Healthcare commercial lending market grows

As commercial loan transactions are slowing down a bit due to the rise in interest rates across financial institutions, healthcare commercial lending is becoming a growing market in South Florida thanks to the increased number of physicians licensed and the expansion of Florida’s population.

City National Bank is adding a medical division within its private banking lending capabilities in response to a significant increase in the size of Florida’s medical, dental and veterinarian practices.

“This is a growth market for us. We feel that the opportunity to work with these doctors, dentists and veterinarians in their financial position is important, not just for the bank but for the community,” said Ricardo Garbati, private banking executive of City National Bank.

Medical commercial loan demands are expanding in the area, he said. “What we’re seeing the most is requests for practice acquisition [loans] for doctors who are looking to grow their practices, either by purchasing an existing practice or merging with other practices. We’re also seeing a lot of practicing doctors looking into starting their own practice.”

The bank’s new division will also seek to cover financial planning for medical practices, equipment financing and commercial real estate investments for private practice physicians, dentists, veterinarians, diagnostic centers and outpatient facilities.

Five experts are joining CNB’s private medical banking group, including Frank Nogareda, as senior vice president; Shaina Mejia and Gerson Sotolongo, as vice presidents and private banking relationship managers; Leniel Rendon, as vice president and treasury management sales officer; and Adriel Martinez, as senior client service specialist.

According to the 2021 Physician Workforce Annual Report by Florida Health, the number of physicians providing care in Florida has increased 24.6% during the past ten years, while the Florida population has increased 13.5%.

“The number one factor causing this growth is the large migration of folks to Florida in general, the demand from high-income individuals that have settled in South Florida as well as the income growth that our market has experienced for locals,” said Mr. Garbati. “Demand for qualify medical care … has fueled the growth in this area.”

Growth is seen evenly spread across South Florida, he added, “in large hospitals acquiring talent from across the country, from large dental practices acquiring smaller dental practices and doctors seeking the opportunity to go on their own and feel more comfortable in where the economy is to a practice owner.”

Additionally, other commercial loan markets have settled a bit. “Florida continues to be hot and show growth, but the transaction volume has slowed down a little bit,” he said. “We attribute this to the rise in interest rates, but we continue to see a strong group of buyers [of commercial real estate] as people continue to move into South Florida and other areas.”

Pablo Pino, South Florida market president for commercial banking at TD Bank, said that commercial lending is exceeding pre-pandemic volumes, although stabilizing in an array of industries due to higher interest rates and inflation costs.

Clients seeking commercial loans are looking for additional working capital, he said. There is demand for commercial loans on all-front equipment, mortgage loans, and treasury management services. “They’re buying equipment and thinking whether to buy [real estate], versus to lease,” since rents have increased.

There is pent-up demand in the hospitality industry, he said; also, in the food distribution, consumer goods, nutrition and vitamins, airline industries, automobiles and automobile parts distribution industries. “It appears that there was a pent-up demand coming from the pandemic,” said Mr. Pino. “A lot of folks were holding back.”

Manufacturing and distribution companies are buying their raw materials in bulk to make sure they have the necessary materials for their production, he added. “Bringing larger numbers of inventory is going to require more working capital.”

In addition, with the return to traditional business in the office setting, Mr. Pino said, businesses are adding the technology they implemented during the pandemic to their core business.

“We anticipate that [the medical division at CNB] is going to continue to grow, and the demand for top healthcare is not going to change,” said Mr. Garbati. “Migration to South Florida has been different than in years past. Folks are enrolling their children in schools, participating more in the community, so we feel that the medical side of the market will continue to be a growth area for years to come.”