Take a look at loan origination for commercial real estate properties in New York City in the second quarter and you’ll find something unusual: The quarter’s biggest loans aren’t just big, they’re astronomically big. And the size of those loans appears to be masking what would otherwise look like a decline in NYC loan origination for the quarter.
Take the General Motors Building at 767 Fifth Ave., the office tower that is home to Apple’s flagship Fifth Avenue store, currently under renovation, and marked by the distinctive glass Apple cube slated to return to its position outside the GM Building once renovations are completed next year. The property was refinanced in June in a $2.3 billion loan originated by a group of banks including Morgan Stanley, Wells Fargo, Citigroup and Deutsche Bank, the quarter’s leading NYC loan originator, according to CrediFi’s Q2 report on NYC lending. However, the list of banks does not include any lenders that may have submitted a loan after origination.
Another top loan was for 245 Park Ave., which was acquired by Chinese conglomerate HNA Group in May and received $1.2 billion in financing. As for the GM building, this loan was also syndicated and Deutsche Bank was involved in the financing here, as were several other foreign banks. In addition to Germany’s Deutsche Bank, the other originators were JPMorgan Chase, the U.K.’s Barclays, and French lenders Natixis and Societe Generale.
Altogether, New York City’s top five loan origination in Q2 accounted for over 20% of the total loan amount originated in the quarter. Compare that with 13% in Q2 2016 and 14% in Q2 2015, and you’ll see that these loans are larger than usual.
Now, let’s look at Big Apple lending overall and see what kind of impact those billions of dollars in financing had.
Overall, commercial real estate origination in New York City was flat in Q2 year-over-year, at $24 billion, following a 12% dip from Q2 2015 to Q2 2016.
Flat is better than down, so that sounds all right. But a closer examination shows that if the top five origination had totaled roughly the same in the second quarter of this year as in the parallel quarter the past couple of years, lending would have declined year-over-year by about $2 billion.
This doesn’t mean the sky is falling. It’s just one quarter, after all. And although these origination may be extraordinarily large, outsize deals and loans are not exactly unheard of in New York City. Yet, especially given the drop in NYC loan origination by insurance companies and local banks that CrediFi has observed this year, there is reason for caution.
Still, there is rational motive for caution, especially given the decline in commercial real estate in NYC loan origination by insurance companies and local banks CrediFi has observed this year.