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A four-year construction boom in Manhattan, New York City that was projected to profit handsomely has seemingly backfired. The idea has been to provide  super rich investors with high-end condominiums with which to stash their wealth. Since the 2008 crisis, wealthy investors viewed high-luxury real estate as safe investments. However, even in major global cities such as Paris and Dubai, upper-level property prices have dropped considerably.

In addition to market-driving factors such as oil prices, debt, and currency exchange rates, the likes of BREXIT and uncertain tax increases have halted investors from pursuing.

Less spending has meant sellers have been cutting prices. At 432 Park Avenue, a $78 million apartment was cut in half, both of which were put up for around $40 million. There is more demand for mid-level apartments in the $3 million range. Sales of $10 million-plus homes saw a drastic 18% decline, from 130 units to 107.

“The global misperception was that the demand would be endless...The reality was the market was not as deep as what was." - Jonathan J. Miller, president of Miller Samuel, a real estate appraisal firm. thought.”

Although there is an oversupply in the luxury market, it does not necessarily mean investors won't eventually indulge. Rather, they are being patient as market factors continue to consolidate.

What do you see transpiring in Manhattan's luxury real estate market? Has the demand reached its ceiling, or will it eventually meet the supply?

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Cerco Funding LLC is a New York-based real estate private equity firm. Cerco acts as a direct portfolio lender originating commercial bridge loans nationwide. Cerco has extended capital for acquisitions, refinancings, repositionings, and a host of special situations.

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