The developer of a residential condo tower in Edgewater has received the construction financing necessary to break ground on a planned 90-unit development, the developer announced Thursday.
The $16 million loan, from Coral Gables-based Banesco USA Bank, comes amidst an environment in which local banks have decided to slowly open the spigot on construction loans, which had been scarce since late 2008.
The money from Banesco should cover 60 percent of total project costs on The Crimson, an 18-story waterfront tower being built at 601 NE 27th Street, according to Stephan Gietl, a principal with Aventura-based mckafka Development Group. The financing was arranged through a broker, Luis Duany of Duany Financial Network but, according to Gietl, basically came through on account of mckafka’s previous relationship with Banesco.
“We didn’t need to shop around because we had quite a good experience with them in a previous re-financing,” Gietl said.
In spite of that amicable association, however, Gietl noted that obtaining the loan was “a much longer process” than the one seen during the last real estate boom cycle.
“When I look back from the moment when we proposed the project to the point when we got the closing documents, it was 12 months,” Gietl said, explaining Banesco took time to dig into the project’s contractors, investigate personal assurances and otherwise vet the loan. “At the end of the game, you need to show them you have skin in the game.”
Luis Duany, the broker who helped arrange the deal, said the transaction could be instructive for other project developers looking to arrange financing in the near future, as it set the tone for the kinds of deals local banks will and will not take.
“The banks are just starting to do the construction loans and if they don’t know the customer, they’re holding back,” Duany said. “They’re hesitant to push it too much because a glut is starting to form already. A lot of people are getting to the construction phase so, right now, banks are picking and choosing. The know-your-customer part is key.”
While not huge by objective standards, the $16 million loan by Banesco is likely to be the biggest construction loan on their books and, indeed, one of the biggest negotiated in South Florida in 2013. As of the last reported quarter, Banesco held $44 million in construction loans on its balance sheet – with only $11 million actually disbursed. The bank had $806 million in total assets as of that filing.
A representative from Banesco declined to comment on the transaction.
Although preliminary construction work has already been performed on the site, The Crimson will officially break ground this month, mckafka noted in a statement. Once completed, the project will feature one- to three- bedroom residences.
Gietl noted nearly 45 percent of units had already been sold, with strong interest coming from Latin American buyers. About a third of that sales activity has occurred since mid-September, when mckafka moved its listings to Aventura-based broker ISG World.