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Coffee Talk
Let's play Capeopoly
The annual Capeopoly real estate conference in Cape Coral drew more than 400 people recently. It's easy to understand why: Cape Coral was the nation's fifth-fastest growing city last year.
It's not a game.
Capeopoly, a word play on the Monopoly game, is a real estate confab that draws hundreds of real estate investors every year to Cape Coral, the country's fifth-fastest growing city in the country in 2005.
The city, which sits on a Lee County peninsula across the Caloosahatchee River from Fort Myers, is poised for more of the same rapid growth in the years ahead, experts speculated. It certainly has room to grow; with 115 square miles, Cape Coral is the state's third-largest city in terms of landmass.
On Pine Island Road, the east-west road that splits the city in two, about 6 million square feet of shops, offices and warehouses have opened or are under construction since 2003, according to Gary Tasman, a commercial leasing and investment specialist with VIP Commercial in Fort Myers.
Now, Cape Coral's future is tied to Babcock Ranch in the distant east side of Charlotte County. That's because Del Prado Boulevard, the city's north-south connector, will be extended to Interstate 75 near Nalle Grade Road near the Lee-Charlotte line to relieve traffic congestion.
"Del Prado going north will be a tremendous area of development growth," says Orlando economist Hank Fishkind, a guest speaker at Capeopoly.
Earlier this year, Morgan Stanley and West Palm Beach developer Syd Kitson bought Babcock Ranch for an undisclosed sum. They sold nearly 74,000 acres to the state and Lee County for about $350 million and they plan to build about 19,500 homes on the remaining 17,000 acres.
The development of the ranch will accelerate the construction of the interchange, Fishkind says. What's more, the news of the deal has spurred statewide interest in Charlotte and Lee counties. "That is a tremendous stimulus to the Del Prado corridor," Fishkind says.
Observers say Cape Coral will continue to benefit from huge investments in roads, sewers and municipal buildings by the city. For example, the city is spending $500 million to increase sewer-treatment capacity and it's planning a new government office center called City Centrum near Country Club Boulevard and Nicholas Parkway.
To maintain the momentum of growth, landowners in certain areas are considering self-taxing districts to widen roads. There are discussions underway about creating a self-taxing district along the main arterial roads of Chiquita Boulevard, Burnt Store Road and Del Prado between State Road 78 and Kismet Parkway.
"If you want to know where the next hot spots are, look at where government is investing resources," says Joe Mazurkiewicz, president of BJM Consulting and the former mayor of Cape Coral.
Southwest Florida International Airport, which saw 7.5 million passengers last year, is a key component to Cape Coral's continued growth because it brings tourists who may eventually buy homes there. "I think that's a big deal," Fishkind says.
Still, there are some clouds on the horizon and they're not unique to Cape Coral.
Fishkind reminded his audience that fast-rising property taxes and insurance premiums are threats to second-home buyers. Those buyers already are stressed because they're having trouble selling their primary homes in the Midwest, which is Southwest Florida's traditional feeder market. Midwestern states that are dependent on auto and other heavy industries have economies that are struggling.
What's more, land values have exceeded condominiums as the most vulnerable area of real estate to the dangers of speculative excess, he warned.
Already, land prices have started to decline in downtown Cape Coral, says Tasman. Part of that may be due to the fact that a large number of condos were planned for that area and the market for those units has fallen this year.
- Jean Gruss
Cannon seizes opportunity in housing slowdown
John Cannon, founder of the Sarasota-based custom homebuilding firm bearing his name, admits he's "very conservative when making decisions, especially those with a lot of dollar signs." He stayed true to his beliefs with his latest Big Decision: It took him about three years to officially open a business branch specifically for commercial construction.
