Valley Bank Lenders Are Bullish About Florida’s CRE

With industrial real estate cranking along, grocery-anchored retail centers hanging in there and multifamily doing surprisingly well in Florida, commercial real estate lenders Trey Korhn and Vince Chillura of Valley Bank are bullish about the state’s prospects for 2021. 

The bank’s commercial real estate lending has stayed extremely active despite the pandemic:  Valley Bank’s 2020 Florida CRE lending total, $847.3 million, surpassed 2019’s $734.1 million. And the success of the Florida team, led by Korhn and Chillura, speaks to the state’s economic resilience.

“This has been a very strange recession around Florida, with some industries impacted significantly while others are thriving and doing quite well,” Korhn said.

With this in mind, Valley’s lenders have been avoiding trouble spots while still finding plenty of deals around the state with favorable risk profiles.

As some examples, the bank is providing funding for renovation at Tampa’s Westshore City Center in conjunction with Heritage Insurance’s upcoming 88,643-square-foot headquarters move there, and it’s financing construction of a 710,000-square-foot Ace Hardware distribution center in Lakeland.

In the Orlando suburb of Winter Garden, Valley Bank is financing construction of a 112,000-square-foot retail center, The Mark at Horizon West, for Unicorp National Developments. The bank is financing construction of two affordable multifamily communities by AGPM/Banyan Development, in Fort Myers and in Marathon. And in South Florida, Valley is financing the expansion of Diversified Aviation’s hangar facility at North Perry Airport in Pembroke Pines.

GlobeSt.com asked Korhn and Chillura about where they see the Florida commercial real estate market going in 2021, how they see loan terms evolving, and where they see potential challenges.

Q: Why do you think Florida is faring well compared to other parts of the country?

Korhn: Certainly, the continued influx of people moving to the state, which has only accelerated during the pandemic, is a factor. And the strength of a number of industry niches, notably industrial and multifamily, helps.

Q: What impact is the strong activity in industrial having on those projects?

Chillura: There is a lot of institutional money chasing the best deals, and it’s about location. The same product in different locations will vary widely on cost because of the land cost. So it’s important that the developers make smart decisions on location.

Q: Is it surprising that multifamily would be doing so well, with rental delinquencies consistently in the news?

Korhn: We just haven’t seen significant issues, even in the B- and C-class spaces. You would think that many people would be struggling to pay rent, but that hasn’t been the case, except in some specific submarkets like Kissimmee, which has been hurt by theme park shutdowns.

Q: How is the Florida office market doing from your perspective? Are there concerns about people not going back into the office, hurting occupancy rates in the long-term?

Chillura: From what we hear from our clients, they see the inefficiencies of people working from home, so we expect office to be strong after the pandemic. It’s not a doomsday scenario at all, in our view. That said, we are not chasing large speculative deals while the situation plays out.

Q: Are there any positives in the retail, hotel and restaurant industries, which have been hit hard in Florida?

Korhn: If there is a positive, it would be that we are seeing operators get so much more efficient. They know where every dollar is going now. Things have certainly been challenging – though Paycheck Protection Program loans have helped a number of businesses stay afloat – so we are hoping that 2021 improves in those sectors, for sure.

Q: Have lending terms changed as the pandemic wears on?

Chillura: Deals still need a significant amount of collateral, but terms have not gotten more restrictive when compared to the beginning of the pandemic, from what we’re seeing. Of course, the May-July timeframe was bleak. But now we are seeing a good deal flow and the borrowers with means to make deals work.

Q: Are you hearing more optimism with news of the COVID-19 vaccine rolling out?

Korhn: I think it’s a bit early for that to have an impact on the market, since we don’t know all the details yet on how quickly everyone will get the vaccine. That said, now we can have conversations with our credit partners about how long this is going to last, which is a major positive and helps us see light on the other side.

Q: Where do you see challenges in 2021?

Chillura: Assuming we don’t see major changes in any particular niches, the challenges are the same as always for us as lenders. Our success depends on making smart decisions, working with solid borrowers who have experience and knowledge in their industries. It’s a great time to be in Florida, knowing that the fundamentals are in place for continued growth, with rational lending taking place and solid demand drivers.