The potential effects of climate change and how soon they could have an impact are the subject of contentious debate in Texas and around the country, but the consequences of anticipated rising sea levels have already prompted some commercial real estate lenders to reevaluate their positions on coastal developments according to a panel hosted by the Commercial Industrial Association of South Florida. However, funds may still be readily available to developers in municipalities that have taken steps to address the threat posed by climate change.
Much has been written in recent years about how climate change will impact South Florida, but banks and nontraditional lenders still seem willing to fund commercial real estate developments in the region. The CIASF panel members say that this is because cities like Miami have committed hundreds of millions of dollars to infrastructure projects designed to prevent flooding and mitigate these effects.
However, community banks are becoming more cautious even in areas where steps have been taken to mitigate the impact of climate change. Financing packages with loan-to-value ratios of 75 percent or more are becoming increasingly difficult to obtain, and new banking regulations that have been introduced to reduce the likelihood of future asset bubbles are also making borrowing more difficult. While traditional banks may be stepping back, alternative sources of funds such as family trusts, private lenders and insurance companies are becoming more active in these markets.
Commercial real estate loans must often be paid back or refinanced far more quickly than residential mortgages, and attorneys with experience in this area may urge developers to study loan terms carefully before making any commitments. Attorneys could also help developers to choose between private lenders. While organizations or individuals are not required to meet federal banking regulations when they lend their own money, they often charge higher rates of interest than conventional lenders.