry webcast on Wednesday morning.

“We’re not expecting a U.K. recession but we will only just escape that,” said Andrew South, a London-based man-aging director with S&P who gave a pre-sentation on current market conditions in the European Union. The shockwaves from Brexit will be nothing on the scale of the 2008 financial crisis, however, he said.

Long-term fundamental effects of the vote to leave the E.U. are uncertain but all eyes are on commercial real estate and commercial mortgage-backed secu-rities in the U.K. Several financial insti-tutions are reconsidering whether their operations should be based in the E.U. or in other financial centers, and 95 percent of securitized office properties in the U.K. are based in London, said South.

The Brexit vote has also cast a shadow over the E.U. project to re-regulate secu-ritization, but the future status of U.K. se-curitizations is critical to the health of the European financial markets, he said.

In the U.S., mid-year CMBS issuance volume reached  approximately $30 billion, said James Digney, a senior di-rector in S&P’s CMBS group. The S&P structured finance research team has reduced its estimates for 2016’s total

projected CMBS volume from $80 billion to $70 billion, a 30 percent decline from 2015. A slight uptick is expected in the sec-ond half of the year, but volatility issues throughout the globe are impacting issu-ance, said analysts.—C.C.

S&P: U.K. Narrowly Dodges Recession, CMBS Issuance Hampered

London, where 95 percent of securitized office properties in the U.K. are located.

24-7VISIT COMMERCIALOBSERVER.COM

http://www.commercialobserver.com

8 | JULY 15, 2016

Former Eastern Union Funding CEO Joins Greystone to Oversee FHA Strategy

Avrom Forman, the former chief executive officer of Eastern Union Funding, has recently joined Greystone

as the director of sales strategy for the firm’s Federal Housing

Administration origination team, Commercial Observer Finance has learned.

Forman will report directly to Mordecai Rosenberg, the head of the FHA group at Greystone. In his pre-vious role, Avrom was responsible for formalizing Eastern Union’s sales struc-ture and helped to increase deal volume from $2.3 billion to $3 billion, according to Greystone. Before his two-year gig at Eastern Union, he worked as chief oper-ating officer and the senior vice president of corporate and externational affairs at telecommunications company Vivaro Corporation.

At the start of his time at Eastern Union Funding, Forman had previously worked with Stephen Rosenberg, the founder of Greystone. He recalled accidentally bumping into him once, and after a lunch and a discussion about trying to do more business together, the two grew a close relationship.

“We went from not doing any business at all with Greystone to having a pipeline

well over $100 million in a short period of time,” Forman said. “What was really nice for me on the other side was that every deal Greystone had done with Eastern was earned on its own merits. It was just

a pleasure to work with a smart, dedicat-ed team that was quick and transparent.”

Creating a new position on the FHA team was a no-brainer for Greystone, es-pecially during a time when the compa-ny has been creating its own proprietary

underwriting system to cut down closing time on deals for clients and increase pro-duction, as Rosenberg discussed in a Q&A with COF recently.

“We’re really looking to transform the FHA industry and to take it to new heights,” he said. “Because we’re not look-ing for straight linear growth, but expo-nential growth, it demands a certain level and a lot more focus to enable all of our originators to be as successful and impact-ful as they can possibly be.”

Since Avrom has started, Rosenberg noted that there has been a significant uptick in activity—the FHA team sent out more than $1 billion in proposals in the month of June.

“Just having Avrom focused on enabling and supporting all of our originators to leverage off the technology platform and superior level of service that we’ve been creating, we’re starting to see that impact on growth,” he added.

Forman told COF that in addition to an increase in proposals, deal size has dou-bled month-over-month, and the team’s current pipeline is roughly $2.5 billion.

“One of the most exciting things for me is the creativity of the people that work there,” he said. “You talk about technolo-gy, but there’s never going to be a replace-ment for people. They’re what makes a company work well. Technology allows people to focus more and gives our cli-ents a far better experience that before. It’s wonderful to see it all in play.”—D.B.

Workforce

McSam... continued from page 1

338 West 36th Street.

EXCLUSIVE

Avrom Forman.

Division arranged the debt package.“This 191,000-gross-square-foot hotel,

which will feature a 280-key Spring Hill Suites on the first 12 floors and a 286-key Fairfield Inn & Suites on the upper 14 floors, will be a great addition to the Times Square/Hudson Yards area,” Hakim said in prepared remarks, noting that the hotels will share a lobby, a fitness center, a meeting room, a bar/lounge and a dining area with buffet.

Bank of the Ozarks didn’t respond to a request for comment.

