Miami’s development dance card filling-up

Any loyal Soundbytes reader knows that Miami’s condo market is back in action, largely thanks to a lending model that collects 50 percent of the purchase price down before construction is completed. Now traditional and unconventional lenders are returning to the scene and putting their stamp of approval on the latest condo boom.

Bottom leftThis come-back marks a dramatic change from nearly a year ago, when lenders were reluctant to jump back into the condo construction game following the previous cycle’s bust.

The tune has now changed: just last month, Blackstone Group lent $120 million to a partnership led by GTIS Partners to fund the up-and-coming Biscayne Beach Residences, currently under construction in East Edgewater.

And Biscayne Beach is not the only sign that Miami’s development dance card is quickly filling-up. The Florida Community Bank recently lent $39.2 million to the Melo Group’s Bay House Miami; $43.1 million was issued by Regions Bank for 400 Sunny Isles; and a whopping $300 million from HSBC Bank in February of this year went towards the Saxony Hotel and Faena house in Miami Beach.

14_NE_Aerial_NightWhy do lenders suddenly have renewed faith in our market? The answer is “risk … or the lack thereof.” The high ratio of buyer equity invested in projects reduces the risk associated with loans. This stands in stark contrast with the last cycle, when lenders were bearing the brunt of the risk. This time around, developers, buyers and banks each have ample have skin in the game, making it a safer bet that a condo development will be completed.

In the case of Biscayne Beach, hundreds of buyers had already snapped up units in the 51-story glass, stone and stainless steel tower. Although the project is not slated to finish until December 2016, buyers have already accounted for most of the project’s inventory. It’s just one example of a trend materializing around South Florida, a market that has gone from toxic to attractive in a matter of a few short years.