For the purchase, Berkadia’s Patrick McGlohn, Brian Gould, Miles Drinkwalter and Pat Cunningham provided $27.3 million of Freddie Mac acquisition financing on behalf of Bozzuto.

“This was a dynamic and competitive financing process that attracted numerous financing options given the strength of the asset, location and sponsor,” McGlohn said in a statement. “Our partners at Freddie Mac exhibited nimbleness and were able to quickly lock the interest rate, which proved to be extremely valuable given the current Treasury volatility.”

Located between 1200 North Queen Street and 1201 and 1225 North Pierce Street, the 132-unit complex has recently been redubbed as The Alcott.

Built in 2009, the Alcott has an average unit size of 813 square feet and was 96 percent leased at the time of the sale, according to Berkadia’s marketing materials for the property.

Neither Bozzuto nor Gables Residential immediately responded to requests for comment. 

Bozzuto has its hands full on the Maryland side of the Washington, D.C., region. In a joint venture with the Chevy Chase Land Company, the firm has spent the last few years developing the 6-acre, mixed-use Chevy Chase Lake, which these days features three luxury apartment buildings — The Barrett, The Claude and The Ritz-Carlton Residences, Chevy Chase — along with 100,000 square feet of retail space. Fitness studio StretchLab and Dok Khao Thai Eatery signed leases there in September. 

Nick Trombola can be reached at ntrombola@commercialobserver.com.

“We’re flush with capital and want to put it out,” he said. “Sometimes, where we want to put it and where the borrower wants it is not the same. But, we’re a little bit agnostic in that we just need trades to happen.

“For two years, I’ve been saying the issue in the lending business is we need to further acquiesce to the fact that interest rates are where they are,” Fineman added. “Interest rates impact value, and when a buyer and seller — or a borrower and lender — agree on what the value is, then a trade can happen.”

Fineman said 2023 was a dead year, and that financiers who are being honest will say volume was down anywhere from 50 to 80 percent from average. But he says he’s seen activity pick up in the first quarter, and expects market improvements the rest of the year.

“I’m optimistic that at some point there will be a catalyst for trades, and that the market will settle on a level,” Fineman said, referring to asset values. “I don’t know that the market has shown us where values are yet. It feels to me like we still need to get to the place where the bid-ask makes sense based on wherever the cost of capital is today.”

Sondra Wenger, senior managing director and head of commercial real estate for the Americas at CBRE Investment Management, said it’s important to be able to pivot and respond to market trends and research. For example, she pointed to work from home trends resulting in far less frequent trips to central business districts for errands or lunch. Instead, people are visiting neighborhood retail centers at far greater rates than before the pandemic.

“If you look at that from a high level, there is limited supply, they have high occupancies, and there’s a lot of under-market rents making it a really attractive investment today,” Wenger said of neighborhood retail properties. “Because retail was in the doghouse for the last nine to 10 years, there wasn’t a lot of construction getting done. So the supply did not keep up with the demand. It didn’t even keep up with population growth.” 

She said, despite negative sentiment, CBRE has seen the highest occupancy levels in retail in the last 24 years, and retailers are seeing higher consumer spending sales per square foot when compared to recent averages.

“We expect that trend to continue on for the next three to four years,” she said. “If you look at pre-pandemic levels, they’ve seen sales increase 33 percent. Because rents were not moving up due to people’s fear of retail, there’s a real mark to market growth in your rental rate. … It’s also unique in that you can get positive leverage today on most of your retail deals.”

Mark Roberts, managing director of research at Crow Holdings Capital and also at SMU Cox Folsom Institute for Real Estate, said while it’s not a typical cycle, there is a lot to be optimistic about. He said investors are responding to the state of money markets by rebalancing their portfolios to reduce exposure in the stock market and target assets with good yield.

When it comes to U.S. office real estate, Wenger said the market tells a bifurcating story between the haves and have nots. 

“It’s a very different animal,” she said. “We need to split it up and call them separate things because the halves are faring very differently than the have nots. And there is a much wider spread in that bid-ask for the have nots versus the haves.”

She said the haves in the office market are actually seeing rent growth and some of the lower vacancies. 

“We’re seeing a huge trend where tenants are now using this as an opportunity to say, ‘We want to get into some good space where we can really pull our tenant pool and our workforce in,’” Wenger said. “We do that through an office that’s the right product, in the right location with the right user experience.”

Roberts said it’s a tenants’ market, which means it’s going to take a lot more capital to develop those types of office amenities. “Part of the challenge is that not all landlords are well capitalized to do it,” he said.

Wenger added that funding is the first thing office tenants ask about when touring properties.

“It’s not ‘Where’s the metro line?’ or ‘What amenities does this building have?’” she said. “We’re now getting asked, ‘What is the capital stack of this building?’ because it’s very important for tenants to know if they’re going to make a commitment that it’s not going to turn into a zombie building.”

Opinions from the panel about multifamily investment were varied. They agreed, though, that multifamily operation fundamentals are strong.

“Most of the properties you see that are distressed aren’t distressed because the occupancy is not there,” Jay Porterfield, executive director at PGIM Real Estate and another panelist, said. “They’re distressed because of the financial engineering that went into the capital stack. My living is made around apartments, so maybe I’m biased, but I continue to be bullish on apartments. But you have to pay the right price.”

Wenger said CBRE was expecting distress in the multifamily market because of the volume of deals completed in 2021 and 2022 at very low cap rates. “But the reality is, there just isn’t yet because it is a long-term investment asset class,” she said.

Fineman cautioned that the nation isn’t out of the woods when it comes to distress in the multifamily market.

“If the [U.S. 10-year treasury] stays at 3.5 to 4 percent, distress in multifamily is coming up,” he said. “There will be capital that’s dejected by the current owner, or capital dejected by the next owner. I think there’s tremendous opportunity and we’re very bullish on putting money out in the multifamily market. But to say we’re past seeing distress in multifamily is not correct.”