—Lauren Elkies Schram

9 | JULY 15, 2016

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10 | JULY 15, 2016

“Commercial mortgage-backed securities liquidation volume for the month of June came in below the 12-month average of $902.9 million,” said Sean Barrie, an analyst with Trepp. “Disposition activity reached $809.3 million in June, compared with $854.5 million in May. The average loan size also dropped, to $10.1 million across 80 loans, below the average loan size of $13.4 million reported for the past 12 months. June loss severity spiked to 53.9 percent, which is a 20-basis-point increase from the previous two months. Office and retail loans once again made up over 80 percent of total disposition volume for the month. Retail loans continued to rank on top for highest loss severity at close to 60 percent while loans backed by office properties comprised the bulk of overall liquidation activity.”

Source:

The Takeaway

Month Loan Count Loan Balance Realized Losses Loss Severity

June 2015 75 $950 million $384 million 40.39

July 2015 72 $680 million $231 million 33.94

August 2015 73 $838 million $382 million 45.56

September 2015 70 $1,018 million $443 million 43.48

October 2015 54 $869 million $354 million 40.73

November 2015 72 $942 million $415 million 44.06

December 2015 60 $888 million $541 million 60.90

January 2016 125 $2,431 million $1.5 billion 61.61

February 2016 43 $567 million $191 million 33.71

March 2016 36 $436 million $304 million 69.86

April 2016 52 $501 million $174 million 34.67

May 2016 72 $854 million $284 million 33.27

June 2016 80 $809 million $436 million 53.90

Property Type Loan Count Loan Balance Realized Losses Loss Severity

Retail 30 $295 million $175 million 59.28

Office 34 $377 million $200 million 53.24

Multifamily 4 $15 million $1 million 9.39

Lodging 2 $12 million $6 million 54.72

Industrial 4 $35 million $9 million 25.61

Mixed-Use 5 $73 million $43 million 59.17

Total 79 $807 million $434 million 43.56

Property Type Breakdown for June 2016 Loss Severity

11 | JULY 15, 2016

Q+A

Commercial Observer Finance: What are you working on at Pembrook right now?

Boesky: The format is private equity and we raise money, at this point, just from in-stitutional investors. We hope to migrate into raising money from high net worth in-dividuals, maybe someday a public fund or a public entity. the market is sort of pushing us that way. [For] the first several funds we did a fair mix of all the property types. We did some apartments, some office, some retail. We did a few lodging deals. The second fund was similar. The third fund, we’re starting to focus more and more on affordable housing.

After the crisis, there was a tremendous demand for any capital, any product type. At this point, the pressing need is really af-fordable housing. I think that supply and demand-wise it is an extraordinary opportu-nity. There are 3 million-plus families look-ing for affordable housing. Every year, there’s probably somewhere between 200,000 and 300,000 units total being built in the coun-try. That’s a 10-year supply-demand imbal-ance, assuming that no one else gets added to the marketplace. There really is for af-fordable housing an insatiable demand. It’s never going to be satisfied, and in fact, in my 30-year career, it’s never been satisfied.

Are you changing your loan offerings since you’re shifting more towards fi-nancing multifamily?

We certainly are talking to maybe a differ-ent and broader investor base, and perhaps some of the investors that we’re going to be attracting in the future have more of a so-cially responsible viewpoint. But the reality is that the risk-reward ratio is as good or bet-ter as everything else we’ve done. When you look at the benefit stream that we’re able to produce for investors, it’s every bit as good. We’re not compromising return, and we’re not taking more credit risk, and we’re pro-ducing the same or better returns than we have in the past.

So you traditionally look for mid-teen returns?

We target teens returns, yes.

Having grown up in Detroit, have you gone back and done any business there?  

Everyone loves Detroit! I have a lot of interest in Detroit, both from personal and profession-al standpoints. About a year ago or so I spent a fair amount of time exploring opportunities in Detroit. I think there are some good oppor-tunities, and while I’m not sure that there are necessarily going to be deals that our fund gets involved in, from a personal standpoint, I’m working on a transaction. I’ve been working with the city and the community to do something. It’s not clear whether it’s going to come to fruition yet, but I hope it does. It’s basically converting an existing building to rental apartments with an affordable component.

What’s in the pipeline for the rest of the year?

On an annual basis we put on to our pipeline somewhere around $3 billion worth of deals. We’re seeing a tremendous amount of deal flow and that basically is a testament to the fact that the banks have really left a big hole in the mar-ketplace for funding commercial real estate. If a firm like Pembrook can see, call it, $6 billion worth of deals a year, then that just tells you how much product out there is looking to be financed.

The pipeline is enormously robust—far more business than we could ever close. Out of the—call it $3 billion or so a year—that we’re logging in, we maintain roughly $250 million to $400 million on our weekly pipeline. Those are deals that are actively being worked. The net result of that is that we’ve been closing pretty consis-tently, call it, somewhere between $200 million to $300 million a year in deals, and we certainly have the appetite to do more. We’d like to see that volume double over the next 24 months.

Stuart BoeskyChief Executive Officer of Pembrook Capital Management

Stuart Boesky.

FINANCE WEEKLY

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