Distress call: Foreclosures threaten 13 South Florida dev sites

The last couple of years have been rough on developer Brian Tuttle.

In December 2023, facing a maturity date on three loans totaling $38.4 million secured by a Royal Palm Beach development site, Tuttle was hunting for new lenders to refinance the debt and new equity partners to provide the capital to break ground on his 38-acre mixed-use project, Mainstreet at Tuttle.

But Tuttle got an icy reception from banks and potential investors. "Banks were saying that due to interest rates, the appraisals had to be reduced significantly," Tuttle told The Real Deal. "And with the appraisals being reduced significantly, you had to put more equity into the deals."

When he spoke with potential investors, "they were all looking for a steal," Tuttle said. "So when everyone is looking for a below-market deal, the fair-market deals just get overlooked. It was very frustrating."

In July 2024, the lender—Fort Lauderdale-based Fuse Group—filed its foreclosure complaint against two Tuttle entities that own the Royal Palm Beach site. In an email to his contractors that same month, Tuttle said he had met with more than 200 groups over a 14-month span to put equity into the project, with no luck. In September, the Tuttle entities filed for Chapter 11 bankruptcy to stave off a foreclosure auction after Fuse Group won a $47.4 million judgment over the summer.

Tuttle is not alone. A dozen other developers are going through a similar predicament. Across the tri-county region, 13 development sites have landed in bankruptcy court or are in the crosshairs of foreclosure, with industry players warning that this is the front edge of a bigger wave. In 2024, five development sites faced foreclosure, according to an analysis by TRD.

South Florida's pandemic boom was supposed to inoculate the region from the commercial real estate reckoning gripping the rest of the country. Instead, rising interest rates, high construction and land costs, and more skittish equity investors are turning stalled projects into distress cases. A growing list of local developers are nursing a brutal hangover, facing a reckoning with lenders that are done "extending and pretending."

"There's more in the pipeline," Josh Rubens, a shareholder with Miami law firm Kluger Kaplan, told TRD. "I think there have been some extensions over the last 12 to 24 months that you'll be seeing headlines about in the next six to 12 months, as those maturities hit."

Loans due after pandemic boom

During the Covid migration surge, developers raced to lock up sites and launch apartment towers, condo-hotels, offices and mixed-use projects on the assumption that rents and prices would keep climbing—and that floating-rate debt could be refinanced before it reset higher.

That script blew up when the Federal Reserve hiked rates and construction costs jumped by roughly 30 percent in just a few years, according to lenders. Plans that looked like slam dunks in 2021 and 2022 now show thin or negative returns once higher borrowing costs and pricier hard costs are baked in. That makes it far tougher to secure new construction loans or new bridge loans.

"Florida, and South Florida for sure, still has demand," said Brett Forman, whose Fort Lauderdale-based Forman Capital has financed ground-up projects across the state. "But you had explosive growth brought on by Covid… and there are developers that may have gotten over their skis, perhaps [got] too aggressive."

He points to a "ginormous amount of debt" still coming due through this year and 2026, much of it on land or early-stage deals that never made it to full construction financing.

The common denominator across many of the distressed sites is short-term bridge loans—typically 12 to 36 months, sometimes with six- or 12-month extension options—that have already burned through multiple reprieves. Those loans were meant to carry a project through entitlements or early predevelopment to a cheaper construction loan or a sale. Instead, developers are stuck in place while interest accrues at double-digit rates.

"You rerun the math at a higher interest rate and building costs up 30 percent, and the numbers don't make sense anymore," Holly MacDonald-Korth of Coral Gables-based KDM Financial told TRD. "[Developers] have a hard time getting a new loan for a deal that, on paper, doesn't look like it's going to turn the profit they thought."