The Weekly Dirt: South Florida’s (limited) construction loan rush

Condo developments saw a rush in construction loans. Other projects? Not so much.

South Florida developers scored more than $1 billion in construction financing in recent weeks, Much of it for condo towers. Others are for mixed-use projects. I heard from sources that another $1 billion-plus in South Florida condo construction loans are expected to close soon. This is all happening against the backdrop of growing costs — insurance, materials, labor, etc. Bank OZK is the lender for about two-thirds of the largest such loans to close since November.  

When so much doom and gloom (with a hint of optimism provided by the Fed) exists in real estate today, can we really say South Florida is the exception?

To a certain extent, yes. It’s important to note that the projects that recently secured large loans have strong presales, what lenders and brokers consider “good sponsors”  and are in desirable locations. Also, condo developers risk their presale contracts becoming invalid if they don’t move forward with construction by a certain date. So it’s kind of now or never. 

Ben Jacobson, a partner at Miami-based Forman Capital, tells me that he doesn’t expect the overall construction financing market to improve. The condo deals “will still get done in a good market, bad market,” he said. 

It is more challenging for borrowers looking to finance construction of hotels, office buildings and high-end rental developments. Industrial and some multifamily projects are a bit easier. 

Banks are also willing to fill smaller portions of capital stacks, and it could take three or four lenders to come up with enough financing today, versus one lender two years ago. More equity is also likely a requirement. 

Prominent real estate attorney Suzanne Amaducci recounted working on a hotel refi that she said “should have been a no-brainer,” but was really tough. 

“A lot of deals don’t pencil out right now,” she said. 

This all kind of reminds me of a conversation I had last week with housing market expert Jonathan Miller. I was reporting on fourth quarter residential sales figures and on the hunt for an interesting headline. Miller joked that while 2023 was the year of disappointment, 2024 will be the year of positive “incremental change.” 

The same seems to apply to construction lending. 

What we’re thinking about: Bal Harbour council members aren’t happy with lobbyist Ron Book representing the village at the same time he represents Whitman Family Development, the largest commercial property owner in Bal Harbour. Will this become a bigger problem for Book, who represents other developers and local municipalities that may be at odds with each other? Send me a note at kk@therealdeal.com. 

CLOSING TIME 

Residential: Oil heirs Kenneth Endelson and Kathi Belfer Cypres sold their late mother’s Breakers condo in Palm Beach for $14.8 million. A hidden buyer acquired the unit at 2 North Breakers Row. 

Development: Brazilian developer Jose Isaac Peres’ firm, Multiplan Real Estate Asset Management, paid $64 million for the oceanfront development site at 9309 and 9317 Collins Avenue in Surfside. R Palace Surfside, led by Vivian Dimond, sold the Regent Palace condo site to Multiplan, which plans a luxury condo building on the 0.9-acre property. 

— Research by Adam Farence

NEW TO THE MARKET 

Singer-songwriter Billy Joel re-listed his oceanfront estate in Manalapan. The Piano Man is asking $54.9 million for the 13,349-square-foot mansion at 1110 South Ocean Boulevard, according to Realtor.com. It has nine bedrooms, 11 bathrooms, a theater that connects to a pub with its own full bar, a paneled library, pool and a dock on the Intracoastal-front portion of the property. Christian Angle of Christian Angle Real Estate has the listing. Joel has had the property on and off the market for years.

A thing we’ve learned 

A brain-dead person who received a transplant of a genetically altered pig liver experienced normal function of that organ for 72 hours, according to Wired. The experimental procedure is promising for those with failing livers, especially as a temporary solution for people whose livers could recover. 

Elsewhere in Florida 

• I’ll leave the original headline from local news station WFTV here for you: “Florida lawmakers step back from plan to let teenagers become roofers.” 
• A Boeing plane was spotted in the air with a “trail of sparks” over Miami last week. The Atlas Air Worldwide plane experienced an engine malfunction shortly after departing Miami International Airport on Thursday and had to turn around for an emergency landing shortly after, according to CBS News. 
• The Florida Senate unanimously passed an $800 million health care bill geared toward improving the health care worker shortage and providing more people with access to maternal care, mental health care and free clinics. Funding would come from the state and federal government. Medicare expansion is not a part of the legislation, according to the Miami Herald.