August 28, 2013
Some seven years after the dramatic South Florida real estate crash of 2007, lenders have begun to open the financing spigot for proposed condo towers east of Interstate 95 in the tricounty region of Miami-Dade, Broward and Palm Beach.
In the past 20 months, lenders have provided nearly $900 million in financing to condo developers — excluding the massive Brickell CityCentre mixed-use project that includes a trio of condo towers — who are proposing more than 150 new projects in South Florida.
This condo financing figure is addition to the untold number of loans currently being provided to developers of rental apartments in South Florida.
Financing for new condo projects is being provided to developers to purchase development sites and construct towers in South Florida, where less than 19,000 units are currently on the resale market, according to the Southeast Florida MLXchange.
By comparison, more than 60,000 condo units were on the resale market in the fourth quarter of 2008, just months after the failure of the investment bank Lehman Brothers pushed the U.S. financial system to the brink of an economic meltdown.
Contributing to the current demand for new condo construction is the dwindling number of unsold developer units from the last South Florida boom-and-bust cycle that began a decade ago.
Less than 2,000 developer units are unsold from a pool of nearly 49,000 units created since 2003 in South Florida’s largest coastal markets of Greater Downtown Miami, South Beach, Sunny Isles Beach, Hollywood, Hallandale Beach, Fort Lauderdale, Boca Raton and West Palm Beach as of June 30.
In this latest condo boom, financing has already been provided for nearly 35 South Florida condo projects, including $160 million for the planned Mansions At Acqualina tower in Sunny Isles Beach, $105 million for the planned Echo Aventura project with two towers in Northeast Miami-Dade County, and $50 million for the proposed BeachWalk condo-hotel tower in Hallandale Beach.
Overall, the condo project loans have ranged from less than $1 million to more than $150 million.
The biggest condo financier — based on dollars lent — in South Florida is Alabama’s Regions Bank with nearly $250 million allocated. New York City’s NorthStar Realty Finance Corp. ranks second with more than $125 million in financing provided, according to Miami-Dade County records.
Some other lenders that have been active financing condo projects in South Florida are New York City’s Deutsche Bank Trust Company Americas with $50 million allocated, Miami-based City National Bank Of Florida with more than $46 million lent, and Dallas-based Bank of the Ozarks with a $21 million loan, according to Clerk of the Court records in Miami-Dade, Broward, and Palm Beach.
The return of financing for proposed condo towers is significant in that developers had been preselling units — and ultimately building new towers — based on a strategy of using buyer deposits of between 30 percent and 80 percent to cover the cost of construction since 2011 as construction loans were different to obtain.
As financing returns to the preconstruction condo market, industry watchers have begun to speculate that the new local norm of 50 percent buyer deposits — compared to 20 percent buyer deposits during the last South Florida condo boom — for presale units could soon be reduced, ultimately making preconstruction units more attractive for a larger pool of buyers.
If presale condo deposit requirements do begin to shrink, industry watchers contend more domestic buyers — who have been more hesitant than foreign buyers to entrust developers with such large financial commitments — could soon join in on the growing trend of purchasing preconstruction condo units in South Florida.
To date, developers are proposing more than 150 new condo towers with more than 20,200 units in coastal South Florida east of Interstate 95. Of the proposed condo projects slated for South Florida, at least 70 towers are currently marketing units for presale with at least 35 of those towers already under construction as of Aug. 20, according to CraneSpotters.com.An additional two towers — 23 Biscayne Bay in Greater Downtown Miami and 4001 North Ocean in Palm Beach County — have already been constructed. As the busy winter tourism seasons nears, many condo developers in South Florida are refining their marketing efforts in hopes of being able to capture enough presale buyers to qualify for construction loans.
Unlike South Florida’s last real estate boom where 50 percent presales were required to obtain a loan, the guidelines to qualify for construction financing in this approaching condo boom have not yet emerged.
The unanswered question going forward is whether lenders, developers, and buyers have long enough memories to avoid creating another boom-and-bust condo cycle in South Florida.
Peter Zalewski is a principal with the Miami real estate consultancy Condo Vultures. Zalewski, a licensed Florida real estate professional since 1995 and founder of CVR Realty and Condo Vultures Realty LLC, advises developers, lenders and institutional investors. Zalewski launched the preconstruction condo project website CraneSpotters.com in conjunction with the Miami Association Of Realtors in August.
Source: Miami Herald