Colin Fitzgibbons, president at Hunt Realty Investments, said he’s bullish on multifamily, and the company is working on affordable and workforce housing projects. He pointed to Downtown Dallas’ deficit in affordable housing.

“It is a problem and it’s going to affect the overall growth if we don’t figure out a way to address it,” he said. “So I’m someone who spends a lot of time trying to wrap my mind around how the numbers work, but we’re very bullish on the long-term prospects.”

Carmical wrapped the panel by asking for bold predictions for 2024. 

“I don’t think the Fed moves [interest rates], and I think the treasury stays where it is right now,” Porterfield said. Fineman predicted one rate cut this year “right before the election.”

Roberts’ forecast shows a lower chance of cap rates rising then falling over the next couple of years. Wenger said there will be an undersupply in “brand-new responsive office space in 2025.” And Fitzgibbons predicted “more new office development than you think.”

Gregory Cornfield can be reached at gcornfield@commercialobserver.com.

Unfortunately, despite some policies and investments that are a step in the right direction, the recently enacted 2024-25 state budget falls short, because it lacks a comprehensive solution that preserves the units we already have while building future affordable housing stock.

Jolie Milstein. Photo: NYSAFAH

The truth is that unless we protect existing units, they will become uninhabitable and unavailable. We will be adding new units as old units come offline, merely maintaining the status quo and failing to make significant forward progress.

The New York State Association for Affordable Housing (NYSAFAH) this year proposed creating a $250 million Affordable Housing Relief Fund to help preserve buildings and prevent the loss of many of the vital existing affordable housing units that house vulnerable individuals and families. Unfortunately, the governor and state lawmakers failed to recognize the need for this fund and left it out of the final spending plan.

In 2017, NYSAFAH was a key advocate for the first five-year Affordable Housing Plan, which helped bring about once-unimaginable affordable housing production. The certainty provided by the five-year plan was a game changer in attracting private sector investment.

Much of this progress was undone by the pandemic, during which many affordable housing tenants were either unable or unwilling to pay their rent. While emergency rental assistance programs helped qualified tenants, many failed to apply while others failed to qualify. This left owners in the untenable position of having to tap reserves just to make mortgage payments so tenants could stay housed during the COVID crisis. 

Now, these same buildings need emergency repairs yet lack the funding necessary to ensure the highest level of health and safety that all tenants deserve. These buildings operate on the slimmest margins, and raising rents is not an option because it would undermine the promise of affordability.  

We applaud many of the housing-related changes enacted as part of this year’s budget, such as the extension of 421a tax benefits, the creation of a new 485x program, removing barriers to new construction in New York City, encouraging upstate municipalities to undertake planning for affordable housing, and prohibiting affordable housing discrimination in insurance. But without the financial backing to save our existing affordable housing stock, we are missing a vital piece of the puzzle.

Failing to fund the Affordable Housing Relief Fund will result in a sadly predictable outcome: another year of disrepair, operational losses and increased costs. Owners will have to leave units vacant because they lack funding for repairs that pose safety risks to tenants.

Negotiating a $237 billion state budget is no small undertaking. It is filled with competing priorities and difficult choices that require compromise. Taking stock of wins and losses, and forging a path forward is an equally important part of the process and one that is critical to advocacy.

Government has a far-reaching inventory of solutions well beyond its budgetary authority. Statutes, regulations, programs, policies and procedures are all tools for problem solving. The governor and lawmakers must put these tools to work to ensure vital affordable housing buildings across the state have the support they require so they don’t default — an untenable prospect for tenants and property owners alike.

In the New York state budget, the lack of resources for an Affordable Housing Relief Fund will have consequences as more affordable units are unavailable to families in need. The opportunity to solve the preservation crisis in this year’s budget may have passed, but Albany must dig deep to find solutions to help now. 

Our responsibility to the well-being of New York’s tenants is a cornerstone of the affordable housing industry. We are here to do everything we can to honor that commitment, but waiting until the next budget cycle is not an option. 

Jolie Milstein is president and CEO of the New York State Association for Affordable Housing.

Aiese described The Mann Group and True North Management as “exceptionally experienced investors” and described the strategy to refinance the portfolio as a “value-add” move that improves New York’s “supply-constrained” housing market. 

“[The] lenders were eager to partner with a best-in-class New York City operator and a national asset manager on a newly renovated, mixed-use portfolio situated in highly sought-after neighborhoods,” Aiese said in a statement. 

The larger portion of the residential portfolio includes seven buildings located in Greenpoint, Brooklyn: 591 Manhattan Avenue, 592 Manhattan Avenue, 593 Manhattan Avenue, 595 Manhattan Avenue, 574 Manhattan Avenue and 602 Manhattan Avenue. The two building portfolio includes 126 Bedford Avenue in Williamsburg and 152 Norman Avenue in Greenpoint. There are approximately 44 renovated residential units and eight retail units among the nine buildings.  

The North Brooklyn neighborhoods of Williamsburg and Greenpoint have developed more than 2 million square feet of office space in just the last two years, according to JLL. 

The Mann Group and True North Management did not respond to requests for comment. 

Brian Pascus can be reached at bpascus@commercialobserver.com 

Mark Roberts, managing director of research at Crow Holdings Capital and also at SMU Cox Folsom Institute for Real Estate, said he’s been working in Dallas since the late 1970s. He noted the diversity shift over time in terms of the companies leading the market. First, energy, finance and transportation companies were the key drivers in the market. American Airlines, Exxon and Fidelity, for instance, moved to major campuses in the 1980s. Today, a number of Fortune 500 companies have moved headquarters or outlets to Dallas.

