Property Developer POVs: Steven Klaiman

Property Developers POV is a Ullico blog series that highlights the perspectives and experiences of established real estate developers.

Steven Klaiman is a real estate developer with G&S Investors. He is in charge of development, leasing, and management of mixed-use properties and renewable projects in the New York tri-state region. His expertise focuses on managing capital transactions, which includes joint ventures, sales, and refinancings.

On the inevitability of cycles, Klaiman says, “A developer who knows how to enhance and continually progress their assets will be the one to survive the highs and lows in the real estate market. The people who can manage throughout a crisis are typically in a better position when they come out of it. For many people in my field, being on the wrong side of a market correction can be detrimental, even if you have a wonderful project. If you have an office building with no tenants, you are in trouble. Depending on your asset class, if there is a loan maturing in the next few years, you are going to have to make some tough decisions.”

On working with union contractors, Klaiman says, “Over the past 10 years in Jersey City, we have worked on three projects with union contractors. Our current development in Jersey City is a 60-story tower with 802 units and a brand-new grocery store. To execute a project of this scale, an extremely high level of sophistication and competency is required by the contractors. In Jersey City, the unions are incredible. They have a deep pool of talent and training, and they get the job done.”

On how developers impress a lender, Klaiman says, “When you begin conversations with a lender on a development project, your goal is to highlight why the project will be financially successful and clarify your company’s ability to execute the business plan. You need to showcase that the project is shovel-ready. For example, you want your zoning or site plan approval in place. You want to have your general contractor lined up, your drawings virtually complete and you should have a clear understanding of your construction costs. During the last 12 months, it has been very difficult for developers to close a loan if they do not have all these details confirmed.”

On how lenders impress developers, Klaiman says, “Another extremely important element of a project is loan administration. You have some lenders who make the loan requisition process almost impenetrable, while others make it seamless. These are complex jobs that involve dozens of contractors, with hundreds of employees and tens of millions of dollars. Ultimately, momentum is highly important and paying your contractors on a regular basis is imperative. While Ullico has normal checks and balances, their process of funding requisitions and working with our accounting team is not onerous. This is due to their professionalism and experience as a lender in the construction industry.”

On the current state of financing commercial real estate, Klaiman says, “Generally speaking, the sources of capital continue to grow. Previously, the market consisted of insurance companies, banks, or pension funds. Then the investment banks marketed CMBS products and most recently, private equity firms have dramatically increased the availability of capital through newly created debt funds. For our particular deals, we profile the deal and the risk for that particular project. We then think about which lenders are the best fit and who we should approach. You’re trying to find the right win-win situation for all parties.”

On working with Ullico, Klaiman says, “Ullico’s comparative advantage is that it has a long history of construction lending and they have established an enviable track record. If you talk to any the developers that Ullico has done business with, they will confirm that Ullico performs. Very few lenders still live by the creed of ‘your word is your bond.’ Ullico does. That speaks to how they behave in the marketplace. We consider them to be more like a partner than a traditional lender.

The views and opinions expressed by the subjects do not necessarily reflect the views or positions of Ullico. This interview has been edited and condensed for clarity.