Condo Lenders Regain Appetite for Risk in Florida

Private Equity Fills a Funding Void Left by Skittish Banks

The Wall Street Journal

Riding the Wave

Slowly but surely, lenders are regaining their appetite for risk in South Florida's red-hot new-condominium market.

Fort Capital, a real-estate investment firm, received $290 million in construction financing to build 151 condos designed by Pritzker Prize-winning architect Richard Meier and a 77-room Four Seasons-branded hotel at the Surf Club, a luxury oceanfront resort Fort Capital owns. The lender is Blackstone Group's Real Estate Debt Strategies fund, a lending arm of the buyout shop.

The loan is thought to be the first sizable nonrecourse loan—meaning the developer didn't have to pledge as collateral any of its own capital or assets, aside from the property itself—made in the Miami area since the real-estate crash. That crisis led banks to reclaim dozens of half-empty condo buildings from developers unable to pay off their loans.

Jim Dockerty and Scott Wadler of brokerage HFF, brokered the loan for the Surf Club. Mr. Dockerty said that, since the crash, private-equity funds such as Blackstone have provided riskier, nonrecourse lending that once came from banks, which have retreated from the market. HFF says 60% of the condos at the Surf Club are under contract.

"Prior to the 2008 correction, the vast majority of loans came from banks," Mr. Dockerty said. "But private equity is really becoming a bigger player in the condo-construction marketplace, rather than the banks."

—Robbie Whelan

Gaw Goes West

Gaw Capital Partners, a Hong Kong-based property investor that is turning its sights across the Pacific, has raised $160 million for a new U.S. property fund, according to people familiar with the plans.

The firm is looking to attract up to $400 million by early next year, these people said. Gaw previously raised more than $3 billion through a series of Asia-focused funds and co-investments.

Goodwin Gaw, the firm's Hong Kong-born and Wharton-educated co-founder, got his start in 1995, when he acquired and renovated the run-down Roosevelt Hotel in Hollywood for $34 million. Brokers now say it is worth several times that amount.

Recently, Gaw bought a controlling stake in the Soho House Chicago, a members-only club for the entertainment and creative industries. Early this year, it sold a Sacramento shopping mall to the owners of the Sacramento Kings basketball team as the site of a new arena. Gaw is now turning to the Bay Area and Pacific Northwest, where it is looking to acquire low-rise office buildings, create more communal space in them and attract new companies.

—Craig Karmin

Touting Texas

Texans are known to brag. Houston now intends to put its biggest talkers, in an economic-development sense, in the same building.

Houston First, a city entity that owns the city's convention-center hotel and manages several municipal buildings, started construction last week on a 15-story building to house at least six economic-development and civic groups. The building, spanning up to 115,000 square feet, and a 1,900-space parking garage are going up adjacent to the George R. Brown Convention Center.

Houston First intends for the office building, estimated to cost $26 million, to open in 2016. Its tenants will include Houston First, the Houston Convention & Visitors Bureau, the Hotel & Lodging Association of Greater Houston and the Greater Houston Partnership, among others. The tenants signed 20-year leases. "We're creating a building that will enhance the economic powerhouse that we already are," said Ric Campo, chairman of Houston First and chief executive of apartment giant Camden Property Trust.

The accompanying $50 million garage will serve the office building, the convention center and nearby sports venues and hotels. Houston First is financing its project with cash and bonds backed by hotel-occupancy tax revenue.

—Kris Hudson

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