Late last year, a developer needed a hefty loan to get started on a 15-story condo tower in Naples. Prospects were grim.
Banks had retrenched amid elevated interest rates, insurance was expensive and questions over the project’s viability loomed. Fewer than half of the 56 units were presold. Worse, the tower faced competition for buyers from others in Naples’ hefty condo pipeline, especially since it was neither on the waterfront nor right downtown.
Forman Capital, a Delray Beach-based private real estate lender, heard a sunnier story.
The units, starting at $2 million, a reprieve from Naples prices that can run up towards $10 million, would bring in demand from buyers seeking a luxury city lifestyle at a discount, thought Brett Forman, co-founder of his eponymously named firm. The site was only about a mile and a half from downtown — not really that far. And, the developer sweetened the deal, pledging a patch of buildable land in a prime area as collateral to the lender.
Forman went for it, providing a $113.6 million construction loan.
“We gave them more money than what we normally would have given a borrower at that time,” he said. “But they also gave us a big piece of additional collateral. That’s what we say is creative structuring.”
Forman Capital’s business model is to be this optimistic, and often, there’s a space in the market for it.
Over the past three years, legacy financial institutions got stuck extending and pretending on existing loans, pushing back maturities and granting forbearance. Operating under regulators’ watchful eyes, banks have to maintain minimum capital and clean up existing delinquencies on their balance sheets, curbing their issuance of new loans.
At the same time, Florida became a magnet for well-heeled Northeasterners and West Coasters, and developers jumped to supply the demand for apartments and condos. They planned ever bigger and more luxurious projects, which had bigger capital needs.
Forman stepped in, becoming one of only a handful of non-institutional alternative lenders in the Sunshine State to fill the void. After two decades in the industry, during which Forman — mostly on his own and more recently with the help of partner Ben Jacobson — painstakingly established his firm’s reputation and secured steady, though not especially notable, deal flow, the firm has suddenly unlocked a new level.
“We have never seen so many opportunities — we are turning away 99 out of 100” borrowers, Forman said. “It’s like the golden era.”
Forman Capital beat its record in 2023, with $125 million in loans across seven deals. Then it bested that again last year, lending $358.4 million on 10 deals. By the end of April, Forman had bankrolled seven loans for $268.5 million. If the momentum holds, the firm is looking at topping $800 million in loans by year’s end.
Yet, as its dealmaking soars, so does its risk. South Florida, where the lender has more than half of its book of business, is experiencing a post-boom condo and multifamily slowdown, the other side of the mountain from the environment that revved Forman’s growth.
But Forman and Jacobson are not worried.
“We don’t lose sleep right now,” Forman said.
The slow road
In May, Jacobson flew to Chicago to do the best part of the job. The firm was considering making an acquisition loan for four office buildings in the Windy City, and Jacobson was there to do some shoe-leather reporting.
“We spoke to leasing brokers, sales brokers. We spoke to attorneys, we spoke to debt and equity brokers, retail owners, office owners, and we spoke to a friend of Brett’s that just happened to have lived in that area her entire life,” Jacobson said. “And then to a few people just walking around on the street.”
At Forman Capital, the view on Excel spreadsheets and public records is that they are useful — but they can only tell so much.
“It’s not just in LTVs and other metrics,” said Jacobson, 34. “We dive into every market.”
The ethos is rooted in Forman’s formative years.
“It was very real versus learning from a textbook. I liked real estate and I didn’t love class.”
As a high-schooler in the 1980s, he helped out his father — the late Sam Forman, who was in the retail business, selling Kuppenheimer Clothiers and later serving as executive of American Eagle Outfitters, helping it go public — at his bridge real estate lending firm in Atlanta, sometimes skipping class to work. In Philadelphia, where Forman graduated from the Wharton School in 1991, he leased commercial properties.
“You had to go and ask people what they were paying on a per-square-foot basis and how is business,” said Forman, 56. “It was very real versus learning from a textbook. I liked real estate and I didn’t love class.”
He worked at Bear Stearns, then joined family firm Forman Enterprises, which took over and turned around struggling retailers, including County Seat stores. Following a stint at early-stage investor Sylvan Ventures, he started Forman Capital in 2004.
In the living room of his Delray Beach apartment, he cold-called mortgage brokers, as well as his family and professional network, to seek their investment.
“Had I known how difficult it might have been at times, maybe I wouldn’t have done it,” he said. “You wake up every day and the phone is not ringing. You have to make it ring.”
At first, deals in the $3 million to $5 million range trickled in, then grew to $12 million, and then $20 million. He partnered with Richard Perry’s New York-based hedge fund Perry Capital, before Perry rolled back his focus on real estate during the Great Recession.
To weather the downturn, Forman pivoted to distressed real estate, purchasing single-family lots in Tampa, a shopping center in Naples and an office building in Palm Beach, which the firm gut renovated. It also formed tax lien funds, bidding at online auctions for real estate liens that allowed it to assume first-priority loans.
In 2016, two new chapters started. Forman hired Jacobson and partnered with Vancouver-based Trez Capital.
Jacobson is a Palm Beach County native who’d worked at several capital markets brokerages before he met Forman. On the way to the airport for a trip to New York, he stopped by Forman’s office. In the car, he changed into a suit. He’d just be a few minutes, he told his wife.
“It was like two hours and we switched flights. It was like meeting my long lost big brother,” Jacobson said.
