The banking industry in Florida is in such disarray that buyers of commercial properties seeking financing will have to look well beyond state borders for financing, says Ed Kearney of Kearney Commercial Realty/Sperry Van Ness in West Palm Beach, Florida.
Florida led the nation with 20 of the 108 failures through July 30, 2010. Georgia was close behind with 11 failures. And the FDIC’s private list of problem institutions grew to 775 in the first quarter of the year from 702 three months earlier.
“The troubled banks are overwhelmed and limiting new business,” says Kearney of Kearney Commercial Realty. “Even the healthy ones are avoiding risk. And right now, real estate is the riskiest sector.”
How did banks get in deep trouble? Some Florida banks made lending decisions that have left them with an unhealthy mix of commercial real estate loans and rising loan losses, says Bill Pittenger of Bill Pittenger Real Estate Economics, in Stuart, Fla.
Writing in a July 30, 2010, report, he said, “Some small banks made serious strategic blunders in last decade’s bubble era when they stepped out of their community bank mold and ventured into unfamiliar loan territory.”
But their biggest mistakes were “loans made late in the growth cycle and even after the market had already begun its downward spiral,” Pittenger said.
More Florida banks will fail as a result of their errors and misfortunes, says Kearney of Sperry Van Ness. Those that survive will be extra-cautious until the state economy and job market improve.
Georgia banks will not come to the rescue of real estate buyers. Nor will institutions in Alabama, where a leading Florida lender, Colonial Bank, failed, and another Florida player, Regions Financial, reported consecutive quarterly losses from the second quarter of 2009 through the same quarter of 2010.
Where will the money come from? Look to North Carolina and Canada, says Ed Kearney of Kearney Commercial Realty in West Palm Beach. BB&T is growing in Florida; First Citizens has moved in through purchases of failed institutions.
Canadian-owned TD Bank gained a giant foothold in April 2010 with its acquisition of the failed Riverside National Bank, with $3.4 billion in assets, along with two other Florida institutions.
“Investors will have to learn a new way of doing business with these institutions,” says Kearney. “Brokers who have dealt with them in the past can be excellent guides on what these lenders want – and don’t want – through our experiences working with other clients. These times demand an experienced guide.”
About Edward Kearney and Sperry Van Ness
Edward Kearney is managing director of Kearney Commercial Realty Inc./Sperry Van Ness with an extensive background in various aspects of commercial real estate including investment analysis, landlord and tenant representation, and property tax abatement. SVN is a leading national brokerage firm that markets commercial real estate properties to an investment and brokerage community of more than 100,000. Kearney welcomes investors, brokers, and others with an interest in the Florida commercial real estate market to contact him today by calling 561-616-6262, or visiting http://www.svnpalmbeach.com for more information about the services he provides.
For more information about Edward Kearney and Kearney Commercial Realty Inc./Sperry Van Ness, please visit http://www.svnpalmbeach.com.