How A Hamptons Developer And Lender Navigate ‘Strange’ Times Together

As interest rates continue to rise and financing is difficult to obtain, developers naturally are concerned about how they will make projects pencil.

However, Chatham Development Co. Vice President of Design and Construction Chad Gessin said that business and construction fundamentals remain the same, even amid what he called “definitely a strange market.”

“We’re a very fundamentals-based developer, and we’re also very conservative,” Gessin said. “The current market doesn’t really change much for us except that we’re having to bring in land costs as tight as possible to compensate for rate increases, especially since we also need to figure that we may have a bit of extended carry time.”

If Gessin — whose company develops mixed-use, multifamily condominiums in New York City, planned communities on Long Island and single-family homes on “unique and complex” sites — sounds relatively unfazed by market fluctuations, it could be because CDC has a long-term relationship with a lender that has helped the firm navigate difficult times for years, including the start of the pandemic in 2020.

“We finance our projects with both private lenders and conventional bank financing,” Gessin said. “Our approach is to match the best debt options with the project at hand. When a reliable close, flexible repayment terms and seamless loan operations are priorities, we will typically look to private lenders, and Emerald Creek Capital is always our first choice.”

Gessin said that before working with ECC for the first time in 2017, his firm had borrowed only from conventional banks and commercial mortgage-backed securities lenders. He added that CDC was previously “skeptical” of the private lending market.

“But when we got to know ECC, we realized they were just like a bank, staffed with very diligent, knowledgeable and dedicated people and were able to customize terms, execute seamlessly and quickly without the constraints that hold traditional banks back,” he said. “ECC overperformed from initial contact through closing and repayment on that first project. We felt like we had a reliable partner more than a lender, and so it was a no-brainer to return for the next deal and several thereafter.”

The relationship between the two organizations has only grown since those early days. In March, they completed their seventh deal when they closed on a $3.5M construction loan for a project in Westhampton, New York. This deal capitalized on momentum the companies had been building since the beginning of the coronavirus, when many other businesses were holding back. 

Gessin recalled a loan ECC originated for CDC in the early days of the pandemic that allowed his firm to purchase a beachfront, income-producing rental property to create cash flow to support further development on the site. In fact, a bank partner even encouraged CDC to work with ECC, he said.

“It’s hard to say whether another lender would have closed, but with ECC, it was as if there was nothing going on in the outside world,” Gessin said. “The deal enabled us to capitalize on the Covid summer 'staycation' market. If we had stuck with the conventional bank, we would not have closed until midsummer and missed all that revenue.”

ECC Managing Director Mike Cleaver recalled that his firm had no qualms about working with CDC during a very uncertain time.

“At that point during the pandemic, we were already seeing residential demand spike outside of New York City, and we thought this new CDC development was exactly what the market was calling for at the time,” Cleaver said. “Our trust in one another and open communication allowed us to close in just a few weeks while many other lenders were hitting the brakes.”

Gessin said that throughout their relationship, ECC has remained “calm, composed and open” — rare qualities in the real estate world during times of turmoil, he said. 

“We like to operate that way, too, so it is a relief when you find those qualities in your lender, especially when that ethos is essentially end-to-end within the organization,” he said. 

Rising interest rates in the past year compounded the lingering disruption of the pandemic and have provided another test of the ECC-CDC relationship.

“In the deal we closed just a few weeks ago, ECC was there for us — not quite at the loan amount we were looking for, but with fair justification and open communication on their reasoning — and the deal was seamlessly executed in less than two weeks,” Gessin said.

Cleaver and Gessin said their companies share a mindset that looks beyond the current quarter or year, and they are confident they can rise to meet future challenges together.  

“Whenever we’re considering a new deal, trust is imperative, and CDC has already demonstrated its integrity as a sponsor,” Cleaver said. “Closing and servicing can be simpler under those conditions. That said, each deal is different and requires in-depth due diligence regardless of sponsorship. But over the years with CDC and their design-build construction arm, First Dunes, we’ve experienced the quality of their work firsthand and built a dynamic partnership that serves us both.” 

This article was produced in collaboration between Emerald Creek Capital and Studio B. Bisnow news staff was not involved in the production of this content.

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