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Rising Rates, Construction Costs Force Developers to Get Creative With Financing
When a development project no longer pencils, rethinking what can be built may offer a path forward, Day Pitney Miami Land Use Partner Steven Wernick tells Commercial Observer.
According to Wernick, that search for flexibility is extending beyond project design to the capital stack, as private lenders and family offices increasingly join sponsors on the debt and equity sides of South Florida construction loans.
“The issue is not just about the construction costs, but really trying to maximize the value of the project and how can they better position the project to pencil,” Wernick said. “When a project stops working with today’s costs or the original fundamentals, the first question that often comes to us is whether they can revisit the entitlements and are there any changes in terms of what they’re allowed to build on the site.”
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