Buy Side

By: 
Dec. 22, 2017

Greg Hoffmann doesn't just want to own commercial property in downtown Naples — he wants to dominate the market.

And he is. Hoffmann, CEO of Chicago-based Hoffmann Commercial Real Estate, a family controlled firm that also owns portfolios in St. Louis and Avon, Colo., has spent roughly $200 million to acquire 17 “Old Naples” buildings over the past three years.

As a result of the purchases, clustered around Fifth Avenue South, Third Street and First Avenue North, the firm today is downtown Naples' largest commercial property owner as measured by square feet.

“We're big believers in Naples,” says Hoffmann. “Everyone there has the same vision, and we want to be a part of that and make our properties better and better.”

Hoffmann isn't done yet, either. In January, the company is scheduled to close on another four buildings — at 360 12th Ave. S., 990 First Ave. N., 950 First Ave. N. and 80-90 First Ave. N. — that will raise its total investment in Naples to more than--- $250 million.

“Our goal as a company is very strategic,” Hoffmann says. “We want to be the dominant player. We're very careful about where we go, where we invest in, but once we do, we try to build a significant portfolio.”

In the wake of its purchases in 2016 and this year, Hoffmann has embarked on a series of renovations and improvements, including adding statues around its buildings, a farmers market and live music in addition to new paint, awnings and other cosmetic upgrades.

Hoffmann has also sponsored a shuttle service that provides free rides to Naples shoppers.

“Owning multiple properties helps us add value,” Hoffmann says. “Take our farmers market as an example. If we owned one property, we'd have to coordinate that with, and get buy in from, say 20 different owners. And that's really complicated. But since we own a block of properties, that conversation gets really easy. It happens.”

Hoffmann, whose parents vacationed in Naples years ago, says in addition to intentional clustering the company is guided by a simple philosophy: Invest in places you want to frequent.

“We treat the properties we've bought like they're our home,” he says.

Hoffmann began assembling its properties in late 2015, with the $74.4 million purchase of the Fifth Avenue Collection, a series of seven retail and office properties totaling 122,275 square feet.

Three months later, drawn by its high visibility, the company committed to buying the three-story Four Corners Building, at 898 Fifth Ave. S., at the intersection of Fifth Avenue and Tamiami Trail.

Hoffmann closed on Four Corners in April 2016 for $6.5 million and followed the deal by buying 837 Fifth Ave. S., a two-building property occupied by Chops City Grill and residential real estate firm Engel & Volkers.

Last month, the company continued its buying spree, snapping up the Pettit Square building, at 294 14th Ave. S., and 271 Broad Ave., for nearly $14 million, according to Collier County property records.

The deal brought the number of properties Hoffmann has acquired to 17 in all.

“Their philosophy is to get adequate market share and make an impact throughout an area,” says David Stevens, a principal in Naples commercial real estate brokerage firm Investment Properties Corp., who has been involved in several of Hoffmann's deals.

“I think what we're seeing here with them is a repeat of the strategy that they've employed in other markets, and one that's been very successful,” Stevens adds. “And then they bring in aesthetic components that tend to influence their properties and the surrounding ones, with the aim of developing something experiential.”

Hoffmann maintains that Naples — one of the fastest-growing areas within one of the nation's fastest-growing states — has only begun to hit its stride.

“We believe there's a lot of upside yet in Naples,” he says. “The amount of new home construction there, the number of new families coming in, is very encouraging, and that's good for our tenants.”

At the same time, Hoffmann believes the area has reached an inflection point, away from being solely a seasonal destination.

“Naples and Collier County are becoming more of a year-round destination than ever before,” Hoffmann says. “Baby boomers are now in retirement mode en masse, and the county is gaining an influx of those individuals.”

The only headwind Hoffmann is experiencing in Naples is a decline in capitalization rates, a reflection of higher prices that his company, ironically, has partially caused.

“Cap rates have definitely compressed, and the market, frankly, is on fire,” he says. “It's surely an issue, but we've paid prices to date that we're comfortable with. And falling cap rates are a double-edged sword. It also means the value of your holdings are worth more in a given area.”

Still, the hike in prices isn't prompting him to rethink the company's strategy.

“We're still in the acquisition stage,” Hoffmann says. “And we have a long-term vision. We have no intention to sell these assets. We consider them generational assets, and my goal is to be able to hand them down to the next generation of our family.”