Williams Island developers Eddie and Jules Trump may feel like the luckiest condo developers on the block.
The brothers are one of the first condo developers to secure a large construction loan since the real estate market crashed. An affiliate of the brothers’ Trump Group closed Monday on a $160 million loan to help build the luxury Mansions at Acqualina in Sunny Isles Beach.
"I have to think this is the first sizable construction loan in a long time," said Johnathan Robertson, managing director of the Miami-based company.
Parts of the proceeds of the loan — backed by the land and purchase contracts — paid off a $19 million land loan. The 2.03-acre site was purchased in a distressed deal for $3 million in January 2011, according to Miami-Dade County property records. Robertson did not disclose the total project value or the sellout value from buyers.
The 47-story project would be home to some of South Florida’s most expensive condos, including a 16,000-square-foot penthouse priced at $55 million. Construction started in August, and the developer is preparing to pour the first floor of the lobby. The project should be completed in late 2014 or early 2015.
The syndicated loan was led by Regions Bank. The other participating lenders were SunTrust Bank, Mercantil Commercebank N.A., Sabadell United Bank N.A. and the Miami branch of Israel Discount Bank of New York.
"Our approach to working with clients is always to understand their business, what they want to do and then bring the right people to the table," Jeffrey Shulman said in a statement. He is executive vice president and South Florida market manager for Regions.
The Trumps are not related to New York-based celebrity developer Donald Trump.
Other banks wanted to join in the deal but had no luck.
"The construction loan was oversubscribed," Robertson said. "We had more commitments than [we needed] so people got refused. We only needed $160 million because of the use of deposits and equity."
Robertson said 80 percent of the 79 units are under contract. Prices start at $7.8 million, and buyers are required to pay half of the purchase price by the time the building’s roof is topped off.
"In Florida, you can use deposits for hard costs except for the first 10 percent," he noted.
For the most part, condo developers are financing construction of their projects with buyers’ deposits and their own equity. In some instances, developers secure a small construction loan after a significant portion of the building is completed.
Construction lending for residential projects after the crash changed dramatically, said Miami attorney Jim Shindell, who represented Trump Group affiliate LPLA Partners LP as the borrower.
"Most of the condo construction loans tend to be smaller loans that serve as more or less cash flow, and the construction is funded out of deposits," he said.
But this case is different, in part because of the Trump Group’s track record. The brothers built eight condo projects since 1988 totaling at least 1,830 units. Most of their projects are in Aventura.
Shindell said the brother’s "impeccable" reputation played an important role.
"The lenders really respected them, and as a result we had a collaborative process where the lender heard the borrowers’ concerns," said Shindell, a partner with Bilzin Sumberg Baena Price & Axelrod.
He said the syndicated lenders made sure the unit buyers were not investors seeking to flip the units and had a significant investment in the project in form of deposits.
"It is more difficult for a unit buyer to walk way, and it provides that there is less risk if they do" for lenders, he said.
Half Up Front
Lenders’ reluctance to fund condo projects may be easing up as well.
"Banks are tiptoeing into condominium construction loans, but they are still extremely conservative," said mortgage broker Howard Taft with the Aztec Group in Miami. He is not involved in the deal.
He said he is aware of another construction loan in the works for more than $200 million to build an oceanfront condo in Miami-Dade County. He declined to name the project or the developer but said the new loans show how selective lenders are.
They want borrowers that are well-capitalized and seasoned developers who have largely pre-sold their units and collected at least half of the purchase price up front, he said.
"Most construction lenders require a construction loan to be between 100 and 120 percent covered by pre-sales with substantial deposits," Taft said. "In other words, if you have a $120 million construction loan, you need to have at least $120 million of pre-sales."
Long gone are the days when banks would lend up to 70 percent of construction costs and require only 20 percent deposits from condo buyers, he added.
The Trump Group, founded and co-chaired by the brothers, is behind the 80-acre, $1 billion Williams Island development in Aventura, Acqualina Resort & Spa in Sunny Isles Beach and the 10-story, 27-unit exclusive Luxuria oceanfront tower in Boca Raton.