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Lender Financing For New Miami Area Luxury Condo Projects
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After seven years the memory of that dramatic South Florida real estate crash of 2007 seems to be starting to fade. Lenders have started to offer hefty financing for proposed condo towers east of Interstate 95 in the South Florida counties of Miami-Dade, Broward and Palm Beach.
During the past 20 months, lenders have given almost $900 million in financing to condo developers, not counting the large Brickell CityCentre mixed-use project that includes three condo towers. Condo developers are proposing 150 more condo towers for Miami and neighboring cities. Financing for new luxury condo projects will allow luxury real estate developers to purchase development sites and construct towers in South Florida, where there are less than 19,000 units currently on the resale market.
Not too long ago in 2008, there were more than 60,000 luxury condo units on the resale market, months after the U.S. financial system was on the brink of an economic meltdown.
A contributing factor to the current demand for new luxury condo construction is the ever shrinking number of unsold real estate developer units from the last Miami luxury housing boom-and-bust cycle that began a decade ago.
Less than 2,000 real estate developer units remain unsold from a group 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 the end of June.
During the current luxury condo boom, real estate financing has already been secured for almost 35 South Florida luxury condo real estate 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.
The range of luxury condo real estate project loans have ranged from less than $1 million to more than $150 million.
The biggest luxury condo financier for Miami has been Alabama’s Regions Bank with nearly $250 million allocated. New York City’s NorthStar Realty Finance Corp. comes in second with more than $125 million in financing provided.
The return of financing for proposed condo towers is important because real estate developers had been pre-selling units and building new towers based on a strategy of using buyer deposits in the range of between 30 percent and 80 percent to cover the cost of construction.
As financing returns to the preconstruction condo market, it is believed that the new norm would be for 50 percent buyer deposits and not the 20 percent buyer deposits during the last Miami condo boom. This would make preconstruction units more attractive for a larger pool of buyers.
If presale condo deposit requirements start to be reduced more domestic buyers will enter into a market that has been kept afloat by foreign buyers.
In Miami's last real estate boom 50 percent presales were required to obtain a loan. Today's rules to qualify for construction financing in this approaching condo boom have not yet been revealed.
It is uncertain whether lenders, developers, and buyers are smart enough to avoid creating another boom-and-bust condo cycle in Miami.
Andres Leiser is a local contributor for Constec Realty's Miami luxury real estate website. Andres Leiser has been involved in Miami real estate for over a decade. For more information please visit http://www.constecrealty.com
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