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MIAMI—Florida’s commercial and residential real estate markets continues its winning streak. Well-capitalized investors are pouring in. Home prices are on the rebound. New construction is coming out of the ground and domestic buyers looking to seize upon value-driven prices and historically low interest rates.
So says Jeff Bartel, managing director of Hamptons Group LLC and chairman of Benworth Capital Partners LLC, a South Florida-based private equity firm focused on real estate finance and related real estate services. He points to both numerical data and anecdotal evidence that show positive indicators for South Florida, especially in Miami-Dade County.
“While demand for real estate is strengthening and the values of assets—particularly improved assets—are trending upward, significant obstacles to borrowing remain,” Bartel tells GlobeSt.com. “Regulatory constraints remain an impediment for accessing debt financing that borrowers require to acquire or develop property under the traditional levered model.”
For some institutions, lending has all but dried up amidst the global financial crisis and tightened regulations, with home mortgage lending falling from $2 trillion in 2009 to $966 billion last year, according to the Mortgage Bankers Association. Still, Bartel says, there are worthy borrowers seeking capital for creditable investments. This leaves alternative sources of financing, such as private mortgage lenders providing bridge, hard money and other alternative lending models, in position to fill these gaps.
“These positive indicators do not paint a full picture,” he says. “High-end buyers often have more equity at their disposal, and we have seen many instances of all-cash deals, particularly in the slowly rebounding condominium market in the South Florida area. Meanwhile, middle-market buyers—and even luxury buyers who require a second mortgage—are challenged to secure financing.”
Despite signs of stabilization on the commercial front, Bartel says the capital markets remain in a state of flux amid turmoil overseas. This uncertainty is taking a toll on available financing among large and mid-size institutional lenders. As a result, some of the most valuable deals taking place in South Florida are being fueled by inbound international investors flush with cash.
“The domestic market tells a very different story, with many U.S.-based buyers and developers still requiring debt financing. Even then, securing favorable loan terms remains a challenge,” he says. “Against this backdrop, borrowers are increasingly turn to private mortgages and alternative lending as a source of funding that enables a residential or commercial property purchase or the start of a new development.”
As Bartel sees it, South Florida remains an attractive real estate investment target among worthy borrowers despite tightened bank regulations. With opportunities knocking for value creation and loan-seeking buyers faced with persistent obstacles, private asset-based lenders are filling the gaps.
“Qualified borrowers are partnering with private lenders that have operational expertise, underwriting discipline, and a track record of performance to fund and manage residential and commercial loans,” he says. “This model can provide sustained value creation while helping to avoid the ‘Wild West’ environment that precipitated the mortgage crisis.”