Forman Capital: Navigating the Complexities of Real Estate Lending in Florida

In the current real estate climate of Florida, developers face numerous challenges. High interest rates and a competitive market have made securing financing for projects increasingly difficult. Amidst these obstacles, Delray Beach-based Forman Capital is capitalizing on opportunities that arise from the evolving landscape.

The Naples Condo Project: A Case Study in Innovative Financing

Last year, a developer aimed to build a 15-story condo tower in Naples, yet faced adverse conditions. With only 28 out of 56 units presold and heavy competition in the local market, traditional banks began to retreat, tightening their lending criteria.

• Key Challenges:
  • High interest rates leading to increased borrowing costs.
  • Expensive insurance and doubts regarding project viability.
  • Intense competition from nearby condo developments.

Fortunately, Forman Capital saw potential where others did not. Co-founder Brett Forman recognized the demand for luxury units priced around $2 million, a relative bargain in an area where prices can soar to $10 million. The development site, located just 1.5 miles from downtown, added to its appeal. Moreover, the developer presented a prime piece of land as collateral, facilitating a $113.6 million construction loan from Forman Capital.

“We gave them more money than what we normally would have given a borrower at that time,” said Forman, underscoring the firm’s creative structuring.

A Growing Demand for Alternative Lenders

In recent years, many financial institutions opted for a conservative approach, pushing back on new loans while focusing on existing contracts. This trend has heightened the demand for alternative lenders like Forman Capital, which has filled a significant gap in Florida’s real estate market.

• Market Insights:
  • Amidst this lending freeze, Florida has emerged as a hotspot for affluent buyers relocating from the Northeast and West Coast.
  • As developers rush to meet the growing demand for luxury housing, Forman Capital has become a pivotal player by offering more flexible financing options.

Record Loan Growth Amid Market Shifts

Forman Capital’s lending volume has surged, with the firm providing a staggering $358.4 million across 10 deals in one year. As of April, they had already financed $268.5 million across seven loans in 2024, and projections suggest they could exceed $800 million by the year’s end.

“We have never seen so many opportunities — we are turning away 99 out of 100 borrowers,” Forman remarked. “It’s like the golden era.”

Navigating Risk Through Market Analysis

Despite this rapid growth, the firm is aware of the lurking risks. South Florida’s post-boom slowdown in both condo and multifamily housing presents new challenges. Forman and his partner, Ben Jacobson, emphasize the importance of risk mitigation in their lending practices.

In May, Jacobson traveled to Chicago to assess potential loans for four office buildings. Using on-the-ground research, he gathered insights from various stakeholders, illustrating their commitment to a thorough understanding of market conditions.

“We dive into every market,” Jacobson emphasized. “It’s not just in LTVs and other metrics.”

A Diverse Background Fuels Strategic Decisions

Brett Forman’s journey began in the 1980s when he helped his father in the real estate sector. With a degree from the Wharton School and a wealth of industry experience, Forman Capital was established in 2004. The firm has since evolved, pivoting its strategies to adapt to changing market conditions.

• Key Milestones:
  • Forman’s early years involved working on distressed real estate projects.
  • A partnership with Trez Capital bolstered growth until parting ways in late 2022.

Mitigating Downturn Risks: A Proactive Approach

As the market trends shift again, Forman Capital remains vigilant. The firm understands that despite current challenges—such as potential slowdowns in hire and rental prices—demand for housing will always exist.

“People still need to find a place to live at some price point,” Forman stated, highlighting the firm’s cautious optimism amidst uncertainty.

Upcoming Initiatives

To adapt to evolving market conditions, Forman Capital plans to launch a real estate investment trust (REIT) in the third quarter. This initiative will allow investors to diversify their portfolios across a range of projects, seeking to raise up to $300 million initially.

Conclusion: Forman Capital’s Unique Position

Forman Capital has effectively positioned itself at the forefront of Florida’s real estate lending landscape. By blending innovative financing with meticulous market research, they are poised to meet the demands of a changing market while managing risks effectively.

Learn More About Forman Capital

For those interested in understanding the impact of private lending in Florida’s real estate market, additional resources can provide insights into the broader landscape:

• Understanding the Real Estate Lending Process
• Exploring Florida’s Housing Market Trends
• A Deep Dive into Construction Financing

By continually adapting their strategies and focusing on comprehensive market analysis, Forman Capital stands ready to tackle the challenges ahead, leading the way for alternative financing in Florida.