The South Florida real estate market is experiencing a rise in distressed development sites, with 13 projects either in bankruptcy proceedings or facing foreclosure. This trend follows a period of rapid growth during the pandemic, which had initially fueled optimism that the region would avoid broader commercial real estate challenges.
Developer Brian Tuttle’s experience illustrates the difficulties many are encountering. In December 2023, Tuttle struggled to refinance $38.4 million in loans tied to his Royal Palm Beach project after banks reduced appraisals due to rising interest rates. “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.” He added, “they were all looking for a steal. So when everyone is looking for a below-market deal, the fair market deals just get overlooked. It was very frustrating.”
By July 2024, Fuse Group filed a foreclosure complaint against entities owned by Tuttle after he failed to secure new financing or partners despite meeting with over 200 groups within 14 months. A $47.4 million judgment led Tuttle’s entities to file for Chapter 11 bankruptcy protection in September.
Other developers face similar pressures across Miami-Dade, Broward, and Palm Beach counties. Five sites faced foreclosure in 2024 alone according to an analysis by TRD. Factors such as higher interest rates and increased construction costs have made it harder for developers to obtain new loans or attract investors.
“There’s more in the pipeline,” said Josh Rubens of Kluger Kaplan law firm. “I think there have been some extensions over the last 12 to 24 months that you will be seeing headlines about in the next six to 12 months, as those maturities hit.”
Many projects relied on short-term bridge loans that are now maturing without permanent financing options available. Holly MacDonald‑Korth of KDM Financial explained: “You rerun the math at a higher interest rate and building costs up 30 percent, and the numbers don’t make sense anymore… [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.”
Some developers have turned to legal tactics such as bankruptcy filings or appeals in an effort to delay foreclosures but lenders are increasingly challenging these moves in court.
Notable cases include Rok Lending taking control of an Aventura medical office site at auction after developer Marlon Gomez’s attempts at delaying through bankruptcy filings failed; and Monarch Alternative Capital moving forward with foreclosure on Legacy Hotel & Residences at Miami Worldcenter after construction halted and refinancing efforts stalled.
Tuttle stated his Chapter 11 filing aimed “to protect the unsecured creditors so that [Fuse Group] didn’t wipe them out,” adding: “And right now we’re working with the bank and the bankruptcy court to come up with the best plan to try and make it a win as much as possible.”
Lender-side attorney Rubens noted high default interest rates—sometimes above 20 percent—can quickly worsen borrowers’ situations if fresh equity is not injected: “There may be a large balance that another lender is apprehensive about getting involved in… These things just take time, and unfortunately, time sometimes really works against the developers when you have a high interest bridge loan that’s ticking away with interest.”
MacDonald‑Korth concluded more defaults are likely given previous aggressive lending practices: “Everybody thought South Florida is exempt from all of these commercial real estate issues,” she said. “But it turns out, a year or two later, it’s not.”
