During my entire career in banking and real estate, I have never experienced a time when real estate owners have had the opportunity to access the local banking and capital markets for financing of real estate with such ease. This is a tangible sign that the unprecedented conditions in the market are driving institutions to make available a large amount of financing, as many industry experts have observed.

The chairman of the national real estate practice at the law firm of Greenberg Traurig LLP, Robert Ivanhoe, said “2004 was a remarkable year, with record prices in sales for residential and commercial real estate. Prices continued to rise, primarily due to tremendous liquidity in the marketplace, accompanied by unprecedented interest rate levels.”

“As investors plow more dollars into real estate investments, opportunity rises for financial institutions to lend on a preferred asset, this asset being real estate,” said a senior vice president at M&T Bank, Sam Giarrusso.

“The only thing easier than accessing debt today is accessing equity, but the only thing harder than finding deals is finding reasonably priced deals. Finding equity is like mining salt water in the ocean, and finding a good deal is like mining through the salt water trying to find Atlantis,” said the president of Newmark Global Real Estate Advisors, James Kuhn. Russell Appel, a founder and president of The Praedium Group LLC, a company that provides equity to real estate investors, says, “Debt has become so available, it’s great to be the equity.”

Last year, Estreich & Company arranged for more than $2.5 billion in debt and equity financing in the metropolitan region. The financing included $181.5 million for the 796,000-square-foot office building at 498 Seventh Ave.; $84 million for the 1.240 million-square-foot Lincoln Building at 60 E. 42nd St., $165 million for the 800,000-square-foot building at 63 Madison Ave., and, last month, $85 million for a 955,000-square-foot building at 1407 Broadway.

“I have never seen a market, whether it is for debt or equity, that has been so competitive. It is without a doubt the best borrower market in the last 30 years, probably ever,” said the principal of Estreich & Company, Jonathan Estreich.

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On my TV show last month, five of New York’s most active real estate investors agreed that lenders are offering close to 97% in a combination of financing for real estate projects. The five included Jeffrey Levine of Levine Builders, Ziel Feldman of Property Markets Group, Matthew Adell of Adellco, Joshua Muss of the Muss Development Organization, Gerry Davis of Alchemy Properties, and Sam Kirschner of GMAC Commercial Mortgage. Mr. Estreich told me that before 1996 leverage for financing was defined as up to 75% of the loan to value, or total cost of a development. “The extent of leverage is dependent on the institution and the term of the loan,” Mr. Estreich added.

Mr. Feldman provided insight into the extraordinary amount of financing a real estate investor can obtain by saying that many lenders will provide a first mortgage of up to 85% of the cost of the development. In many instances, due to the availability of funds, institutions that also provide mezzanine lending are providing the next 12%. The net effect is that the investor can own a property by only providing a mere 3% of the total cost of the development.

Last year, Mr. Feldman’s Property Markets Group purchased the vacant 48,000-square-foot, 12-story apartment building at 823-825 Park Ave. for about $60.25 million. They are in the process of renovating and increasing the size of the building to 69,000 square feet for a conversion to luxury condominiums, which are expected to sell for $3,000 a square foot. Fremont Investment & Loan provided Mr. Feldman a loan of about $70.5 million for the acquisition and renovation of the property.

The co-head of the real estate and transactions and finance practice at the law firm of Weil, Gotshal & Manges LLP, Philip Rosen, said, “In my 20 years in the business, there’s never been more availability of inexpensive capital for equity and debt as there is today. The return of speculative construction projects built with variable-rate money is the only problematic twist to the vigorous lending and equity market.”

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Many of the region’s local commercial banks, including North Fork, M&T Bank, New York Community Bank, and Independence Community Bank are major players in providing financing. According to Mr. Estreich,

“These banks are major players in the fixed-rate arena and have very competitive rates, but also can be extremely flexible in their terms by structuring more palatable prepayment penalties and giving the borrower the ability to come back for more money at a future date.”

“Over the past 10 years, nonperforming real estate assets has been low, making it seem a relatively safe bet for lenders to provide financing for real estate,” said Mr. Giarrusso. “In the late 1980s and early 1990s, real estate was not in favor, and lenders preferred not to be aggressive in financing.

“In the 1990s, there were probably five real contenders for real estate transactions in New York City,” he added. “Today, at least 100 companies are interested in lending on real estate. It’s a fad, so to speak, to provide financing for real estate – remember the Cabbage Patch dolls? The real test will be the staying power of those who continue to provide financing.”

Mr. Estreich also told me “that the market for transitional loans, construction loans, bridge loans, and loans that have lease-up risk are also being extended at all time lows for rates. Today, it is not unusual to get a nonrecourse construction loan. Banks such as Fremont have made a business extending nonrecourse construction loans, and have done a fine job understanding the market.”

Competition to provide financing is at record pace, and financing is available from a variety of banks and by the issuance of commercial mortgage backed securities. Last month, Deutsche Bank Mortgage Capital provided the Macklowe Organization a $1.1 billion fixed-rate loan to refinance the 1.9 million-square-foot General Motors Building at 767 Fifth Ave. Active CMBS lenders in the region have included Greenwich Capital, Goldman Sachs, Credit Suisse First Boston, Wachovia Securities, Commerzbank, JP Morgan, and Morgan Stanley.

A principal at RCG/Longview LP, Jay Anderson, said, “The CMBS market has become very efficient as to the speed of execution, the amount of financing, and the low spreads, which has made everyone else in the market be more aggressive. Everyone has a mezzanine fund able to get borrowers more proceeds, which also drives volume.”

Andre Collin, director of investments at PSP Investments in Montreal, says the CMBS Market will remain very competitive in 2005 and that we will see a reduction of conventional loans on the market.

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A number of foreign lenders including Hypo, Helaba, and HSH Nordbank have been responsible for providing financing for many of the region’s newest residential rental and condominium developments for developers including Jack Resnick & Sons, Donald Zucker, Vornado Realty Trust, and Sheldrake Company. Last month, a major German lender provided a $120 million letter of credit for the Liberty Bond financing of Boymelgreen Developers and Africa Israel’s 386,000-square-foot, mixed-use residential rental development at 88 Leonard St.

Foreign lenders have always been active players in providing real estate financing. During the last real estate cycle of the late 1980s and early 1990s, Japanese banks including Sumitomo, Yasuda, and the Bank of Tokyo were aggressive lenders who incurred losses and discontinued providing real estate financing.

Short-term interest rates have increased significantly over the past nine months. Nevertheless, long-term rates have remained at all-time lows. I suggest that if you own any commercial or residential real estate, now is the time to lock in at least a five- or 10-year fixed-rate mortgage. Competition by lenders will enable the astute real estate investor to capture the lowest fixed-rate financing.

I have to agree with Mr. Giarrusso when he said, “Overall, the money chasing real estate is at a frenzied pace because of many dynamics involved with the investment criteria.” The question remains: When will it end, or in the new dynamic, can alternative investments lure capital from real estate? Simply put, as long as demand is present for financing, there will be institutions that will provide financing to credit worthy investments.