Posted on Monday, February 14, 2011
Big banks are not holding back when it comes to acquiring or leasing branch locations in South Florida.
Several major banks, including TD Bank, PNC Bank, Chase and BankUnited, have made expanding in the region their mission for 2011. They are willing to pay premium to lease or buy prime locations, real estate experts say.
"The top tier of banks are aggressively pursuing and paying top dollar" for South Florida branch sites, according to Matthew Goodman, principal at Miami-based CresaPartners. Goodman represents banks in finding branch locations.
"I still think most banks go with leasing more than purchasing to give them flexibility," Goodman said.
"At the same time, because of the lack of available properties, if some are only available for purchase they have to look at it. Larger banks with deep pockets can overpay for a site if they just have to be in that market," he said.
Among the most aggressive major banks expanding in the region is TD Bank, a subsidiary of Canada's Toronto Dominion Bank Group.
By the end of September, the close of its 2011 fiscal year, the bank expects to have 58 South Florida branches, an increase of more than 20 branches from a year earlier, according to Kevin Gillen, TD's regional president for Florida. In the next four months, branches are scheduled to open in Hollywood, Homestead, Delray Beach and Pembroke Pines.
In most cases, TD Bank constructs new branches, regardless of whether it owns or leases the land, Gillen said. Bank executives are also willing to convert unconventional sites, such as former restaurant buildings or gas stations, into branches. They will also lease bank branches that became vacant when the previous occupants merged to moved.
"It comes down to what numbers make sense for us," Gillen said. "We look for high-profile [properties] with good visibility and traffic flow."
Eight or nine branches were inherited from TD Bank's May 2010 acquisition of South Financial Group, which included Mercantile Bank, Gillen said. But most of the bank's South Florida growth is expected to come from a combination of property acquisitions and ground leases.
"South Florida is a phenomenal market for us," he said. "With its great demographics, you could refer to it as the sixth borough of New York. We are nowhere close to stopping" the regional expansion.
"TD Bank has been out in the market for a while, and they have their own plan of how to grow their branch network," said Greg Masin, senior director of Cushman & Wakefield's retail division. "Chase Bank, because of [its merger with Washington Mutual] is aggressively trying to cement its Florida footprint. PNC is [currently avoiding] Miami-Dade but aggressively doing things in other places."
National banks are attracted to South Florida because population growth in the region has been driven by migration from New York and the rest of the northeast where many of these banks have a presence and have strong brand recognition, said Jason Press, senior retail associate at Coral Gables-based Continental Real Estate. Whether times are good or bad, these banks feel they need to be in South Florida.
Press represents Pittsburgh-based PNC Bank, which entered the market in October 2008 when it acquired Cleveland-based National City for $5.6 billion.
PNC, which recently agreed to acquire 19 BankAtlantic branches in the Tampa area, plans to open 17 additional branches statewide in the next 24 to 36 months, according to Kevin Sloan, the bank's retail market manager for Florida.
"We are focused on filling some existing gaps, including Palm Beach and Broward counties," Sloan said. "At this point we have no presence in Miami-Dade County. That's not to say it is outside of our expansion plans. We certainly understand the connectivity."
Like TD, PNC's new branches are a mix of property acquisitions and leases, Sloan said.
In one high-profile deal, PNC in early January paid $3.45 million for a 22,399-square-foot building at 1153 S. Andrews Ave, a former home to Women In Distress of Broward County.
According to broker Brad Fitzgerald, who handled the sale, PNC plans to raze the existing structure, a former church building, to build a 4,000-square-foot branch. The site plan has been approved by the city of Fort Lauderdale.
Sloan referred questions about the project to the city. Representatives of the Planning and Zoning department did not return calls.
Chase Bank plans to add between 18 and 20 branches in South Florida in 2011, according to spokeswoman Daisy Cabrera.
The bank prefers to purchase land and build to its own specifications, but "leases work well in opening new branches," said Cabrera, who said the banks spends between $6 million and $10 million to build each new branch.
The bank later this year plans to occupy a branch that's under construction at 8285 W. Sunrise Blvd., Planation. The company signed a 20-year land lease for the site. The restaurant building on the site was razed in late 2010.
Miami-based BankUnited plans to use part of the $783 million raised from a Jan. 27 initial public offering to grow its branch network in the state.
The bank, which currently has 81 Florida branches, plans to add 15 branches in 2011 and 20 in 2012, according to Harlan Parrish, senior executive vice president of retail banking.
Despite many bank failures, the cost to buy or lease branches remains stable because few locations end up on the market.
"The new ownership [of seized banks] is allowed to keep the branches they want and walk away from the locations they don't want," Goodman said. "The result of that is when a bank is taken over, there is not a mass availability of all these locations."
Not every major bank is in a hurry to acquire or lease branches in South Florida.
Wells Fargo spokeswoman Kathy Harrison said the bank is focusing on the integration of Wachovia Bank, scheduled to be completed this summer. San Francisco-based Wells Fargo, the fourth-largest U.S. bank by assets, purchased Charlotte, North Carolina-based Wachovia in December 2008.
"All of our 670 Florida stores are converting," Harrison said. "It involves system changes, sign changes; it's a tremendous project. That said, we are always looking at our master plan and making sure we have enough stores to accommodate all our customers."
RBC Bank, the retail banking division of the Royal Bank of Canada, and popular among Canadians in South Florida, also is not ready to expand, according to bank spokeswoman Dorsey Landis.
"We plan to remain prudent in waiting until the market sorts itself out to be well-positioned to take advantage of growth opportunities as the economy recovers," Landis said. "Our focus today is on improving our performance and building capabilities to enhance our client experience while positioning ourselves to take advantage of strategic opportunities once the economy rebounds."
The banks, including TD Bank, PNC Bank and Chase, are willing to pay a premium to secure prime locations, real estate experts say.
"The top tier of banks are aggressively pursuing and paying top dollar" for South Florida branch sites, according to one broker.
Eric Kalis, DAILY BUSINESS REVIEW