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Coffee Talk
Business Observer Thursday, Oct. 30, 2008 11 years ago

Coffee Talk

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+ How lowcan Chico's go?The stock of Chico's FAS, the Fort Myers-based women's apparel retailer, hasn't sunk this low since December 2000.+ Economic fallout:additional lawsuitsSo much for a decline in lawsuits filed against businesses. + Simple advicefor selling propertyReal estate has taken a big hit in today's economy, but there is still buying, selling and construction on the Gulf Coast.+ Brazilians buyRiverside BankA group of Brazilian investors plans to buy Cape Coral-based Riverside Bank of the Gulf Coast with promises to put $23 million in new capital into the struggling bank, according to an application filed with the Florida Office of Financial Regulation.+ Technology company scores with new advisersA little known Bradenton-based solar energy company has hit the big time with its roster of senior advisers by successfully recruiting a pair of former high-level federal officials from the Bush Administration. + Commercial real estatesales move alongWhile not yet reaching trend status, the news squeaking out of some commercial real estate pockets of the Gulf Coast is surprisingly good.+ Urban Studio Architectsheads to the MidwestMickey Jacob's Tampa firm, Urban Studio Architects, has done work outside of Florida before. + CorrectionIn the Review's Oct. 17-23, 2008 issue a real estate brief listed a wrong acreage. GULF COAST UNEMPLOYMENTWhat the data shows: Local area une

Coffee Talk

+ How low

can Chico's go?

The stock of Chico's FAS, the Fort Myers-based women's apparel retailer, hasn't sunk this low since December 2000.

Thomas Weisel analyst Liz Dunn, in an Associated Press report, says the stock is now so low that there's little risk for it to fall further. No kidding: The stock (symbol CHS) recently traded around $2.50 per share.

That's little consolation to the company's shareholders, who have seen Chico's stock fall more than 70% this year. On Feb. 17, 2006, the stock hit $48.37 per share.

Still, Chico's is trading at nearly half its book value, which represents the value of the company if it were to be liquidated today. By comparison, retail stocks are currently trading at 2.87 times book value, according to Reuters.

And Chico's had zero debt and $278 million in cash and short-term investments as of August. That gives the company time to weather what is likely to be the toughest retail holiday season in years.

+ Economic fallout:

additional lawsuits

So much for a decline in lawsuits filed against businesses.

That was the trend reported the past three years by Fulbright & Jaworski, a global law firm that produces an annual survey that serves as a well-read scorecard for executives spanning the litigation landscape. Consider that trend history, as the current economic mess creates opportunities for plaintiff's lawyers and headaches for defendants.

Indeed, the next year promises to be an "inflection point between the end of a prolonged period of prosperity and the start of a period of economic challenge that is likely to fuel litigation over who is to blame and who should pay for the consequences," says Stephen Dillard, chair of the firm's global litigation practice.

To wit, only 8% of the in-house corporate attorneys polled are projecting a decrease in legal disputes involving their companies next year, while 34% of the respondents are projecting a rise in litigation. And among attorneys for billion-dollar plus companies, the projections are even worse: Only 3% of the attorneys in that category are projecting a decrease in litigation, compared to 43% that are preparing for a spike.

The impending rise in litigation comes on the heels of a three-year drop in lawsuit activity. For example, in 2007-08, the survey reports, 21% of U.S. companies reported no new lawsuits - a rise from the 17% that could say that in 2006-07 and the 11% that could say that in 2005-06. Businesses bringing suits against other business has also dropped, from 88% in 2004 to 56% in 2007.

New York-based Fulbright & Jaworski surveyed 360 in-house corporate attorneys for the survey; just more than 250 responded. It's the fifth year the firm has conducted a litigation projections survey.

+ Simple advice

for selling property

Real estate has taken a big hit in today's economy, but there is still buying, selling and construction on the Gulf Coast.

For example, drive out to Wesley Chapel on State Road 56 and Bruce B. Downs Boulevard in South-Central Pasco County and see the buzz of construction activity and subcontractors busy at work at the Shops of Wiregrass mall, as the outdoor plaza prepares to open Oct. 30 with dozens of new stores.

So the brokers at Commercial Partners Realty in St. Petersburg offered their keys to selling commercial real estate in tough economy to Coffee Talk. They include realistic expectations by buyers and sellers, good functional locations and the right price.

Expectations are particularly important in getting property sold. Brokers need to educate both buyers and sellers.

"Sellers expect to get more than the market value, buyers expect to pay less," says Dana Koay, project coordinator for Commercial Partners.

