Dear Investors and Partners,

The Federal Reserve opted to maintain the target range for the federal funds rate at 5.25% to 5.50%, a level unchanged since last July. Despite a steady decline in the Consumer Price Index over the past year, the Fed announced a reluctance to reduce rates until confident that inflation is consistently progressing toward its 2% target. Annual inflation stood at 3.4% for the 12 months ending in December.

The Fed’s strategy of keeping interest rates “higher for longer” had a chilling effect on New York City’s commercial real estate market in 2023. This contributed to a significant 40% year-over-year decline in investment sales dollar volume, reaching $22.1 billion, and a 29% decrease in transactions, hitting the lowest point in the past decade excluding 2020.

The multifamily segment in New York City experienced its toughest year since the pandemic outbreak. Apartment deals totaled just over $7 billion in 2023, a 52% drop compared to 2022. Factors such as higher interest rates and the collapse of a major multifamily lender, Signature Bank, were responsible for the sharp decline in sales. The aversion of investors towards rent-stabilized buildings, an ongoing trend since the 2019 rent law, continued to suppress dollar volume. However, anticipated rate cuts and the potential entrance of private lenders into the market previously served by Signature Bank are expected to stimulate more deals in 2024.

In the stabilizing rent segment, prices seem to be reviving the apartment market in the city this year after reaching repeated record highs last year. Manhattan’s median rent increased by 2.5% month over month and 1.3% year over year in January, reaching $4,150. New lease signings rose sharply month over month and year over year by 8% and 14%, respectively, totaling 3,922, although the vacancy rate remained above 3%. Brooklyn’s median rent remained steady year over year at around $3,500, with a slight increase month over month. New lease signings almost doubled year over year for the third consecutive month, reaching 2,140, and listing inventory dropped year over year for the first time in five months, totaling 3,388 apartments. In northwest Queens, the median rent decreased year over year, reaching $3,200, with a month-over-month decline as well. Similar to Brooklyn, new lease signings significantly increased year over year, rising from 379 to 497, and listing inventory dropped year over year for the first time in five months, totaling 547 apartments.

And in commercial segment. Luxury retailers, empowered by substantial cash reserves, are embarking on significant real estate investments in the world’s most prestigious and costly shopping areas, according to The Wall Street Journal. In New York City, Prada recently finalized the acquisition of its Fifth Avenue store building and an adjoining property for more than $800 million. Similarly, Kering, the parent company of Gucci, is procuring a 115,000-square-foot retail space just a few blocks south for nearly $1 billion. This trend of retail acquisitions, observed also in Europe, showcases retailers’ strategic move to establish a lasting presence and diminish reliance on landlords. Despite retail rents on upper Fifth Avenue remaining below pre-pandemic levels, averaging $2,000 per square foot over the past year, it remains the world’s most expensive retail destination.

According to The New York Times, the housing shortage in New York City has reached its most severe level in over 50 years. City data released recently shows that the portion of available rentals dropped to a staggering 1.4% in 2023, the lowest vacancy rate since 1968. This highlights the significant lag in home construction compared to the demand for housing in the city. A “healthy” vacancy rate, typically ranging from 5 to 8%, is considered ideal, as it facilitates apartment availability and moderates rent increases. The data underscores the worsening housing crisis in New York City, especially amid the economic recovery from the COVID-19 pandemic, with the 1.4% rate marking a decline from 4.5% in 2021, the last time the survey was conducted.

 

Erez Britt, Founder and CEO

 

See below links to Golden Bridge and to our new fund fact sheets:

 

 

 

Example of loan:

Address: Pacific Ave. Crown Heights, NY

Golden Bridge financed the construction of a mixed-use building in Brooklyn’s Crown Heights neighborhood. Currently, the property consists of a rented basement and commercial floor. With all necessary approvals obtained, the developer now seeks financing to complete the building. The total loan amount is $4,100,000, with $2,200,000 to be disbursed in stages. Upon completion, the property will feature 2 commercial units and 8 residential units, totaling 13,375 square feet, along with a 3,200 square foot basement.

Crown Heights’ growing popularity owes much to its charming, small-town vibe, highlighted by its stunning brownstones, limestone homes, and graceful pre-war apartment buildings. Throughout its history, Crown Heights has thrived as a dynamic hub, nurturing a rich blend of Caribbean, African-American, and Jewish cultures.

 

Loan Amount: $ 1,900,000 + $ 2,200,000

Property Value (As Is): $ 3,900,000

Property Value (ARV): $ 12,700,000

LTV As Is (loan to property value ratio): 49%

LTV ARV (loan to property value ratio): 32%

Loan Maturity: 12 Months

Type of Securitization: Full First Lien + Borrower’s Personal Guarantee

 

Reminder that it is possible to see the fund’s loans on New York City’s website:

https://a836-acris.nyc.gov/DS/DocumentsSearch/PartyName

(Business party name: Golden Bridge)

 

For additional information, don’t hesitate to contact us.