Building Again

From luxury homes to condo towers and restaurants, banks are lending money to build and renovate buildings.

Construction and land-development loans totaled $786 million as of March 31 at 41 banks headquartered from Pasco to Collier counties, up 19% compared to one year ago, according to the Federal Deposit Insurance Corp.

Although that's a significant improvement and a substantial increase, that amount is nowhere near the billions that banks loaned during the boom. For example, now-defunct Orion Bank reported $1 billion in construction and land-development loans at year-end 2006.

Still, community banks are cautiously tiptoeing back into construction and land-development lending on a selective basis. Most of the construction loans are related to housing, though some commercial projects are also being financed.

“Most of it is construction of single-family homes,” says Robert McGivney, chairman and CEO of Jefferson Bank of Florida in Oldsmar. “We're not doing a lot of land development at this time.”

Jefferson posted a 397% increase in construction lending over the year ending March 31. McGivney says most of the loans were from longstanding conservative borrowers who have only now started using existing credit lines.

“People have outstripped their own cash, and now we have the opportunity to lend them some money,” McGivney says.

Jefferson Bank construction-loan borrowers in the Tampa Bay region build homes in all price ranges.

“The demand is pretty broad, whether it's higher end or lower end,” says McGivney.

Banks are focusing on construction and generally avoiding land development.

“That's higher on the risk profile,” says Joseph Chillura, CEO of USAmeribank in Largo. “There's not a lot of speculation going on with land like there was a couple years back.”

Although it avoids land development, USAmeribank is financing construction of shops and apartments, in particular.

“Over the last year to a year-and-a-half, you've seen a big lift in construction lending,” Chillura says.

At $212 million as of March 31, USAmeribank had the biggest portfolio of construction loans on the Gulf Coast.

In Naples, First National Bank of the Gulf Coast's construction and land-development loans are mostly related to housing.

“About 80% of it is residential,” says Gary Tice, the bank's chairman and CEO. Such loans are up 83% for the year ending March 31.

Often, First National will make a construction loan and provide another loan once a home is completed.

“Most of them are high-end homes,” Tice says. “They've come out of the recession in a rapid manner.”

Commercial-construction lending is picking up, however.

“We're seeing very good demand for our construction loans related to health care,” says Trevor Burgess, CEO of C1 Bank in St. Petersburg, citing assisted-living senior housing, in particular.

Burgess says hotel owners also are benefiting from a recovery in tourism.

“What we're seeing is a lot of owners reinvesting in their properties, adding rooms or upgrading their facilities,” he says.

In addition, C1 Bank has been lending on construction of condos in places such as Miami, Sarasota and St. Petersburg. However, unlike the boom years when many banks financed the majority of a condo project, Burgess says both developers and prospective buyers are putting up as much as 70% of the cash.

“Then the bank loan becomes like a construction bridge loan for the last 30%,” Burgess explains. “It's an entirely different financing structure.”

In Tampa, First Citrus Bank has financed projects such as a church in Westchase and renovations at Wright's Gourmet in South Tampa. The bank has been grabbing market share as it beefs up its staff.

“We've added 50% more people in the last 16 months,” says Jack Barrett, president and CEO of First Citrus. “Those types of opportunities take true market intimacy.”