Dear Investors and Partners,
As we conclude the first half of 2024, I want to provide a brief summary of our activities during this period. Despite the challenging interest rate environment and rising inflation, which have significantly impacted financial markets, particularly the real estate market, I am pleased to report that Golden Bridge has successfully maintained its monthly return goals and is on track to achieve a net annual return of over 9%.
While I typically provide a detailed summary of the fund’s activities at year-end, I would like to take this opportunity to highlight our recent efforts in streamlining and enhancing our teams and internal procedures. Over the past year, and especially in the last six months, our teams in Israel and New York City have not only been working meticulously in their day-to-day work, they have also been adapting existing processes and implementing new ones to ensure that the Golden Bridge Fund continues to offer the best risk-to-opportunity ratios and to advance the fund to new heights for the benefit of our investors.
I am also pleased to share positive news regarding the US market. Inflation is cooling, as evidenced by the Consumer Price Index (CPI), which has shown a consecutive decline for the past three months following the worst price spike in four decades. If this trend continues, it is more likely that the Federal Reserve will begin to lower interest rates. However, even as inflation slows, the costs of food, rent, healthcare, and other necessities remain significantly higher than pre-pandemic levels.
Examining rental and homeownership costs, which constitute more than one-third of the Consumer Price Index (CPI), we saw a slower price increase last month, with a 0.3% rise from May to June. This is the mildest increase in nearly three years. Rental costs typically decline last among inflationary factors, so the smaller rise in June is an encouraging sign for economists. Increased apartment construction over the past two years has boosted market supply, prompting some landlords to moderate rent increases to attract tenants.
Alongside these positive macroeconomic trends, the housing market is also showing promising developments. The 30-year fixed-rate mortgage has decreased to 6.625%, down 24.5 basis points since my last update, and the 15-year mortgage rate is now at 5.875%. These downward trends are positive indicators for the broader mortgage market.
Reflecting on the first half of the year, the New York real estate market has demonstrated resilience despite numerous challenges. According to a recent report from Ariel Property Advisors, investment sales in the first half of 2024 increased by 11% in the number of deals and 23% in dollar value compared to the second half of the previous year. This equates to $11.48 billion in commercial real estate transactions across 943 deals involving 1,220 properties. The residential market, particularly multi-family housing, remains a cornerstone, representing over a third of the total value (~$4 billion), with the majority of transactions closing in Q2.
While these figures are encouraging, they highlight a persistent housing shortage in NYC. The vacancy rate is currently at 1.4%, the lowest in over 50 years. Applications for building permits are also very low, partly due to higher lending costs and increased scrutiny from banks and private lenders towards construction loans. Our fund, too, has reviewed and rejected loans with greater scrutiny and has not originated ground-up construction projects since interest rates began to rise. May figures show only 36 permit applications, the lowest for May in decades (outside of the COVID lockdown period).
This situation has led to record-high median rents in Manhattan ($4,667) and Brooklyn ($4,100) in June. However, there has been a decline in lease signings: 14% in Manhattan and 23% in Brooklyn compared to May. Rents in Queens remained relatively flat, with a 1.04% increase in median rental price. Historically, rental activity increases in the summer, so the high prices may be causing some apartment seekers to hold off or look in other areas. We will monitor how these markets perform throughout the summer and observe how potential Federal Reserve interest rate decisions impact NYC housing.
On an optimistic note, JPMorgan’s midyear report on commercial real estate highlights the strength of multifamily, neighborhood shopping, and industrial sectors. These are precisely the property types that both the Golden Bridge and Golden Bridge Opportunities funds have targeted for investment, and we remain optimistic about these sectors for a successful second half of the year.
Thank you for your continued trust and partnership.
Erez Britt, Founder and CEO
See below links to Golden Bridge and to our new fund fact sheets:
Example of loan:
Address: 257 Verona Avenue Newark, NJ
This month we decided to highlight a loan provided by the Golden Bridge Opportunities fund.
As you are probably aware, in 2023 Tandem Capital created a sister fund to Golden Bridge, Golden Bridge Opportunities, which similarly issues debt towards real estate projects in the NY area, yet it differs in that it does not invest in solely towards first lien mortgages. Golden Bridge Opportunities finds investments that are backed by real estate. We can enter the debt structure at any point, including the second position, generating even higher returns, and our net targetted annual returns are 13%-15%. We celebrated 12 months of activity of Golden Bridge Opportunities this past May and we are proud that the the net cumulative annual return this past year exceeded our target.
Last month Golden Bridge secured a $1,700,000 loan with a second position lien security interest towards an industrial property with multiple warehouses in Newark New Jersey. The property is in close proximity to Newark Airport and The Port of Elizabeth, the main port in the NY area, and is already fully leased. Our borrower holds a nice size portfolio of industrial and warehouse facilities in the NY area, specifically in Brooklyn and near the Ports of New Jersey. After significant due diligence on our borrower, appraisal and the existing loan agreement, we structured the loan and accompanying fees to best maximize the return for our investors.
Loan Amount: $ 1,700,000
Property Value (As Is): $ 11,500,000
LTV As Is (loan to property value ratio): 53% )inc. the first lien)
Loan Duration: 12 Months
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.