Commercial Partners recently listed a 3,500-square-foot retail store property on a half-acre lot at 5660 66th St. N. in St. Petersburg, and had in under contract within 40 days.

+ Brazilians buy

Riverside Bank

A group of Brazilian investors plans to buy Cape Coral-based Riverside Bank of the Gulf Coast with promises to put $23 million in new capital into the struggling bank, according to an application filed with the Florida Office of Financial Regulation.

Riverside Bank has been hit hard by deteriorating real estate loans. It has lost $19.2 million for the year through June 30, according to the Federal Deposit Insurance Corp.

It has charged off $4.8 million in residential loans and about $3.5 million in construction and land-development loans so far this year.

The bank, which had assets of $621 million as of June 30, closed four branches earlier this year. Its chief executive officer also resigned in June.

Neither the prospective buyers nor the sellers could be reached for comment.

+ Technology company scores with new advisers

A little known Bradenton-based solar energy company has hit the big time with its roster of senior advisers by successfully recruiting a pair of former high-level federal officials from the Bush Administration.

The company, Sunovia Energy Technologies, scored its first coup with Spencer Abraham, U.S. Energy Secretary from 2001 to 2005. Abraham, who served a term as a U.S. Senator from Michigan before joining President Bush's cabinet, now runs an energy industry consulting firm in Washington D.C. "Our ability to get a handoff from Spencer Abraham is huge," says Sunovia co-founder Craig Hall.

Two days after announcing the Abraham news, in late October, Sunovia followed up with another big-name connection: Ken Juster, who served as U.S. Undersecretary of Commerce from 2001 to 2005, when he oversaw the federal Bureau of Industry and Security, would also be joining the company as a senior adviser.

Sunovia's products focus on solar, infrared and LED lighting technologies. The company's brightest bulb, however, is in what's known as solid state lighting - company officials call it an improvement over compact fluorescents because it lasts longer, uses less energy and contains less mercury.

The company has been marketing is solid state lighting products to a bevy of a potential customers, from colleges and municipalities to small and big businesses.

Another revenue source for the company to delve into is the complicated world of federal government subsides and incentives. That's where Abraham and Juster fit in.

The splashy adviser announcements come at a crossroads for Sunovia, publicly traded over the counter, under the symbol SUNV.OB.

The three-year-old company has received $18 million in private funding from a top-notch list of investors, including a former governor and several retired Fortune 100 executives. It's those connections that got the company access to Abraham and Juster in the first place, Hall says.

But connections haven't translated to sales yet.

The company has lost a total of $24 million since its November 2005 founding, according to SEC documents. And in its most recent filing it reported an $18 million loss in the nine months ending April 30. Revenues in the same time period barely eclipsed $5,000.

Hall, however, predicts the Abraham and Juster announcements will be the first of many more positive developments for the company, which has about 15 employees.

For example, Sunovia sold about $4.8 million solid state lighting products and components in May and June, says Hall, data that will show up on its next SEC filing. Hall adds that the company is poised to announce another big sale by the middle of November.

+ Commercial real estate

sales move along

While not yet reaching trend status, the news squeaking out of some commercial real estate pockets of the Gulf Coast is surprisingly good.

The past month has brought several large and noteworthy closings, with closings being the key. Many recent deals have fallen apart in the tense days leading up to contract signings, various brokers tell Coffee Talk, in an obvious sign of market instability.

Yet Dennis and Betty Lou Dick were able to sell their 17,000-square-foot antique mall in Palmetto last month - and wrangle a $70,000 profit in the process.

The Dicks sold the mall to their small business neighbor, Stephen Guzman, who owns an RV parts company around the corner.

Guzman paid $1.3 million for the mall and plans to lease back one of the two buildings to the Dicks, so the antique operation can remain open.

"This is the kind of deal I thought would have fallen apart at closing," says David Jennings, co-founder of RealtyOne Alliance, the brokerage that handled the deal for the buyer and the seller. But Guzman arrived at the closing meeting with loan documents from Bank of America and the Small Business Administration, Jennings says.

Two other commercial sales on the Gulf Coast, both more lucrative, also recently passed through the closing stage.

In Sarasota County, an industrial warehouse went for $9.5 million. And the Miami-based Adler Group recently closed on the $28 million sale of Breckenridge Park, a 330,000-square-foot industrial park in Tampa, near U.S. 301 and Interstate 4.

(For more details on these and other commercial real estate transactions, see Pages 22-26.)