“The economy used to be a lot more volatile,” Roberts said. “We would go through swings with booms and busts on job growth. For people trying to sell property, it was really tough: By the time you get a building finished, all of a sudden we’d be in a recession. It’s gotten a lot more stable and diverse now. Chicago has been a city that has a diversity index that’s basically equal to the nation, so it moves with the nation. Dallas is in about the same place right now.”

Roberts said there were concerns last year that the industrial market was building too much space.

“But shoot if we didn’t get it absorbed,” he said. “Occupancy rates remain 1 percent below the long-term average. That’s a big deal. … Dallas, I think it will continue to be a magnet for investor capital.”

Roberts added that the diversity and stability in Dallas and Texas as a whole adds to the benefits of favorable political policies and regulations. Tony Fineman, senior managing director and head of originations at Acore Capital, said they are very focused on Dallas and all of Texas, and also cited the business-friendly approach.

“The key thing to us as we look at other markets in this country where the policies of the government are anti-growth, anti-investment; look at Dallas and Texas: People are still moving here. There’s still migration into this city,” Fineman said. “The truth is these markets are resilient. The growth is fostered here. So we’re really bullish on lending here.” 

Sondra Wenger, senior managing director and head of commercial real estate for the Americas at CBRE Investment Management, said her company remains very active in looking for investment opportunities in Dallas. 

“Dallas has above-average economic and demographic growth, very low cost to do business with a highly skilled labor force,” she said. “We recently did an investor intention survey, in which CBRE talked to 100-plus investors across the country, and Dallas was ranked No. 1 in terms of places where investors want to invest.”

Jay Porterfield, executive director at PGIM Real Estate, said Dallas led the nation in apartment deliveries over the past two years.

“That would have the potential to be a little bit scary or cause problems in the market,” he said. “But because of so much in-migration, because of so much job growth, most of those have been absorbed or are being absorbed. … There are a lot of markets in the country that if you had those kinds of deliveries, you’d have some big occupancy problems. Dallas has just performed like a champ.”

Colin Fitzgibbons, president at Dallas-based Hunt Realty Investments, said the region has seen much less distress and fewer defaults than they were expecting. 

“I keep saying, ‘Man, this year hasn’t started out that bad,’” he said. “It’s starting to feel like it’s going to be a good year, actually. In the last six weeks, we’ve had a lot more conversations with office-focused brokers. There’s a big deal on the market all of the sudden and we haven’t had one of those in a while. We always kind of thought Dallas would be relatively insulated or recover faster from whatever happened. … It feels like we’re trending.”

Gregory Cornfield can be reached at gcornfield@commercialobserver.com.

Goldman Sachs’ CRE financing team is one that has perfected the delicate art of “go time” these past two years. As a result, the firm significantly increased its market share when others were sidelined and licking their wounds. 

“Clients needed the best advice possible as to when to go to market [with a CMBS deal]and how to approach the market,” Siddharth Shrivastava, a managing director in the group, said. “We had a competitive advantage in that clients wanted to work with a seasoned team like ours during the volatility, versus in stable markets where every deal is getting done at very tight levels. We were able to gain market share and capitalize on the volatility out there through being advisers to our clients.” 

Indeed, “nothing in the past few years was straightforward,” Steven Pack, another managing director, said. “Most people who decided to do a deal in the last few years had to do a deal. We pride ourselves on not taking an ask at its face value but instead by being really creative about solving for what the client needs. We aren’t just one pocket of balance sheet capital. There are tons of groups within Goldman that work very cohesively together, and getting a deal across a finish line may involve a solution that the client didn’t think of at the start.” 

The team’s deal sheet from last year includes a number of those examples. 

In November, it led a $1 billion CMBS loan to refinance an 8.5 million-square-foot portfolio backed by open-air retail assets owned by Strategic Value Partners. It was the first CMBS deal for the sponsor, and the largest retail loan of 2023. It also took 18 months to perfect and pull the trigger. 

“They had a portfolio of retail assets they had taken over the debt through a bankruptcy process with Washington Prime, and it was a really important deal for them,” Pack said. “They hadn’t borrowed in the CMBS market before, and they had a huge basket of collateral across some more difficult, enclosed malls, plus some more attractive open-air retail centers that were doing really well with positive leasing momentum. It’s an example where we worked together to deliver a solution that they were really happy with. There were some buyers of the bonds in that deal that had never participated in CMBS before and we were able to creatively bring people into that deal that the market may not have thought of as being key players, in order to get the deal across the finish line.”

Then, there was the $1.185 billion single-asset, single-borrower CMBS transaction backed by a portfolio of Amazon-leased industrial properties on behalf of Preylock Holdings. Preylock had acquired the assets in a very different rate environment and was trying to get a CMBS deal done in the first quarter of 2022, but then the Russia-Ukraine war broke out and the deal was put on pause. The team worked closely with Preylock to determine the best time to bring the trade to market, with triple A bonds on the deal printing at the tightest level for a SASB trade since the first quarter of 2022.

“We spent a year and a half working with them, figuring out the right time to bring it to market and eventually executing the deal in July last year,” Shrivastava said. “It’s another example of us working with a client over time to figure out the best solution in a challenging environment.” 

In 2023, only four SASB deals topped the $1 billion mark, and those were two of them. 

Follow the gold brick road 

While its CMBS chops are nothing to sneeze at, Goldman’s platform has evolved significantly over the past decade to encompass far more than just CMBS. 

“We have a lot of different solutions for our clients today. We’re a large bank lender, we do a lot of warehouse financing where we’re providing loan on loan financing, and then separate from us the firm also has a number of fund strategies that are our more opportunistic capital,” Managing Director Miriam Wheeler said. “We’re in a unique position now when a client comes in, as we have a product for whatever they need. The firm wants to continue to grow asset-secured lending. That’s one of our main priorities as it will allow us to keep growing our business and having more solutions available for our clients.” 

