The commercial real estate sector in South Florida is facing a growing number of foreclosures and bankruptcies, with 13 development sites now either in bankruptcy court or threatened by foreclosure. Developers such as Brian Tuttle have encountered difficulties refinancing loans and securing new equity partners amid rising interest rates and declining property appraisals.
Tuttle described the current environment: “Banks were saying that due to interest rates, the appraisals had to be reduced significantly. 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.”
After unsuccessful attempts to secure funding for his Mainstreet at Tuttle project in Royal Palm Beach, Tuttle’s entities filed for Chapter 11 bankruptcy in September 2024 following a $47.4 million judgment awarded to lender Fuse Group.
Industry experts suggest this may be only the beginning of broader distress across the region’s development sector. “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.”
The surge in South Florida’s real estate market during the pandemic led many developers to pursue projects based on expectations of continued growth and easy refinancing options. However, Federal Reserve rate hikes and an estimated 30 percent increase in construction costs have eroded returns on these projects.
“Florida, and South Florida for sure, still has demand,” said Brett Forman of Forman Capital. “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 noted that significant amounts of debt remain due through this year and into 2026.
Short-term bridge loans—often intended as temporary financing until construction or sale—are at the center of many distressed situations. With higher borrowing costs and extended loan terms exhausted, developers face mounting pressure from lenders.
“You rerun the math at a higher interest rate and building costs up 30 percent, and the numbers don’t make sense anymore,” said Holly MacDonald‑Korth of KDM Financial. “[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.”
Several high-profile projects are affected by these challenges. In Miami’s Arts & Entertainment District, Forman Capital is seeking foreclosure on a planned condo-hotel site after an $8.3 million bridge loan defaulted upon maturity. In Aventura, Rok Lending acquired title to a medical office site at auction after winning a $19.9 million foreclosure judgment related to an unpaid $15 million loan.
Legal disputes between borrowers and lenders are common as developers file bankruptcy petitions or appeals in hopes that conditions will improve before losing their properties outright. According to Forman: “It’s a way of quasi delaying the inevitable.”
Lenders are increasingly contesting these tactics; Fuse Group has asked bankruptcy court to dismiss Tuttle’s Chapter 11 petition alleging it was used solely as a delay tactic.
Tuttle maintains his intention is to protect unsecured creditors: “We filed a Chapter 11 to protect the unsecured creditors so that [Fuse Group] didn’t wipe them out,” he said. “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.”
Even major developments such as Miami Worldcenter are not immune; Monarch Alternative Capital is moving forward with foreclosure proceedings against Legacy Hotel & Residences after construction stalled last year amid financing shortfalls.
Rubens explained: “There may be a large balance that another lender is apprehensive about getting involved in… 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: “Everybody thought South Florida is exempt from all of these commercial real estate issues… But it turns out, a year or two later, it’s not.”