+ Urban Studio Architects

heads to the Midwest

Mickey Jacob's Tampa firm, Urban Studio Architects, has done work outside of Florida before.

But these days, with a softer economy, it is making a more dedicated effort to look beyond the state's borders for business.

Where? Kansas, North Dakota, Iowa, Wyoming and Montana.

Their projects aren't as dense as those in Florida, but they are selling an affordable Midwest lifestyle. And they have jobs. There are a lot of projects from university systems, such as classrooms, dorms and apartments.

"I was out in North Dakota, and it's booming," says Jacob, managing principal. Bismarck, N.D. is about the size of Lakeland. The University of Mary, a Catholic college in Bismarck, is in need of design work on some building projects.

Jacob is looking at two projects in Iowa and is working on a joint venture with an architecture firm in North Dakota. If there's a hot market, Urban Studio will consider opening an office there.

Military bases, a lot of which have aging infrastructure, show promise, too. Oklahoma City's Tinker Air Force Base - like Tampa's MacDill Air Force Base - where more than 20,000 military and civilians work, is in the middle of huge rebuilding program.

"We would love to joint venture with someone there," Jacob says. "We're looking for people to do that with. They are doing a ton of housing now."

Some of Urban Studios Florida clients have connected the firm to out-of-state architecture work. The firm also has industry contacts that keep it plugged into what is happening in other areas of the country.

+ Correction

In the Review's Oct. 17-23, 2008 issue a real estate brief listed a wrong acreage. The United States Postal Service purchased about 2 acres in the Palmer Business Park.

GULF COAST UNEMPLOYMENT

What the data shows: Local area unemployment rate by metropolitan statistical area in September and the annual percentage point change. The data is not seasonally adjusted.

What it means: Lee and Charlotte counties continued to feel the impact of the construction downturn as the unemployment rate in those areas closed in on 10% in September. The unemployment rates continued to rise in all areas of the Gulf Coast and they all exceeded the statewide and national rates.

Forecast: The unemployment rates may rise slightly before leveling off at the end of the year as tourism-related businesses started hiring seasonal help. However, tourism may not hold up as well as last year as consumers avoid big purchases such as vacations. Retailers may not hire as many people either, as the holiday shopping season may be disappointing. However, employers looking for qualified help will likely find it easier to fill open positions.

SEPTEMBER UNEMPLOYMENT RATE

Area Unemployment rate Annual pt. chg.

Punta Gorda 9.5% 3.2

Cape Coral-Fort Myers 9.2% 3.5

Naples-Marco Island 8.4% 2.5

Bradenton-Sarasota-Venice 7.5% 2.7

Tampa-St. Petersburg-Clearwater 7% 2.5

Florida 6.8% 2.4

United States 6% 1.5

Source: Florida Agency for Workforce Innovation

Housing prices drop, but sales rise

Median prices for existing homes fell on the Gulf Coast in September compared to the same month a year ago, sparking a jump in sales in many areas, according to Realtor associations. The Fort Myers and Naples areas showed the biggest increases in sales of existing homes as prices fell 39% in both cities. Condo sales in both cities also showed increases as prices fell.

Existing single-family homes

SEPTEMBER SALES SEPT. MEDIAN PRICE

Area 2007 2008 %Chg. 2007 2008 %Chg.

Cape Coral-Fort Myers 327 746 128% $231,600 $141,400 ‑39%

Marco Island 16 23 44% $450,000 $450,000 0%

Naples 139 209 50% $420,00 $255,000 ‑39%

Punta Gorda 189 153 ‑19% $170,000 $136,900 ‑19%

Sarasota-Bradenton 594 550 ‑7% $281,000 $200,800 ‑29%

Tampa-St. Petersburg-Clearwater 1,691 2,174 29% $200,700 $160,500 ‑20%

Existing condos

SEPTEMBER SALES SEPT. MEDIAN PRICE

Area 2007 2008 %Chg. 2007 2008 %Chg.

Cape Coral-Fort Myers 102 153 50% $224,000 $185,000 ‑17%

Marco Island 23 29 26% $350,000 $337,500 ‑4%

Naples 101 152 50% $262,000 $221,000 ‑16%

Punta Gorda 14 17 21% $180,000 $85,000 ‑53%

Sarasota-Bradenton 217 119 ‑45% $280,400 $156,400 ‑44%

Tampa-St. Petersburg-Clearwater 408 398 ‑2% $158,300 $139,100 ‑12%

Sources: Florida Association of Realtors, Naples Area Board of Realtors

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