The bank also has a global real estate and structured products franchise under its belt, with a syndicate desk that touches all of the different markets the bank operates in. “That allows us to bring great deals to our franchise clients and borrower clients, but also get real-time information around where there’s demand in the market and what bond buyers are focused on to get the best possible execution,” Wheeler said. 

In terms of lending preferences, one area it’s leaning heavily into today is data centers — a sector Goldman started dabbling in more than 10 years ago, long before others jumped on the bandwagon. 

“We had around 25 percent market share in that business last year, so significantly more than anybody else in the space,” Wheeler said. “That was a testament to clients entrusting us with their most important financings last year.”

The sector has become a “huge focus” for the firm, as has digital infrastructure, more broadly, Wheeler said. “We’ve used our balance sheet to support construction in the space, and we expect to have a lot more both CMBS and [asset-backed securitization, or ABS] activity in data centers,” she said. “We’re super excited about what we’re seeing in AI and the opportunities it’s creating there.” 

Data center financings aren’t for just anyone. They often require supersized loans, they’re nuanced and include both real estate and infrastructure components, and every financing is a bit different. Still, Goldman is pursuing the complexity. 

“Where we stand out is, we have solutions for a data center that is 15 years leased to Microsoft, we have solutions for data centers that are leased to co-location data centers, which have shorter lease terms,” Shrivastava said. “We have CMBS, equities, ABS private placement, we can do borrowing-based facilities, we can do revolvers. We have a lot of connectivity, so to speak, and I keep reviewing that space in anticipation of what’s to come.” 

The team did its first small data center deal in 2012, but the real effort began in 2018. “Some of the clients we spent time with very early on are now very well-known players in the sector,” Shrivastava said, noting that Blackstone’s $3.2 billion deal to finance its $10 billion acquisition of data center operator QTS in 2021 helped to mainstream the sector. 

Data centers may be what the cool kids are pursuing today, but that’s not to say Goldman is shying away from the one asset class that others are treating like a peanut butter sandwich at the school lunch table.

“We’re still very active in the office market,” Wheeler said. “We’re focused on the top end of the market in terms of B-plus assets and assets that have a fair amount of cash flow and weighted average lease term, but we are finding for those best-in-class assets that satisfy those criteria that there is good market demand on the investor side. Of course, we’re cautious around office fundamentals, and are looking at each opportunity on an individual basis.” 

Think small

At the other end of the spectrum from mammoth data center deals, Goldman is continuing to expand its product offerings to smaller conduit CMBS loans. 

“Historically, our franchise focused more on larger loans,” Tim Richards, another managing director on the CRE finance team, said. “As we’ve continued to grow, going back to this idea of having a solution for any client out there in any real estate asset, we’ve really tried to grow our market share in the conduit market, and in smaller loans specifically. 

“We have products for all shapes and sizes of our sponsors, and we want to be able to touch people that need a $5 million, fixed-rate loan,” he continued. “We can help them figure out solutions for this space, so that’s an area that we’re spending a lot of time in, with pretty distinct success.” 

As its suite of offerings has expanded, so has the team’s client base — especially in the past two years when the lending playing field thinned out significantly. 

“There were some institutions that needed to pull back,” Wheeler said. “We were able to step up for people in times of volatility, and that makes for a great relationship.” 

“In this type of market, we’re more meaningful to our existing clients,” Pack added. “But we’re also using it as an opportunity to take out a piece of paper and be like, ‘OK, who haven’t we worked with in the past? Who’s well capitalized but their lender’s not there anymore?’” 

Roughly half of Goldman’s business was with existing clients last year, the other half with new clients. 

“In order to get 25 percent market share last year, we had to be doing business with everyone, and I think we’re really happy about the expansion of our client base over the last 24 months,” Pack said.

Timing’s everything 

Like several other lenders on this year’s Power Finance list, the Goldman team played financing consiglieres — at times offering tough love — to their clients. 

“I think one of the biggest challenges as the market has evolved is having clients that are long-term holders of assets understand the rapid changes in the market, and how that’s impacted them when it comes to financings,” Richards said. “You’ve had to say, ‘I know that six months ago you thought you were going to get this done at X debt yield, but, given where things have moved, you need to be here instead.’ It’s not us trying to take advantage of them by any means. It’s what a deal needs to look like in this market, and helping them understand what it takes to execute.”  

When it came to CMBS deals, that guidance involved trying to time the market as perfectly as they could.

“It comes down to a combination of doing a bunch of upfront work to get to a place where you can tap the market — a lot of asset due diligence — and working with the rating agencies, shaping the right pool, and having the flexibility to go when the market is open,” Wheeler said. “For some of the malls, there’s bond buyer education as well, in terms of what’s really happening in the sector right now, and why we have more conviction than we had 24 months prior. So we’ve been having a lot of those conversations.”

Happily for CMBS, a lot of those bigger malls were historically financed by life companies, which weren’t offering the proceeds that sponsors were seeking last year. 

“We took advantage of that trend, and worked with sponsors who hadn’t tapped the CMBS market before,” Wheeler said. 

Again, a successful execution depended on timing. 

“The last two years, it’s been all about when there’s been a window the market has offered up,” Shrivastava said. “That’s true for our market, and also for the IPO market. We knew there were clients like SVP and Greylock and others who had deals they wanted to get done. So the moment we saw an opening, we were in front of them, telling them: ‘Here’s where your deal can execute today, and here’s the timeline. Let’s go!’ When the Preylock deal printed in late July 2023, that prompted a few more deals that came to market around then. The world’s become very collaborative in the last few years.” 

With Preylock, the Goldman team first marketed the bottom tranches of the deal with five investors to test the market. “Once we had the right traction there we went out broadly,” Shrivastava said. “It’s not just timing, it’s a process — stage and execution. The market right now feels great, it’s just go, go, go. But the last two years were different, and I think we did a good job with our clients in navigating that.” 