Not all bonds are so secure. Trez Forman Capital Group was a joint venture between Trez, which provided the capital from its Canadian investors, and Forman, which sourced the deals. For a while, the JV was on a roll.
It provided $89.3 million in four loans for the development of a pair of garden-style apartment complexes and two single-family-home communities in North Carolina. In 2019, it loaned $115 million for the construction of a Greenville, South Carolina, project consisting of a 17-story, 20-unit condo tower; a 217-unit multifamily tower; a 194-key hotel and roughly 288,000 square feet of office and retail space. It also bankrolled broker Vivian Dimond’s 247-unit apartment building in downtown Hollywood with a $48.7 million loan.
“Brett had more deals than he had money and Trez had more money than maybe had deals, so that’s why I think it was so attractive at the time,” Jacobson said.
But the partners split, though it’s not clear why. Records suggest it wasn’t an entirely amicable parting.
Forman tells it like this: In 2022, “the lending market kind of came to a freeze and they [Trez] owned 50 percent of our operation, which at that time meant no origination but 50 percent of the expenses,” Forman said. “They made the decision to curtail.”
In two lawsuits filed in 2023 and last year, Forman RE, the entity used to hold its JV stake, accused Trez’s U.S.-based entities of owing money to the JV, including at least some of the 10 percent performance fees for the period from 2019 to 2022, according to court records. In its responses, Trez argued it is not liable to pay under the JV agreement, court filings show. Both suits settled, though details of the settlements are not public. (Trez may have owed as much as $3 million in performance fees to the JV, court filings say.)
Morley Greene, Trez’s founder, who was pivotal in engineering the JV with Forman, didn’t return a request for comment.
Rubik’s Cube
During a two-hour interview in late May, Forman and Jacobson repeated their mantra — “risk mitigation, risk mitigation, risk mitigation” — at least a dozen times.
Case in point: a $19 million construction loan Forman Capital provided for 100 townhouse rentals in Texas in 2023. Forman Capital held a portion of the note as preferred equity, had a developable lot pledged as collateral and allotted the developer a three-month extension to refinance. In the end, the lease-up period and actual rents fell short from what the developer projected, though they were still better than Forman Capital’s expectations based on its research. Everyone made money in the end.
“Developers seem to always think that only the best is going to happen. We want to know that [the deal] works today,” Jacobson said.
This is another tenet of the Forman Capital way: Make the deal work.
As the Naples project, North Development’s planned 172-unit Domus Brickell Park in Miami was on the market for financing when banks retrenched.
Domus is a short-term rental-friendly condo, a hospitality product that’s not exactly a hotel, which legacy financial institutions don’t always know how to value. The individual form of unit ownership also is considered riskier among financiers, said Arturo Vidal, VP of finance at North Development.
Domus is also largely backed by Peruvian investors, a fact that can give banks pause, Forman added.
Forman Capital again did its own shoe-leather analysis — Forman flew to Peru — and discovered the glass was half full.
“I met the individuals making things happen in the business,” he said. “I spoke to a lot of their investors. … They did bring a lot of the presales, that helped. And they did bring a lot of equity to the table.”
“Developers seem to always think that only the best is going to happen.”
Forman Capital provided a $54 million construction loan for the project last year. That, plus $16 million from a Lima-based firm affiliated with one of the developers, bumped up by about 30 percent the loan-to-cost compared to what banks offered and required less recourse.
Every loan “is a little bit like a Rubik’s Cube,” Forman said. “I can’t do a Rubik’s Cube. But I can figure out how a borrower may be asking for one thing but look at something different and we can solve where our investors feel comfortable with the risk.”
Though Forman’s short-term loans usually come with a 600-basis-point spread over SOFR, generally higher than banks’, borrowers are willing to take it in exchange for more proceeds and ease of doing business.
“You can text them any time of day and they will respond,” North Development’s Vidal said. Banks, by contrast, “usually have very fixed forms and processes. Forman adapts.”
Forman Capital is primarily backed by two high-net worth families in Palm Beach that fully fund each loan. After a financing is issued, the firm syndicates the loan to other investors. This has been the rinse-and-repeat cycle since the firm reconstituted after the Trez JV ended.
In that, the firm’s been rather closed off to investors. That’s about to change.
In the third quarter, the first Forman Capital-managed real estate investment trust will launch, allowing its backers to diversify their investment across deals instead of putting money in one property at a time. The open-ended fund will first target an up to $300 million raise, hopefully pushing this to $500 million in the future.
Mitigation for a downturn
Yet, Forman Capital’s growth comes as the market stalls. After the past five years’ development flurry in South Florida, multifamily lease-ups slowed, concessions increased and rents dropped due to record unit completions last year.
Strict condo structural repair mandates and the ensuing hefty assessments have brought sales of vintage condos to a near standstill, with prices dropping, some brokers say. Preconstruction condo sales are slower.
In the meantime, the commercial mortgage-backed securities market is recovering after a slowdown during recent years’ higher-rate environment, which could pose competition to private lenders just as Trump’s tariff and deportation policies threaten chaos.
Consumer sentiment is down and uncertainty is here to stay, Forman conceded.
“But people still need to find a place to live at some price point. Apartments aren’t going to go empty,” Forman said. “I don’t think the price of homes is going to plummet because there’s a natural demand [cycle].”
Though he’s moving fast now, his hedge seems to gesture to the firm’s slower days.
“We have always been very conservative in our approach,” he said.
(Except for the headline, this story has not been edited by PostX News and is published from a syndicated feed.)
