How Popular Bank Gets More Deals To Pencil For Clients In Miami
While elevated interest rates and strict lending requirements have put a damper on the construction market across the U.S., investors still have an appetite for South Florida.
The Miami-Dade area witnessed significant sales activity in 2023, totaling $9.7B across asset types. This was 23% lower than 2022 but still 56% higher than prepandemic levels. Multifamily remains the preferred asset class in the region, even earning the distinction of 2023’s hottest rental market.
Several massive ground-up projects have hit the Miami-Dade market, including the construction of what will become the city’s tallest skyscraper at 100 stories, The Waldorf Astoria & Residences, and 2600 Biscayne, a luxury mixed-use development that will feature 41 stories divided into 187K SF of office space and 399 residential units.
But for many developers, sourcing ample capital and navigating the high costs associated with getting projects across the finish line isn’t feasible in present market conditions.
“We are hearing from clients that it has been more challenging to make deals work in today’s environment, but there are signs that things are starting to pick back up,” said Jorge Morera, director of South Florida commercial banking at Popular Bank.
Popular Bank is the mainland subsidiary of Puerto Rico-based Popular Inc., a publicly traded, full-service financial institution founded in 1893 that ranks among the top 50 banking institutions in the country. On the mainland, Popular Bank operates regionally in South Florida and the greater New York area.
Morera said that Popular Bank has noticed some of its competitors in the Miami-Dade development market pulled back over the past two years as interest rates rose and recessionary fears filled the sector. Lenders, in turn, tightened their standards to avoid potential losses.
Popular Bank has taken a different approach, Morera said. The bank is seeking ground-up construction projects across South Florida.
“We see a lot of potential in the multifamily sector, especially given the housing shortage in our region,” said Eric VanDett, South Florida senior vice president of commercial banking at Popular Bank.
Popular Bank recently closed loans on three ground-up construction projects in the Miami-Dade area, including one mixed-use and two multifamily developments.
In 2023, Popular Bank provided a $33M construction loan to complete a 161-unit mixed-use project. The 5-acre development in the West Little River area includes two six-story apartment towers, approximately 25K SF of retail and restaurant space, and a 121K SF self-storage facility.
Seven miles away in North Miami, the Popular Bank team issued a $12.7M construction loan in 2023 to develop a six-story, 67-unit luxury multifamily building, which will feature a sustainable design highlighting its outdoor green space and public transit-oriented elements.
Popular Bank also recently closed on a $28M loan to develop a 144-unit multifamily project in the Miami area, VanDett said.
“We are excited to be a part of these developments, in West Little River and in North Miami,” VanDett said. “They will not only offer housing for residents but will also positively impact the local economies.”
While Popular Bank is still an active player in the Miami-Dade commercial real estate lending scene, there are a few trends the bank has noticed negatively impacting developers in the market. In addition to elevated interest rates and lengthy lead times, the cost of construction materials have increased significantly — about 40% from 2019. This has put a damper on construction starts, Morera said.
Miami-Dade-specific trends affecting market activity include insufficient affordability due to a lack of inventory in the multifamily sector, high prices of raw land and existing properties, and windstorm insurance cost hikes. A combination of these factors has caused developers to hit the brakes, Morera said.
“Miami is no stranger to tropical storms and hurricanes, and that does drive our windstorm insurance costs up, making them among the highest in the nation,” Morera said. “We’re working with clients on a case-by-case basis to try and alleviate some of those pressures.”
To take some of the weight off developers' shoulders in the current economic climate, Morera said that the Popular Bank team has worked with clients to provide shorter prepayment penalties for higher interest rate loans to allow for future modifications. It’s also trying to stay competitive with the market on interest rates.
“Popular Bank has local decision-makers who like to move quickly,” Morera said. “There are minimal bureaucratic layers and there's always someone to speak with. We’re looking forward to continuing lending in the Miami-Dade area, a market in which we’re bullish.”
Jorge Morera is a senior vice president and South Florida director of commercial real estate for Popular Bank. He can be reached at jmorera@popular.com.
Eric VanDett is a senior vice president and South Florida commercial real estate team leader for Popular Bank. He can be reached at evandett@popular.com.
This article was produced in collaboration between Popular Bank and Studio B. Bisnow news staff was not involved in the production of this content.
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