Banks face increasing competition from capital investors to finance Miami CRE

Strong economy, tax-friendly environment fuel capital into the Magic City, experts said at real estate summit
By Francisco Alvarado | April 17, 2019 05:30PM

Keith Kurland and Charles Foschini

UPDATED April 19, 11 a.m.: So much capital investment is flowing into Miami commercial real estate, developers can take advantage of financing options that traditional banks can’t compete with — or offer, according to industry leaders.

“Debt funds and institutional investors are getting very competitive in a universe where banks would traditionally refinance you,” said Matthew J. Allen, COO of the Related Group. “Before we get a final temporary certificate of occupancy, they are offering us [loans with] aggressively low rates and low leverage. Banks are losing out.”

Allen was a featured speaker at the annual Greater Miami Chamber of Commerce real estate summit Wednesday that also included a panel discussion between Charles Foschini, senior managing director of commercial mortgage servicing firm Berkadia and Keith Kurland, vice chairman of JLL.

Foschini described a favorable financing deal Berkadia arranged for developer Lissette Calderon this past October, when she purchased the River Oaks Marina and Tower apartment building on the Miami River for $61 million. Berkadia secured $45.75 million in acquisition financing from life insurance company Voya, which provided Calderon with a three-year, floating rate loan with two one-year extensions. The developer will only be charged interest during the initial term.

The loan was set up to give Calderon some breathing room as she renovates the 20-story tower and markets the 199 units to renters willing to pay $1,600 a month for a one-bedroom apartment, Foschini said. “We created a loan that would allow the transformation of an asset that really wallowed, but that is in a vibrant part of the city,” he said. River Oaks is located at 1951 Northwest South River Drive.

Kurland said capital investors are hungry to finance commercial real estate deals in Miami due to Florida’s healthy economy, positive job growth and advantageous tax laws. At the same time, however, the housing market and luxury condos are experiencing a slowdown.

“We are seeing a tremendous amount of capital flocking to Miami,” he said. “It is fleeing places like New York and New Jersey where equity investors are finding it harder and harder to see returns.”

Correction: An earlier version of this story misstated Keith Kurland’s title.