Financiers backing off pricey condo projects
Established developers with good waterfront lots get money. But high-rises like Trump Tower Tampa may be harder to fund.
By JAMES THORNER
Published March 5, 2006
Many of the region's leading banks are tightening credit for high-rise condominium projects, seeding doubts about whether many of the towers proposed for the Tampa Bay area will ever be built.
Getting more than 10,000 condos off the ground will require billions of dollars in borrowed money. Those loans are key to revitalizing such districts as Tampa's Channelside, downtown St. Petersburg and downtown Tampa.
But if the high price of construction materials, labor shortages and rising interest rates haven't stressed builders enough, banks have grown picky about which projects they view as viable.
Developments such as the 52-story Trump Tower Tampa, which promises glittering, marble-trimmed apartments priced up to $6.2-million, haven't announced construction financing deals, leaving skeptics to ponder their future.
"Obviously we're being a little more mindful, a little more careful and a little more cautious looking at each transaction," said Jeffery Cash, executive vice president for real estate at AmSouth Bank.
AmSouth has financed several high-rise condos in Clearwater and St. Petersburg, the common denominator being established developers with attractive waterfront lots.
It's a similar strategy touted by Mercantile Bank, financing the up-and-coming Ventana, two 11-story condo towers in Tampa's Channelside.
But of the many other projects still chasing financing, Mercantile appears to be taking a pass, said Owen LaFave, the company's vice president of commercial lending in Tampa.
"I don't know of any new projects we're looking at," LaFave said.
Joel Cantor's assessment is more grim. The developer of The Signature waterfront condo tower in St. Petersburg announced a $140-million financing deal with Fifth Third Bank last week.
Having run the gantlet to land a loan for his 224-unit high rise, at 390 feet destined to be the tallest in Pinellas County, Cantor doubts most projects are up to the task.
"At least two-thirds won't get off the ground," Cantor predicted. "I hope they work, but a lot of these buildings don't have prime locations."
Based on slipping sales in December and January, the recent building boom appears to have peaked. Asked if a downturn would force banks to re-evaluate lending practices, spokespeople for companies like AmSouth, SunTrust and Wachovia issued statements along the lines of "we've always been conservative and remain so."
But below the surface bubbles a fear banks could lose their collective shirts on bum condo deals. Bank executives talk about driving past dark windows in newly opened towers that were supposedly sold out.
It sends the message that investors are scarfing up the units, but few families are calling them home sweet home.
Condo projects that have nabbed construction loans are generally crawling with workers, trucks and building cranes. Witness downtown Tampa's SkyPoint, which has built about four stories of the 380-unit tower at Ashley Drive and Zack Street.
SkyPoint developer Novare-Intown went with Fremont Investment & Loan, whose loans are higher priced than those at Wachovia or Bank of America. Fremont, partnered with investment banker Lehman Brothers, stands to lend SkyPoint more than $80-million.
"We charge a little bit of a premium, not having personal guarantees from developers," said Greg Newman, who handles Florida condo loans from Fremont's Atlanta office.
Mainline banks shunning many condo projects usually spot red flags: Projects in which investors grab too many units. Projects that allow buyers to assign apartments to new owners before closing. Projects by inexperienced developers who have never tasted the downside of a market.
Susan Brown, vice president of real estate finance for SunTrust, said a typical warning sign is "when you start seeing end users buying three, four or five units" in one development.
SunTrust financed the Alagon condo tower on ritzy Bayshore Boulevard in Tampa, but has steered clear of others that lacked "experienced developers with prime sites," Brown said.
Trump Tower Tampa began selling its proposed 192 condos about 13 months ago, but hasn't announced who will provide the estimated $200-million loan. Not one of five Tampa area banks surveyed for the story said it's financing Trump's project.
Some worried the condos, ranging from about $700,000 to $6.2-million, are too expensive: The same millions spent on a Trump penthouse could buy a larger spread in the suburbs. Others questioned the smallish 11/2-acre Hillsborough River lot expected to carry the 600-foot skyscraper.
Despite the celebrity gleam of Trump's name - he's getting a cut of potential profits for putting his brand on the building - not all bankers drool at the thought of handing money to a brash-talking tycoon whohas had his fill of bankruptcies.
"There's some allure to having your name attached to that project. But for our own reasons, that's one that we passed on," Mercantile's LaFave said of Trump Tower, echoing other lenders. "We're a little uncomfortable with some of the price points they're charging."
Trump Tower contracts don't bar people from buying and selling units before they're built. Two buyers reached by the Times said they're treating their apartments as investments. Tampa business owner Alan Bridges' strategy is to buy upper-story units in high rises and rent them to visiting sports stars.
He dismissed talk Trump would fizzle for lack of financing. "People who didn't get in are spreading those rumors," Bridges said.
SimDag LLC, the local developer behind Trump Tower Tampa, is negotiating with three bidders who want to finance the condo tower, but is holding out for a better deal, project spokesman David Hooks said last week.
In January, a Trump condo tower in Jersey City landed a $171-million loan from Chicago-based Corus Bank.
The New Jersey tower approximates Tampa's in its height (55 stories) and its location (near a river). But the Jersey tower will have about 445 units, more than double Tampa's, and views of Manhattan's skyline.
Reached in Chicago, Brian Brodeur, senior vice president at Corus, told the Times "we've been involved" with Trump Tower Tampa but would not elaborate.
Corus has been spreading money around Florida, financing a $112-million condo conversion at Palm Harbor's Lansbrook Village last year. Like Fremont, it often lends money to developers willing to pay more for their loans.
"I think our appetite is still pretty healthy," Brodeur said of the company's attraction to Florida. "We're open for business."
But Corus' hunger isn't universal among banks polled about financing Tampa/St. Petersburg condo towers.
LaFave presented a scenario that gives bankers the jitters: Investors scoop up million-dollar condos for resale, can't find buyers and ditch their 20-percent deposits rather than complete the purchases.
If the problem is severe enough, developers could default on their loans and leave lenders in the lurch.
"Banks rely on sales for repayment, so if presales fall through the bank has a problem," LaFave said. "You have to ask the question: Is Tampa ready for upscale living at that price?"
[Last modified March 3, 2006, 21:15:03]
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