"It’s still happening in a number of cases, but you can clearly see that lenders are now actually making deals," said Hauspurg. Indeed, statistics show that there was an increase in Manhattan building sales in the third quarter compared to the previous quarter, but that transactions are still drastically down from the height of the market.
And, there are still many lenders opting to "extend and pretend," a reality that some say will only worsen the industry’s problems (see "Lenders get more help with "extending and pretending" with commercial mortgages").
"That ability to continue to extend is allowing developers to hold on and holders of debt not to have to recognize losses, but at the same time it is essentially preventing the resolution of these issues that exist and aren’t going away," said Scott Singer, an executive vice president at Singer & Bassuk.
Helps: Developer bailouts
Most agree that nobody wins if construction grinds to a halt in New York.
As of early last month, the city’s Department of Buildings counted 456 stalled construction sites citywide. If none of these projects restart, the city could end up dotted with empty towers and water-filled construction pits.
As a way to avoid this fate, the city has launched or tapped into several government-funded "bailout" programs to resuscitate at least a portion of these dead projects. On balance, many say these programs could provide an important cash infusion.
One such program is the Housing Asset Renewal Program, or HARP, an admittedly modest $20 million fund spearheaded by City Council Speaker Christine Quinn that would turn unfinished or unsold apartment buildings into middle-income housing.
So far, 30 developers have applied for the funding, according to a city spokeswoman.
Meanwhile, the city selected the stalled City Point project in Downtown Brooklyn and a retail center for the Arverne by the Sea development in Far Rockaway to receive a combined $36 million in tax-exempt bonds financed by federal stimulus cash.
The program, Recover NYC, has $90 million in bonds left for projects with a commercial component that are critical to the success of "distressed" areas. It is currently reviewing 41 applications for additional funding.
While these stimulus programs have been panned by critics as an example of taxpayers footing the bill for speculative development, supporters argue that stalled projects have broad negative implications for both the overall economy and the surrounding communities.
"[City Point] could be a very important lynchpin project in Downtown Brooklyn," said Jay Neveloff, a partner at the firm Kramer Levin. "City Point has enough scale and vision that it might change a neighborhood, and that is exactly an example of how this money should be spent."
Neveloff consulted with several clients about the new bond program, but said restrictions kept them from completing the application.
Mayor Michael Bloomberg also announced in August that $60 million of $85 million in federal stimulus money earmarked for affordable housing would be spent to build 739 apartments in East New York, Brooklyn, and in East Harlem. Some of those projects will be on construction sites stalled by the recession.
Hurts: TALF expansion
A federal program that has succeeded in easing the flow of credit nationally for consumer-oriented loans has had little impact on the commercial real estate market in New York City or nationwide.
In response to the frozen credit markets, the Federal Reserve opened up the Term Asset-Backed Securities Loan Facility to commercial real estate financing.
While expansion of TALF was announced with great hope, just one loan in the country has been announced for the program, slated to expire in June 2010.
That first loan, which still needs to officially be accepted into the program, was in the amount of $400 million and issued by Goldman Sachs to shopping center owner Developers Diversified Realty, a single borrower based in Ohio. Developers Diversified has no properties in New York City. …CONTINUED