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When Donald Motschwiller talks about a condominium project he plans to build near Sutton Place, his voice rises an octave in excitement.
"It'll be a super-luxury, all-duplex, residential apartment building, the likes of which haven't been seen since Trump Tower," says Mr. Motschwiller, president of Presidential Capital Corp.
In real estate circles, however, the Sutton Place project may get overshadowed by the way it will be financed. Mr. Motschwiller plans to raise several hundred million dollars by syndicating the building; that is, by offering investors a piece of the action.
Mr. Motschwiller's project is one piece of proof that real estate syndications, whose obituaries were written in the wake of federal tax reform, are alive and kicking in the New York area and across the nation. This year, in fact, the dollar volume of syndications will reach $11.8 billion, up from $11.05 billion the year before, says Robert A. Stanger & Co., which tracks the industry.
But the game has changed dramatically. No longer effective as tax shelters, syndications are now being used to finance buildings that promise a healthy cash flow and steady income. That has helped popularize public market placements at the expense of some private ones, as Wall Street figures more heavily in syndications.
But the tax changes will also shift some of the attention away from New York. Although the city remains a hub of syndications, companies outside the marketplace say they'll be less likely to invest in New York syndications because of the high cost of the city's real estate and will instead turn to other markets.
"Many investors thought tax reform meant an end to syndication," says Philip Cottone, president-elect of the Real Estate Syndications and Securities Institute and chairman of Ascott Investment Corp. in Philadelphia. "But that's just not the case."
Indeed, Mr. Motschwiller says his firm will be even more active this year than last, with plans for several private-placement syndications in the works for projects...