Fort Lauderdale, FL–based Bank-Atlantic made its last loan for condo construction nearly two years ago. Speculators in the market, other banks willing to make the loans, and a high proportion of condo loans in its commercial lending portfolio led the bank to take the step, says Alan Levan, BankAtlantic's chairman.
Other banks in Florida—and other parts of the country—are joining BankAtlantic in rethinking how they're financing the condo craze. Many reports continue to justify the demand for condos, but it's tougher to ignore concerns that some markets are getting overbuilt, overrun with investors, or both.
“We have seen a lot of speculation in the high-rise, upper-end condo market in Florida,” says Damon Olinto, president of Synovus Bank of Jacksonville. A recent referendum will limit the height of condominium projects on Jacksonville Beach to 35 feet, so he won't have to worry about funding Miami-style high-rises in the future. Nevertheless, Synovus is trying to keep its concentration of multifamily projects in proportion to other loans. “We're not turning the spigot off,” Olinto says. “If a project makes sense, we'll look at it, but we have to look on a case-by-case basis.”
Bank of America hasn't halted condo loans, but Gene Godbold, its commercial real estate banking president, says some planned projects don't work economically anymore due to sharp increases in construction costs. In those cases, the bank will work with clients to restructure the project, but “we don't lessen our equity requirements in a project that doesn't make sense,” he says.
Meanwhile, BankAtlantic's Levan doesn't rule out a return to the condo market. He believes developers are more sophisticated and better leveraged today than they were during other condo boom-and-bust cycles. “Depending on how the market fares over the next year or so, we may decide to come back,” he says.
Learn more about markets featured in this article: Miami, FL.
