(The arena and the mixed-income rentals depend significantly on tax-exempt bonds, which also face financing challenges.)
An 11/19/08 New York Times article, headlined Defying Slump, Developers Plan 60-Story Hospital Industry Center on West Side, described efforts to build a 60-story tower in Manhattan. The Times noted:
One executive who spoke on the condition of anonymity for fear of alienating Extell said he found it hard to believe that enough companies would commit to 10-year leases in the current market to make the project financially viable. “Under normal conditions, Israel Green and Extell could — and did — raise a lot of money,” the executive said. “They are as smart as they come.”
But he said that over the next 12 months, space would become cheaper to lease, and that it might make more sense to lease than to build. “There is nothing getting done or built that’s over $100 million these days, because you simply cannot get the lenders together to fund it,” the executive said. “In fact very little is being done above $75 million. When you’re looking into a crystal ball, a year to a year and a half looks to us like a train wreck just beginning to hit.”
And how might it be funded? The Times reported:
[Extell's] Mr. [Marc] Shaw said the developers were not asking for government financing at this point, though they might look for tax breaks down the road. He said the building would finance itself through leases that would “replace the conventional bond that’s hard to get right now.”
Condos hard to fund
On 11/17/08, the Real Deal reported delays in funding condos--but perhaps a silver lining in the long run:
Real estate developer and New York Observer publisher Jared Kushner says that because there's so much inventory on the market, "there's nothing too obnoxious that you can ask for right now," when looking for an apartment. Kushner was speaking last week at an event called "Real Estate Gets Real," hosted by the Observer, Halstead Development Marketing and Wells Fargo at the Scandinavia House on Park Avenue between 37th and 38th streets. Meanwhile, Stephen Kliegerman, executive director of Halstead Property Marketing, told the crowd not to expect any real funding for new condo projects until 2012 or for new rental buildings until 2010.
In the video, Kliegerman says:
Because of the banking crisis... there are no new condominium buildings that will be started for the next 12 to 36 months. So any hole in the ground... that has funding... is going to most likely get built. And I say most likely, because I believe that about 25 to 30 percent of the jobs that are just in the ground but are not superstructure up, probably won't get built, because those developers don't have deep enough pockets, and their bank may pull the plug and say, let's hold on right now.
Currently, we have about 6 to 8 months of inventory, resale and new construction. If the economy completely tanks, and no one buys another apartment for the next year,
that inventory will rise to 12 to 18 months. If you do the math, that means, within 24 months, what are we going to have in New York City? We're going to have a housing crisis. There will not be enough apartments to house all the people coming to New York.
Remember, New York is not just a local marketplace. It's an international marketplace as well. Even with international economies faltering, where do people put their money into times of crisis? Into real estate. Why. Because it's a long term hold. It's not a daily traded security. You don't lose half your money overnight.
So you have the 421-a deadline coming and going. You have the credit crunch that is slowing down or stopping any new construction. So 24 to 36 months from now, there's going to be relatively and virutally no new housing stock to speak of, until we get out of this time and the banks start lending again.
But all the projections are, and I was at a Real Estate Board function last week... all predicted that they won't see any realistic, reasonable funding for for-sale housing come until about 2012. Ad they don't believe there will be any reasonable funding for rentals until about 2010, 2011.