Commercial lending in Miami-Dade remains fluid

South Florida’s commercial and construction lending market has remained healthy and fluid, local commercial lenders say.

The commercial lending market is currently seeing plenty of capital in the system, said Greg Freedman, co-founder and co-CEO of BH3 Management.

“It’s a very liquid environment in terms of providers of debt, capital for credit, and that market has remained fluid,” he said. “There are still great deals with great sponsors on good real estate that are still getting done at a very efficient pace that continues to be in line with the market.”

The market is still seeing – which is nothing new – how equity capital has been harder to come by, he said: “That theme has remained consistent for the better part now of going on a year and a half or two years. We think that with the cost of capital coming down, and the expected rate cuts that had been expected for some time, there seems to be some clear line of sight on that.”

Mr. Freedman said he expects activity to increase over the next one to four quarters in terms of equity capital coming back into the market.

The markets have improved and never got really weak, added Anthony Scavo, president and managing partner of Basis Industrial.

“But generally, in the broader market, there has been a lot of movement from banks and larger banks, regional banks to more debt funds just because the debt funds are so flush with cash right now,” he explained. “There’s a lot of money that’s ready to go out and be loaned to people.”

The presence of debt funds and private lenders with significant capital can also make lending easier in certain regions, he said.

“I think you’re going to see more and more money come in, actually. Loans are going to get easier to get in the next year or so. I think they may not be as high a leverage as they used to be,” Mr. Scavo continued. “A bank might only own 50% to 60% when they used to own 55% to 65%. I think they’re going to be opening up and lending more than they have been.”

Lenders are more willing to finance projects that are considered safe and have stable cash flow, he said. Highly speculative projects – those with uncertain outcomes – are much harder to finance, regardless of the region.

“However, in markets with more optimism and economic growth, even less conventional projects, like Miami, may find funding more easily,” he said. “Miami is one of the best markets to borrow in the country right now because people still have a good, optimistic view of the future in certain parts of the country.”

The optimism about the local economy and lending outlook is driven by several factors, said Brian Barroso, head of commercial real estate and corporate banking manager at Banesco USA.

“The Florida commercial real estate market is outperforming the national average with strong construction activity,” he said, “There is healthy demand for industrial, retail, hospitality and multifamily properties. Rent growth, while moderating, remains healthy, and occupancy rates are also healthy. Moving forward, we continue to be bullish on our local economy.”

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