The most difficult part, Pack said, is getting a sponsor off the sidelines to do two months of prep work in a market that’s not at all favorable for borrowing and doesn’t inspire confidence (at all). 

“The groups that did that, trusted us, and allowed us to get their deal ready so they could tap the market when there was this window are the groups that were successful,” Pack said.

CMBS hasn’t always had the best reputation in terms of borrowers’ experience, which could make some first-timers wary about dipping their toes into it during normally functioning markets, let alone volatile ones. But, Goldman has a solution for that. 

“We have a servicing liaison, which is somebody on our staff full time whose entire job is to coordinate between our borrowers and CMBS servicers to make sure that they’re getting quick responses and reasonable outcomes and that sort of thing,” Wheeler said.  “It’s a big differentiator for us.” 

Further, if clients are used to borrowing from life insurance companies or balance sheet lenders, they may be realizing that those pockets of capital are actually less certain now than CMBS in some ways, Shrivastava noted. 

“Sure, CMBS pricing has been volatile for the last couple of years now, but from a proceeds perspective and timing perspective, you feel very good about the fact that you will be able to get there, and get the proceeds that you’re solving for,” he said. “With balance sheet lenders, who knows if they will be there in time or not? So, while there’s an education process, we’ve seen a lot of new borrowers come to the CMBS market, and ultimately they’re getting deals done — which they’re not getting from the traditional sources.” 

Big market events over the past year have also sent CMBS more customers. 

“The regional bank pullback is real,” Wheeler said. “We’re seeing banks broadly pull back on CRE lending, and we think that some of that product will go to CMBS.”

Do more in 2024

After a rough ride in 2023 — and that’s putting it mildly, someone pass the Dramamine —  the market is off to a busier start in 2024, with more optimism in the air. 

Wheeler said her team is excited about what it’s seen year-to-date on the CMBS side, in terms of the depth of the investor pool and its demand for the product.

“People have an almost insatiable appetite to buy fixed income right now,” she said. “We’ve seen issuance in the CMBS market triple from where it was Q1 2023, and spreads are much tighter. Our goal is to grow our business this year and do as much as we can in CMBS.” 

Of course, overall CRE transaction volume hasn’t fully returned, with people begrudgingly adapting to the higher-for-longer rate environment, but some green shoots are beginning to sprout.

“Some single-asset sales and some larger portfolios that have been in the market for 12-plus months are now getting traction in prices that sponsors are willing to trade at,” Pack said. “With that comes even more activity and hopefully further tightening in terms of spreads. It’s an area we’re starting to be more optimistic about than we were in the fourth quarter.” 

“A lot of sponsors know that it’s hard to wait for the absolute bottom to buy,” Wheeler added. “I think they are just starting to feel better about the world, and they feel like they can underwrite some rent growth again in certain sectors. They don’t necessarily feel like they need to wait for the absolute all clear. They have enough confidence to start now.” 

The risks haven’t gone anywhere, of course. Shrivastava pointed to questions around inflation, rates, geopolitical risks, the presidential election and consumer spending, to name but a few. 

“The market is feeling good right now, but we need some of these risks to go our way over the course of the year,” he said. “In our industry, there has been a lot of kicking the can down the road. With rates hopefully coming down, maybe you can start refinancing deals that weren’t refinanceable last year. But, at some point, if you can no longer kick the can down the road, and you need to find liquidity at a lower price, that could have an impact.” 

The Goldman team sits at 200 West Street in Manhattan, but none of them are New Yorkers by birth. Wheeler grew up in Denver and was initially interested in urban planning. She joined Goldman as a summer analyst in 2004, and has now spent her whole career with the firm.

Shrivastava grew up in Kuwait but is from India originally. In 2011, he was exploring what he wanted to do after business school, knew he wanted to work at an investment bank like Goldman, but was agnostic as to which team. “Over the course of discussions, I met folks on this team, and I haven’t looked back since,” he said. 

Pack grew up in Atlanta and always had a hankering to move to New York. He did so in 2004 thinking he’d stay for a few years. “I’ve been here almost 20 years now,” he said. He’s worked on both the banking side and private equity side, most recently at Deutsche Bank for almost eight years, and then found an opportunity to join Goldman in August 2021. 

Richards grew up in rural New Hampshire. His father was a carpenter and his mom a real estate agent. “After a summer roofing and doing cabinets I said, ‘This is not the career for me,’” Richards said. He took a job with Northern Trust in Chicago as a portfolio manager and trader before moving to General Growth Properties. He was eventually enticed by Goldman Sachs in 2015 because, for his boss at GGP, Goldman Sachs was the “easy button” when it came to selecting a lender for a deal. 

“We were working on a deal, and he said, ‘Where’s Miriam on the list [of bids]?’ I said, ‘I think she’s fifth.’ He said, ‘Tell her if she gets to this number, the deal is hers. I’ve had a really tough couple of years and I need an “easy button” for this one,’” Richards said. “That’s when I knew I wanted to work with this team — they were the go-to.”  

The commercial mortgage-backed securities (CMBS) market began to rebound in late 2023, but for much of the year the alternative lending space was the main source for commercial real estate owners in need of fresh capital. 

Apollo helped carry the baton for alternative lenders in 2023 with $11 billion of loan originations from 75 deals. It was one of the few lenders that managed to increase its lending volume from 2022.

PGIM Real Estate also capitalized on lending opportunities last year with $11 billion of volume. The firm’s 2023 statistics were down from the $15 billion it originated in 2022, but it managed to execute many larger deals that otherwise would have gone to banking lenders. 

