Gary Brozowski, Kearny Bank
Obviously, there’s a significant amount of talk within the commercial real estate sector about the impact of rising interest rates. I suspect we’re in for a bumpy ride through the holiday season, though prospects look brighter for 2023. I’m not suggesting everything will turn rosy the instant the calendar flips – but we should see a steady improvement as the new year progresses.
Why will 2023 be better? Because, quite simply, there will be increased opportunity. We’re already seeing less well-capitalized players being steadily pushed out of the market in favor of larger firms with more robust development pipelines of deals. This creates more opportunity for institutions like Kearny Bank. Once we reach 2023, many more of these weaker entities won’t be able to compete in terms of obtaining new projects, which will further pressure their ability to expand. Putting it another way, the story of 2023 will be well-capitalized players succeeding at an increasingly consistent rate, with emphasis on lower risk construction deals.
I suspect some people remain unaware that Kearny Bank also does a robust business in commercial real estate construction loans. We got our start, in earnest, at about the beginning of the pandemic – when many companies were either taking a pause in construction lending or exiting the market altogether. In fact, for a time, we were among very few players willing to make construction loans and we took full advantage of these opportunities to expand our reach into this market. We continue to focus on accommodating our top clients as well as working with other active developers in the market, primarily with $12- to $20-million construction loans.
We’re now emphasizing two product lines. Our commercial mortgages feature three-, five-, and seven-year terms, and range from $2 million to $60 million. A few recent examples are a $42.65 million loan for Valley Stream Village Townhomes in Newark, DE, as well as a $63 million loan for 100 Water Street Development in Jersey City, NJ. In the warehouse/industrial sector, we just completed a slightly more than $26 million deal for a distribution center located in Morrisville, PA.
Our other line, construction-to-permanent loans, is basically 18- to 24-month construction loans that convert upon completion to three-, five-, or seven-year commercial mortgages. Recent examples include a $14 million loan for a multifamily project in Garfield, NJ, as well as an $11 million loan for a mixed-use project in East Rutherford, NJ.
In the case of both product lines – commercial mortgages and construction-to-permanent loans – our emphasis is on multifamily, mixed-use, retail, and warehouse/industrial properties.
For the time being, the bulk of our construction loans are written for projects in New Jersey, New York, and Pennsylvania … but we’re eager to expand that footprint. And why not? We’re already offering permanent loans in these states, plus Maryland, Delaware, Virginia, Massachusetts, Rhode Island, and Connecticut. So, there’s plenty of room for us to grow.
Gary Brozowski is senior VP/director of Commercial Real Estate Lending at Kearny Bank.