Fed Move Breaks Commercial Loan Dam

By Scott Blake
Lending for commercial and industrial properties has increased this year and experts are optimistic it will continue, aided by last week’s aggressive move by the Federal Reserve to drive down the bond market and force investors into riskier investments.

"This is historic for many reasons," said Ken Thomas, a Miami banking analyst and economist.

"This is going to be a very bullish QE3," he added, referring a third round of a process known as quantitative easing by the Fed.

Mr. Thomas was part of a panel discussion Friday in Coral Gables hosted by the Commercial Industrial Association of South Florida about the current lending environment.

The panelists said they are "cautiously optimistic" that this year’s increased lending activity in the commercial and industrial sector will continue.

They said the Fed’s new round of US Treasury and mortgage bond buying at a pace of about $40 billion a month was encouraging because it will drop return on investment in the bond market so low that investors will look for profits elsewhere, including stocks and real estate.

"Florida is a real estate state," Mr. Thomas said, noting that 38% of all Florida’s bank deposits are clustered in Miami-Dade, Broward and Palm Beach counties.

"This is where the money is, especially in Dade," he added.

Another encouraging sign for commercial and industrial businesses was a study by panelist Mike Seemuth, a veteran business journalist, which found lending for that sector has taken off this year.

Loans to South Florida commercial and industrial borrowers, the third-largest loan category, jumped to $4.1 billion by mid-year, up nearly 36% over mid-2011, according to Mr. Seemuth.

"Community banks with headquarters in Southeast Florida have recorded net growth of 7% in their collective loan portfolio since the summer of 2011," he wrote, "driven largely by increases in secured real estate lending and financing for commercial and industrial business operations."

The Fed’s action may further stimulate South Florida’s already rebounding commercial and industrial sector, but some panelists called for caution and restraint to avoid parts of the market overheating.

"A hot product now is multi-family [housing]," said Thomas Wood Jr., president of mortgage banking firm Thomas D. Woods and Co. in Coral Gables.

"Already, there’s a lot of multi-family [projects] going on," he added. "I think South Florida is an exciting place to be investing. But I’m cautious. There’s a lot of money coming into South Florida and there’s not always due diligence done."

Greater Miami’s multi-family housing market is being helped by a surge of foreign buyers and people seeking to rent after their homes were foreclosed upon, Mr. Thomas said after the session.

Loans backed by the US Small Business Administration have been a strong point because it is a relatively safe haven in a shaky economy, said panelist Eduardo Gesio, vice president of Miami-based Florida Business Development Corp.

"The SBA has filled the gap in after the financial crisis," he added, "when nobody was actually lending."To read the entire issue of Miami Today online, subscribe to e -Miami Today, an exact digital replica of the printed edition.