“We historically have done larger transactions but the number and the size of some of these transactions were larger in 2023 because it definitely shifted our average loan size a significant amount,” said Melissa Farrell, managing director and head of U.S. debt originations at PGIM. “What we’re starting to see at the beginning of the year as the CMBS market is starting to open up is it’s getting harder to compete on those larger loans, or at least there’s more competition on those larger loans than there was in 2023.”

Private lenders have been better positioned to stand out in the past year without the regulatory constraints that large and small banks have had to contend with, resulting in resistance to taking new loans on their balance sheets.

The Blackstone (BX) Real Estate Debt Strategies team seized on lending opportunities that presented themselves for nonbank lenders in the last year with $4.6 billion of loan originations globally in the year ending March 1, with $3.7 billion concentrated in the U.S. The platform deployed capital into a number of data center, industrial, multifamily and hospitality properties at a time when there was a big gap that needed to be filled in the lending world.

The addition of new clients was done not so much out of need, but due to a Darwinian hunger to attract new, shiny clients now that so many lenders either fell out of the picture or were unwilling to extend liquidity until the market settled down. 

Christopher Peck, senior managing director and capital markets head of JLL (JLL)’s New York office, emphasized that his team built out several lines of business to take advantage of different market opportunities. To this end, while the firm’s investment sales business might have been down in 2023, its consistent note sale business allowed the group to land Blackstone (BX) as a client on the loan book sale of the failed Signature Bank. 

“By building out emphasis and expertise in every category, we can adapt to what the market gives us,” said Peck. “Whether bull market, bear market, or housing is the opportunity or office is, we have the right ingredients already in place to capture those market opportunities. … We built the business to be resilient in that respect.”  

He said this resilient financing model has allowed the group to access deals and weather a truly generational capital markets storm that it likely couldn’t have withstood as recently as five years ago. 

“We’re not the most aggressive marketers, we don’t spend a lot of capital on marketing, or time running around entertaining people, but we stand behind our ability to execute and navigate people through the shoals of a messy capital markets environment,” said Peck. 

Diversification among business lines is a strategy Berkadia used in 2023 to grow its affordable housing platform, according to Hilary Provinse, executive vice president for production capital markets at Berkadia. She said that David Leopold, senior vice president and head of Berkadia Affordable Housing, constructed a three-pronged business model to reach clients in investment sales, mortgage banking and tax-credit syndication. 

“If you look at each of those three business lines, those are all things our affordable clients need, and each of those groups collaborates together to bring products and services to our clients, and that resulted in a No. 1 market share on the affordable side,” said Provinse. “Our growth and investment in affordable, the collaboration of three business lines together, serves our clients, and we end up doing more GSE [government-sponsored enterprise] business as a result.” 

Even Clarion Partners (CPREX), a global asset manager of real estate, moved outside its comfort zone in 2023 due to the fluctuating capital markets temperatures. The firm said that it has “historically played in the subordinate debt space,” but last year expanded into select senior construction loans given the illiquidity of the commercial banking sector — a pivot that allowed for new clients and new deal flow. 

“We’re typically focused more on mezzanine and preferred equity — so subordinate debt — but market conditions being what they were, we were able to do a few senior mortgages, mostly on ground-up construction,” said Drew Fung, head of North American assets at Clarion.

In 2022, L&L Holding Company co-founders David Levinson and Robert Lapidus entrusted 15,000 square feet of the tower to French restaurateur Jean-Georges Vongerichten, whose latest creation, Four Twenty Five, opened in December and just expanded its hours to include weekday lunch. 

Its design was intensely hands-on and required “amongst the highest level of detail and finishes,” said Dave Margolius, executive vice president of Shawmut Design and Construction’s New York office. “This is the cream of the crop.”

On a recent weekday afternoon, Four Twenty Five’s midday rush was winding down and culinary director Jonathan Benno was on the lower level futzing with microgreens. The restaurant’s main kitchen, bakery, wine cellar and a refrigerated room for storing chocolate buzzed with activity while a hidden ventilation network sucked out the hot air and pushed it through three electrostatic carbon filters onto the street. 

Upstairs, customers can get a glimpse of the action through the soundproof glass of the 1,000-square-foot show kitchen, where staff sweat over a 6,000-pound Molteni oven, handmade in France and hoisted over the balcony through a gap in the paneling left for this purpose, and then sealed.

Being inside Four Twenty Five is sedating. The space overhead twinkles with the light of several hundred LED lamps hanging like stalactites.

From an acoustic standpoint, the dining area is paradoxical — it lacks the echoey din one expects from such a cavernous room. Plush carpeting and sound-absorbing surfaces help with that. 

AAI Architects enlisted Shawmut, along with structural engineering firm WSP and consultant Gardiner & Theobald, to execute Foster + Partners’ vision for the restaurant. Its main dining room is suspended on a mezzanine 20 feet above Park Avenue. The leather upholstery in the ground-floor cocktail lounge matches the velvety hue of the walls, falling somewhere between the colors of carmine and sangria.

As for the American walnut paneling that covers the restaurant’s remaining surfaces, AAI and Foster “had a very specific vision for what they wanted,” said Seth Porter, project executive for Shawmut.

“It was a really tight grain, which is difficult to find because there’s just a limited quantity in the world.”

The firm culled the lumber piece by piece, searching for logs that would pass muster until there was enough to cover 7,000 square feet of paneling. 

The restaurant is cloaked in a floor-to-ceiling gossamer veil, which required considerably more prowess to hang than most window dressings. The curtain rod is threaded through a series of large metal plates that diffuse the weight of 45 vertical feet of drapery into the building’s glass curtain wall, Porter explained. 

The curtain is perfectly functional and can be removed from the rod thanks to a tiny set of screws, although the task is not for the faint of heart.

“If you’re in the cocktail bar and you spill red wine on it, you have to be able to clean it,” Porter said. “We’re thinking about buying a scissor lift, but you’d have to ride it really carefully through the front door.”

Abigail Nehring can be reached at anehring@commercialobserver.com. 