About a month into the venture, Cannon, a past finalist for the Review's annual Entrepreneur Award, has no regrets - both on waiting so long and actually doing it. Called John Cannon Construction, the firm, a new corporation, will focus on commercial jobs throughout the Gulf Coast; initial projects include a family-owned Italian restaurant near University Parkway and Interstate 75 and a clubhouse for a country club. "I've always wanted to grow and expand," Cannon tells Coffee Talk, "but I've been too busy."
Too busy, that is, keeping up with the unprecedented homebuilding demand from 2003 to 2005. The market was especially good for John Cannon Homes, which specializes in luxury residences. Revenues increased 88% in 2003, to $77 million from $41 million. And 2004 revenues climbed 71% from 2003, to $132 million.
The drop began in 2005 and has continued through this year. Cannon looked at the slowdown as an opportunity to revisit the commercial division idea. He tells Coffee Talk he had been getting calls from residential clients and other business contacts for several years, asking him to do commercial projects.
There were several other reasons to go commercial, Cannon says, not just because people asked him to or residential revenues slowed down. He hopes it will ultimately pay off competitively, allowing the company to bid for complicated mixed-use projects that need expert home and commercial builders. Cannon, who started John Cannon Homes from his one-car garage almost 20 years ago, also liked the idea of a new personal challenge.
Cannon also expects the business to be profitable, hoping to be at $20 to $30 million in revenues in three to five years. He hired Darrin Burtwell, a builder with 20 years experience in government and commercial buildings, to run the new commercial division.
-Mark Gordon
THE CANNON IS HALF FULL
John Cannon has put a positive spin on the raw numbers that show revenues at his custom homebuilding company have dropped 20% to 30% from 2005. For one, he might be selling less units, but the ones he is selling are more expensive. The average home in 2006 has been selling for about $1.8 million, Cannon says, compared to a $1.1 million average in 2005.
The slowdown has also allowed the veteran homebuilder to refocus his employees on business basics, such as customer service and watching expenses. "We're more efficient and probably making more money when we're not as busy," Cannon says.
Besides, busy is right around the corner: In addition to the new commercial construction business, Cannon says November and December are looking like the best months of 2006. He expects to close on six homes this month - severely off from the boom times, but almost double the average 2006 month.
+ Getting tech ball rolling
The tech company accelerator located in Pinellas County might be one of the best-kept secrets a startup can find.
Happy Rideout and Bob Austin, principals in ReadyAlert.com, say it sure has helped them get their startup off the ground. The entrepreneurs were among a group of business people that attended the annual chairman's reception of the STAR Technology Enterprise Center Nov. 2 at the University Club, Tampa.
The accelerator, established in 2003, is home to eight early-stage businesses, including ReadyAlert, Alaka'i Consulting & Engineering Inc., Cybershield Technologies Inc., Homeland Intelligence Technologies Inc., ID Rank Security Inc. and Scalable Network Technologies.
To join STAR TEC, a business must be either a manufacturer or tech company with a six-month track record and full-time CEO. The center, which receives federal and local funds, provides mentoring and other support over two years to help accelerate the firm's success. Tenants typically pay below-market rent in return for a 1% interest in the company.
Although the center is located in Pinellas, it's available to any Tampa Bay-area company, says Suzie Boland, the organization's founding chairman who's in charge of marketing.
Volunteers honored at the reception were Boland, president of RFB Communications Group; James Failor, president of CTC Tampa Bay Inc.; Doug Martin, CEO of Business Consulting Group; Tate Garrett, CEO of Capital Strategies; and Ed O'Carroll, outgoing chairman of the organization.
+ Commercial construction strong
As Sarasota homebuilder John Cannon opens a commercial construction division (see page 5) he could take solace in this nugget from the Associated General Contractors of America: Nonresidential construction spending hit its 13th consecutive record in September, proving "that the homebuilding slide hasn't carried other segments downhill with it," says Ken Simonson, the group's chief economist.
Nonresidential construction spending rose 1.1% in September, its 15th consecutive monthly rise, according to U.S. Census data. Residential construction fell 1.1% over the same time period.
