The Most Active Construction Lenders in Manhattan
New York City's construction lending landscape continues to demonstrate remarkable resilience in the face of what has been economic uncertainty. Despite challenges posed by elevated interest rates that have increased borrowing costs, tightened lending standards following economic and political uncertainties, a select group of financial institutions remain committed to fueling the city's on-going development. BKREA has analyzed the most active construction lenders in Manhattan, uncovering not only who are the most active groups, but also what types of projects they are financing, where these developments are taking place, and the trends we’re seeing among the most active construction lenders.
For Every Active Deal in Manhattan, Who Are the Top Construction Lenders?
New York City's construction lending landscape continues to demonstrate remarkable resilience in the face of what has been economic uncertainty. Despite challenges posed by elevated interest rates that have increased borrowing costs, tightened lending standards following economic and political uncertainties, a select, but growing, group of financial institutions remain committed to fueling the city's on-going development. BKREA has analyzed all construction lenders in Manhattan, uncovering not only who are the most active groups, but also what types of projects they are financing, where these developments are taking place, and the trends we’re seeing among the most active construction lenders.
Bank OZK’s Construction Lending Focus
Bank OZK has solidified its position as a dominant force in New York City’s construction lending landscape. Its portfolio includes a range of rental and condominium projects across prime locations in Manhattan. Some of their most recent projects include:
• An 18-story luxury condominium development by EJS Development, featuring 36 high-end residences and ground-floor retail space at 200 East 75th Street.
• A 28-story condominium tower featuring 147 units developed by MRR Development at 126 East 57th Street.
• An 11-story residential condominium project at 428 West 19th Street by Anbau Enterprises.
• A 23-story rental building developed by MAG Partners and Global Holdings, with 30% of its 194 units allocated for affordable housing.
• A 13-story residential condominium project at 2686 Broadway offering 81 units developed by Toll Brothers.
Valley National Bank’s Development Strategy
Valley National Bank has distinguished itself through a balanced approach, supporting a diverse range of residential developments:
• A 13-story condominium project at 525 6th Avenue with 71 luxury units developed by Izaki Group.
• A 12-story, 188-unit rental building at 616 11th Avenue developed by Chess Builders.
• A 70-unit condo development at 201 East 74th Street developed by Elad Group.
• A 57 unit condominium project with a retail component with 17-stories at 183 Chrystie Street developed by Omnia Group.
• A 28 unit condominium project with 20-stories at 126 East 86th Street which is being developed by Rybak Development and BK Developers.
• A newly filed 23-story rental tower with 106 apartments developed by the Torkian Group at 250 East 83rd Street.
Key Trends in NYC Construction Lending
From reviewing these projects, several key trends emerge among the most active groups:
• Lenders are focusing on financing developments with well established sponsors and the better the neighborhood, the more attractive it is for lenders.
• Because of the nature of the Manhattan market, most residential projects are condominiums so the lenders that are lending on these projects believe in the strength of the condo market.
• While luxury condos lead the pack, rental buildings, many of which have an affordability component are still in high demand from the lending community.
• Several projects incorporate ground-floor retail, enhancing the value and appeal of these buildings.
What's Next for Construction Lending?
Despite previous economic headwinds, The New York City's real estate market continues to show remarkable adaptability and is clearly on the upswing. Developers with well-conceived projects in prime locations are still securing financing, underlining the city's enduring real estate appeal. There are a number of lenders who have made construction loans on only one project showing the diversification within the lending marketplace and the fact that there are a wide range of lenders that believe in the future of New York City.
A significant emerging trend is the growing focus on office-to-residential conversions. In response to the shift in office utilization and Mayor Adams' "Making New York Work For Everyone" action plan, lenders are increasingly evaluating conversion opportunities, particularly in Midtown, Midtown South, and Lower Manhattan. The City of Yes legislation adopted on December 5th, 2024 has been overwhelmingly received by market participants as a positive step in the future of New York City. For conversion opportunities, the 467-M tax abatement program has also been overwhelmingly positively received by market participants and will help fuel conversion of older, obsolete office buildings into residential. These conversions represent both challenges and opportunities:
• Increasingly, lenders are getting up to speed with the economic realities of these conversions and are becoming more and more comfortable with the path forward.
• Floor plate configurations and building systems need substantial modifications, but based on pricing levels, more and more of these transactions are working from an economic feasibility perspective.
• Zoning amendments and tax incentives are reshaping the feasibility of these projects. Again, City of Yes and 467-M are highly accretive towards making these conversions economically viable.
• Properties built before 1961 are particularly attractive for conversion due to their architectural characteristics.
• Prime conversion candidates include Class B and C office buildings in areas like the Financial District, Midtown East, and Midtown South.
• The biggest challenge in conversions are very large, dense floor plates. Architects are increasingly coming up with creative ways to get natural light deep into spaces further away from windows.
As we move forward, expect to see continued activity in all of Manhattan's neighborhoods, with a focus on high-end residential condominium construction and mixed-use developments that appeal to both buyers and renters. The office-to-residential conversion trend is likely to accelerate as more owners seek to reposition their assets or sell into an increasingly robust market in response to changing market demands, and the compelling value proposition created by the 467-M tax abatement program.
We believe Class B and C office will be disaggregated into three primary buckets.
The first will be a collection of buildings that will be upgraded and remain office because although Class A new construction is doing well, every tenant can’t pay $200/sf in rent so there will have to be low cost providers and B and C office is the place for that demand to be met.
A second bucket of will consist of all of these conversions from office to residential and other uses, primarily utilizing the 467-m tax abatement program.
A third bucket will consist of buildings that are selling at prices that are sufficiently low that even when layering on demolition costs, they will be demolished to make way for new construction.
The construction lending landscape in New York City remains dynamic and resilient. Bank OZK, Valley National Bank, and other key lenders are not just financing buildings—they're investing in the city's future, supporting innovative developments that reflect New York's ever-evolving urban character. Their willingness to consider conversion projects alongside traditional development deals demonstrates the financial sector's adaptability in meeting the city's evolving real estate needs.
To the extent midtown south rezoning passes, which is fully expected based on the indications obtained from our policy makers, we will see significant conversion and demolition activity in the Garment center. This will lead to profound and significant change to the nature of the Garment center taking advantage of its strategic location between Penn Station and Grand Central Terminal.
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