“Will AI replace or change the receptionist?” Brody said. “Do I think that it completely dominates over the next six months to a year? The answer’s no. We’re giving too much credit to what AI is capable of. But let’s talk about the current functionality of it. The answer would be no, because we still interface with warm bodies. Can a language model assist an existing business with creating efficiencies within what they do and mitigate the cost of labor? Yes.”

Building AI on such a LLM requires a case-by-case analysis of a receptionist’s daily duties, whether at an office or a multifamily residence, Brody said. “If part of their job has to do with following up with people all the time, AI could help you there. Instead of you having to write the same email over and over again, it can create efficiencies for you so that when real trouble happens in real life, you can actually focus on that because AI is taking some of your menial tasks away.”

That’s as far as it goes right now, though. 

“If you have to assist executives with a specific function where there’s a human involved, well, guess what? AI is not a robot who is coming and taking over that,” Brody said. “You still need to be a human. It can handle some of the administrative functions, but you would have to know specifically what the workflow of that receptionist is in order to make an application of AI for it.”

Although not fully an AI product, self-service kiosks have been a step toward receptionist-less entreé to offices, including those doing a volume business in multifamily leasing.

“Our biggest market to date has been new construction, where there’s a giant 55-inch screen on the wall that onsite teams use to tour prospects, because they can’t physically tour the property yet,” said Brent Steiner, founder and CEO of Engrain, a Denver-based company that provides multipurpose interactive touchscreens and kiosks for leasing offices. “And what we’re seeing recently is a shift toward reducing staff on site. So, we introduced a kiosk which is sort of a self-serve traditional kiosk model that serves multiple purposes.”

AI is often wrongly conflated with technology in general, but Engrain’s kiosks are moving toward being more AI-centric in fulfilling the needs of new developments attempting to bring prospective buyers closer to their properties, said Steiner.

“We’re now introducing kiosks in a lot of different physical environments,” he said. “And what we’ve noticed with our multifamily clients is that the needs on the multifamily side are a bit different because the residents and all the visitors that come to those properties on an ongoing basis versus commercial are a little different.”

That means that the pace of replacing humans with tech will vary by property type. “Higher-end properties are more reluctant to replace staff just because of the service aspect,” Steiner said. “But it is very important in the multi-modal part of this because you’re receiving a lot of different types of people for leasing, for touring, but it also could be residents, subcontractors and visitors. I think that’s where AI is going to be important as this evolves.”

Currently, Steiner sees demand for Engrain’s kiosks coming primarily from older multifamily properties, many of them more suburban, garden-style developments across the U.S.

“The Sun Belt and the West Coast are the hottest spots, and in D.C. a bit,” said Steiner. “It aligns exactly with where the multifamily market is growing, including Dallas, Atlanta, L.A. and Seattle. What’s driving this too is because staffing has been difficult at these properties, really since COVID. The industry has had a tough time bouncing back from that from a labor perspective, so that sort of pushed the technology forward first. And I think AI will just make that more comfortable.”

Steiner says that moving toward true AI in reception areas will take a while.

“I think we’re in early innings because right now the industry is just getting its arms around training models,” he said. (His own company dates from 2009.) “You can’t have AI unless you have a model that you’re training how to react. We are partnered with multiple chatbot companies, including EliseAi. They’re a big chatbot company in our space that’s AI-based. So, we are contributing data to those models — location data, map data, descriptions about the apartments — and then leveraging those models across these different technologies. I think that’s very important to be able to have a good system.”

Although multifamily developers would love a plug-and-play solution for their reception area needs, that is also a way off, said Steiner.

“That really can’t be until we understand how the technology is being used,” he said. “And I think the resident demographic is a perfect example of this. Where a lot of the traffic that would go to these leasing offices, or residents that have a question or a problem, they want to interact with a human. That’s a great example of the potential for a model to learn over time. What are the expectations of these users as they’re using the system and then training it to respond, not just with answers, but with transactional outcomes? If I’m a resident, for example, that’s coming to the leasing office because I have a maintenance request, then the technology needs to provide a service request form, or a QR code. Those are obvious examples, but that’s where it needs to evolve.”

Eventually, a natural language AI interface with the user is what everyone wants, he added.

“We’re not going to fully make this comfortable for users until the AI technology is to the point where you can talk to it,” said Steiner. “So somebody can walk in and interact with the natural language processing kiosk, which is what we’re focused on building for websites right now. Where somebody can go in and then literally say this is what I need and have the interface be able to react to that. I think that’s where we think the future will be, not just tapping the screen.”

The result of this reception area technology evolution is already seen in physical space reductions and other changes, said Steiner.

“We are seeing some operators closing these spaces all together,” he said. “We’re seeing quite a bit of that, and in other cases, they’re building out vestibules for some technology.”

Steiner describes the potential changes in reception as closing “an arrival gap.”

“When somebody arrives at the space, there’s an awkward moment of knowing what to do,” Steiner said. “And my phone is typically not enough to deal with that. So I think this will continue to evolve with technology like kiosks. You’re already seeing those at airports, banks, and McDonald’s. This is not a new concept. But, yes, I think the physical space will change and evolve over time.”

Philip Russo can be reached at prusso@commercialobserver.com.

While our Power Finance honorees didn’t slide down a pole in a firehouse when clients called this past year — as far as we know, at least — we view them as Ghostbusters of a different kind. They had their own versions of proton packs, equipped to deal with a ghoulish year of transaction high-vaults, in which many ghosts from deals and rate environments gone by finally rose from the dead and had to be dealt with, stat.

While the volatility didn’t quite reach the level of “human sacrifice, dogs and cats living together, mass hysteria!” there was plenty for our honorees to help — and contend — with, and myriad problems to solve.

