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Climate change and sea level rise could have a negative impact on commercial lending: CIASF panel

Yet a wider pool of insurance companies, family trusts and individual investors are competing to fund deals
By Francisco Alvarado | October 27, 2017 02:45PM

Panel from left: Veronica Birch Flores, Ford Gibson, Bernie Navarro and Mitch Sinberg

Commercial real estate developers building projects in cities facing threats from climate change and sea level rise may find it harder to find traditional bank financing in the near future.

“One of my concerns is rising seas,” said Veronica Birch Flores, executive vice president with First National Bank of South Miami, during a panel discussion earlier this week. “How municipalities deal with rising seas and the impact on coastal properties is something we are being more careful about.”

She said projects in cities like Miami Beach, which is investing half-a-billion dollars on infrastructure projects to prevent flooding, will have a leg up on developments in other coastal communities that have not planned for the threat of sea level rise.

Birch Flores was on a panel hosted by the Commercial Industrial Association of South Florida in an office building at 5555 Biscayne Boulevard in Miami. She joined Foundry Commercial Managing Director Ford Gibson, Bentworth Capital Partners founder and President Bernie Navarro and Berkadia Senior Managing Director Mitch Sinberg for a discussion about current trends in commercial real estate financing. Daryl Shevin, chief financial officer for 13th Floor Investments, moderated the panel.

Overall, commercial lending remains strong in South Florida, according to the panelists. For one, community banks have been bracing the past three years for a recession that has not occurred, Birch Flores said . “We have been preparing for a softening of the market,” she said. “It hasn’t come.”

Yet, community banks are still conservative when it comes to financing commercial real estate projects. “The equity being put into a deal is more important for us,” she said. “We just don’t do 75 percent financing anymore.”

Making it harder are banking regulations that prevent financial institutions like First National to offer low interest rates on loans, Birch Flores said. “We won’t go near 4 percent now,” she added. “We are turning down deals we would have done two years ago.”

At the same time, Shevin said South Florida is seeing a wider pool of insurance companies, family trusts and individual investors with deep pockets competing with big equity firms to fund deals. “There was a group recently in my office looking to put $20 million in a deal,” Shevin said. “Their sweet spot was $60 million.”

Gibson said the industrial sector is saturated with institutional investors searching for projects to fund with equity. “Industrial is on fire in South Florida,” he said. “The only thing that worries me about industrial is the absolute amount of capital trying to jump into this market.”