Bilzin Sumberg’s Suzanne Amaducci: 5 Questions

This interview has been edited for length and clarity.

Commercial Observer: How has deal flow shifted since the pandemic boom?

Suzanne Amaducci: The South Florida market continues to be strong. That’s because of population growth. So many businesses are moving here. Is it booming? I wouldn’t say it’s necessarily booming, but it’s still very strong. We have challenges — it’s very expensive to live here, and we have the affordable housing crisis. So lower-income people are moving out, but we still have an influx of people, and we have an influx of companies. There’s a lot of activity in the real estate industry because of that.

Everyone is feeling the squeeze of rising insurance costs. Where do you see that going?

We definitely need to fix it. How we fix it, I don’t know. Florida was plagued with hurricanes, so we were starting to move to a formulaic-based insurance product, kind of like what they did in California with earthquake insurance: What’s the probable maximum loss? Most likely, you’re going to have to replace the roof, but you’re not going to have to replace the whole structure. Insurers are looking at, “What’s the probable maximum loss? So they might be insuring to 70 percent, so it’s less insurance. The lenders don’t love it, but I think it’s been good. We’re going to have to solve insurance. 

Maybe self-insurance is an answer. The maritime industry forms captive insurance companies to cover losses. All the owners get together and self-insure. Is that a solution for the real estate industry? I don’t know.

Interest rates have been a major wild card in the real estate industry. What’s happening there?

We had this unexpected 5 percent growth. Granted, interest rates were at historic lows, but nobody expected them to go so high so quickly. It got people a little upside down — or a lot upside down, depending on who you are. I don’t have a crystal ball, but some of the Trump economic policies are definitely inflationary, so I don’t know how much the Federal Reserve is going to be able to cut interest rates. 

What’s horrible for real estate is uncertainty — I had clients who couldn’t get a broker price opinion because values were so uncertain. But rates aren’t going to go up 5 percentage points again. So the stability of interest rates will help people reset valuations. Now prices are able to stabilize.

You’ve been handling loan workouts. How does this round of negotiations compare to what was happening 15 years ago?

There are workouts, but they’ve been temporary. It’s been a short-term extension, because nobody knows how to value properties. Now there are going to be more permanent workouts, because you can’t kick the can down the road. What’s different is after the Global Financial Crisis, there was no liquidity. Now, there’s plenty of liquidity. It just depends on how much you want to pay for it.

Office is especially hard. On the one hand, office is great, because you have long leases and very predictable streams of income. The problem with office is it costs a lot of money to replace tenants, because you have huge tenant improvement costs and huge real estate commissions. 

Construction costs were another big wild card during the pandemic. What’s happening now?

They all started to stabilize. Concrete came down, doors became available. I had one client who could not finish construction on an apartment project because they couldn’t get interior doors. They had appliances, but they couldn’t find interior doors, and they needed those to get their certificates of occupancy. That had calmed down, but now a lot of developers are nervous about trade policy. If there’s tariffs, the price is going to go up. It’s math: The tariff is 10 plus or 15 plus.

Jeff Ostrowski can be reached at jostrowski@commercialobserver.com.