New York Multifamily Borrowers Still Eager for Capital

The appetite for multifamily finance hasn't slowed down.

spruce capitalNew York—The appetite for multifamily finance hasn’t slowed down, at least not for deals in primary markets like New York. Spruce Capital Partners and Tall Pines Capital report that their $170 million joint venture first-position real estate lending vehicle, S3, which was launched only six weeks ago, has originated more than $85 million in loans in that time.

All together the loans have gone to 40 projects, predominately in Brooklyn and Manhattan. “Emerging developers in hot neighborhoods have the local expertise to identify and set up rewarding deals, but they need access to capital – which they often need on a near-immediate basis,” explained S3 Principal Robert Schwartz.

Already more than 40 percent deployed, S3, which only recently completed its website and has done no marketing, expects sustained word of mouth to further build momentum for the fund. “Traditional lenders are not interested in lending on these deals,” noted Schwartz.

The volume of deals, however, does come against a backdrop of strong interest in borrowing for multifamily deals. Recently the Mortgage Bankers Association reported that the dollar volume of loans for multifamily properties nationwide was up 11 percent in the third quarter of 2015, compared with the same quarter a year earlier. Total multifamily mortgage originations are projected to come at $225 billion in 2016, according to the MBA, an increase of 6 percent.

Schwartz said that S3’s lending spectrum ranges from $1 million to $20 million, with a “sweet spot” of $2 million to $10 million. He and fellow S3 principal Joshua Crane have developed, invested in, and managed residential and commercial projects in New York and other markets. They include the condo project at 151 East 78th Street in Manhattan; 1209 Dekalb, a rental property in Brooklyn; and mid-rise projects in Virginia and Maryland.

Rendering courtesy of Spruce Capital Partners.