Between asset- and portfolio-level issues being kicked down the road from COVID-19; to short-term, floating-rate debt coming due in a wildly different rate environment; to interest rate caps damn near killing a lot of borrowers; to capital stacks experiencing Terror Dog-size holes in them as financing sources retreated or withheld leverage — borrowers had a lot to navigate, and therefore, by extension, so did our lenders and brokers.

Dealing with Slimer seems like small potatoes compared to dealing with residual ectoplasm from Class B office properties that now need refinancing; the Stay Puft marshmallow man would be more welcome in downtown neighborhoods than another “doom loop” headline (hey, Mr. Stay Puft might at least relieve these neighborhoods of obsolete assets as he stomps around); and raising money for a ghostbusting enterprise HQ in Tribeca seems infinitely more possible than drumming up equity for a ground-up coworking development.

When it came to approaching our honorees, no borrower was in the market for much of the past year unless they really had to be. But some deals simply couldn’t be put off any longer — and that’s where our 50 stepped in.

While the past 12 months have felt way longer than one year, they’ve also felt like several different, contrasting years within a year. Our list reviews the 12 months ending March 1, kick-started by the regional banking crisis.

The first quarter of this year, by comparison, has seen a wave of activity, despite the “higher-for-longer” interest rate determination. In those 12 months, financing sources ebbed and flowed, and there were quiet periods and busier periods, bursts and lulls of capital market activity.

Our honorees took on the challenge head-on. When possible, they leaned into what they do best, in a savvy and prudent way.

They stepped in at the 11th hour when other lenders bailed, they restarted market segments that were quieter than the New York Public Library’s basement floor, and they guided clients through one of the trickiest markets in recent memory. They also knew the right time to pull the trigger — whether to bust ghosts or go to market during a time when no two days were the same for capital markets.

In general, our honorees — or at the very least one part of their business — were open for business and on call for their clients, “24 hours a day, seven days a week: No job is too big and no fee is too big!” as Venkman said.

Heck, busting makes them feel good. So: Who you gonna call?

But lawmakers kicked some big ticket items down the road and the enacted budget leaves the state with an estimated future structural deficit north of $16 billion, according to the nonprofit budget watchdog group the Citizens Budget Commission (CBC).

Medicaid costs are growing at a rate of about 7 percent annually, faster than other parts of the budget, and that’s cause for concern because the state might not have enough cash in the future to foot that bill, said Patrick Orecki, director of state studies at the CBC.

“Frankly, there isn’t a tax base that’s going to keep up with that,” Orecki said. “So you’re either going to be in a position of constantly raising tax rates or crowding out spending in every other area of the budget to accommodate Medicaid.”

Legislators adopted a mechanism to generate about $4 billion annually from state and federal funds to cover its Medicaid bills for the next three years, but the details will remain murky until New York’s budget office publishes the financial data along with the budget bills lawmakers passed over the weekend.

“Without financial plans, we don’t know what the dollar amount is, or what the timing of the spending is,” Orecki said. 

The legislature also refused to remove the state’s “hold harmless” provision, which would have reduced education costs by dropping the practice of keeping school district funding the same each year.

Sparing schools from the governor’s proposed cuts was a “victory for students throughout the state,” State Sen. Michael Gianaris said in a statement.

The CBC, however, argued that the provision was a “common sense” method to curb future budget deficits. As it is, public schools got a boost of about $1 billion compared to last year’s budget to a total of $35.9 billion.

While there’s still a lot of unknowns in the budget, what we do know, according to lawmakers’ remarks and Hochul’s Monday morning announcement, is that the state will spend about $4 billion more than Hochul proposed at the start of the year. 

That’s in part thanks to the budget director’s rosier-than-expected economic outlook in March after the state’s accountants reviewed updated tax receipt data. 

And the spending closes last year’s $4.3 billion budget gap without raising taxes on businesses or personal income.

It does that despite an effort from lawmakers in both houses of the state legislature to raise personal income taxes on people in the top bracket who make at least $5 million annually. 

Hochul put the kibosh on that, and her position was buoyed by the unexpected spike in state revenue from high-income earners in the second year of the COVID-19 pandemic. Those funds allowed the state to prepay some of its future expenses. 

Plus, personal income tax and corporate tax increases enacted in 2021 will continue flowing into the state’s coffers for a few years, but that law sunsets in 2027, creating another structural imbalance watchdogs have their eye on.

All this makes for a mixed bag from a financial planning perspective, according Orecki.

“Those prepayments will eventually be exhausted, so the way that they are contributing to lowering gaps will eventually go away,” Orecki said.

As the ink was drying, the budget bills clocked in three weeks late this year, though that’s pretty much par for the course in New York, where the fiscal year begins on April 1, unlike just about every other state in the nation. 

Even with the delay, hacks to the state’s computer systems and worries about future deficits, lawmakers still praised what eventually got passed.

“As is always the case, we did not get everything we wanted in this final budget, but it represents progress for the people of New York across many important areas,” State Finance Committee Chair Liz Krueger said in a statement.

Abigail Nehring can be reached at anehring@commercialobserver.com. 

But it will be less of a master lease for HF Food Halls. Instead, the company will operate the food stands themselves instead of subleasing to smaller operators, according to the Post, which also reported that the tenant is in talks to take over a similar facility at the Feil Organization’s 570 Lexington Avenue. 

It’s unclear what the asking rent or the length of the lease was in the 230 Park deal. RXR and HF Food Halls did not respond to requests for comment. It’s unclear who brokered the lease.

After an initial pandemic-era boom that saw food halls such as The Hugh and Urban Hawker open in Midtown and the Tin Building at the South Street Seaport, food halls in New York City seem to be struggling now following the recent closure of the Market Line in Essex Crossing. Still, the number of food halls in the U.S. doubled from 150 in 2018 to 352 in 2023.

Mark Hallum can be reached at mhallum@commercialobserver.com.