The nonresidential looks even better over the first nine months of 2006, reports the AGC, one of the largest construction trade groups in the country. During that time, overall private nonresidential construction jumped 17% over last's year's numbers, while public construction rose 10% as compared to 2005.
Finally, while Simonson predicts continued growth for the rest of the year, he also cautions that material costs will "will still outrun overall inflation," which could present long-term problems.
+ Outback buyback done deal?
Outback Steakhouse founders surprised Wall Street when they announced a plan to take the company private, paying shareholders $40 in cash per share, for a total of $3.2 billion.
It doesn't appear to be a bad deal for shareholders of OSI Restaurant Partners Inc., the Tampa-based parent company, since the stock has traded as low as $27.30 within the past year, according to Yahoo! Finance. It's also not a bad price for founders Chris Sullivan, Bob Basham and J. Timothy Gannon since the stock has traded as high as $48.28 in the past 52 weeks.
But what happens if someone else offers to pay more for the 1,300-restaurant chain that includes Outback, Carraba's Italian Grill, Cheeseburger in Paradise, Bonefish Grill, Fleming's Prime Steakhouse & Wine Bar, Roy's, Lee Roy Selmon's and Blue Coral Seafood & Spirits restaurants?
There are rumors of shareholder lawsuits and some people are calling it a poor deal for shareholders on the Yahoo! Finance message board. States one post:
"This is a low-ball offer. Should get at least 50. Now have 50 days for alternative offer. ... I will hold until the end of the year and hope the shareholders are smart enough to recognize this offer is inferior. Well shareholders. Are you?"
The countdown begins. Other would-be buyers have 50 days from Nov. 7 to up the ante, although OSI's board has accepted the founders' offer.
+ Fox Electronics is a blue chip
Fox Electronics' story about overcoming extreme adversity hasn't been overlooked.
The Fort Myers-based company, which was featured recently on the front page of the Review Oct. 27, was honored with the 2006 Southwest Florida Blue Chip Community Business Award on Nov. 2.
Sponsored by Southwest Florida insurance agency Oswald Trippe, the award recognizes businesses in Lee and Collier counties that have successfully overcome adversity. Fox Electronics overcame the bursting of the technology bubble that began in 2000 by drastically cutting spending on everything except research and development. The company has since recovered and is expected to report $27 million in revenues this year.
In Collier County, Mikkelsen's Pastry Shop won the Blue Chip award for its story of survival in the aftermath of Hurricane Wilma. The company lost $20,000 in wedding-cake reservations because of the 2005 hurricane, but the shop rebounded by emphasizing customer service.
+ Wilson family battle continues...
The ongoing Wilson family saga is set to add another chapter Nov. 14, when an empty land plot in a Sarasota subdivision goes up for public auction. The Wilsons - specifically the late Sarasota trial lawyer Clyde Wilson's two children, Clyde H. "Buzz" Wilson Jr. and Paula Wilson - have been at odds for more than a decade, fighting over their father's estate, which was, in essence, cash poor but property rich.
Multiple lawsuits and counter suits have been filed by both Wilson camps over the past five years and in October 2005, a court order closed the estate (See Review: 3/14/03, 3/31/06, 4/17/06). That however, did not end the family squabble, as there were several multimillion-dollar properties that were since sold or put up for sale, with some of the proceeds in legal doubt.
The lot in the Oyster Cove subdivision is the latest Wilson family owned property to be put up for auction. The property was recently appraised for about $1.5 million, says John Chapman, Paula Wilson's son and a Sarasota lawyer involved with the case.
+ Downtown change comes at last?
Downtown Tampa is finally on the cusp of becoming a 24-hour city where people live and work, as the first phase of Grand Central at Kennedy in Channelside nears completion and other residential towers take shape, according to the newest office market report by GVA Advantis Real Estate Services Co.
That's good news for downtown landlords that have been losing tenants to the suburbs, especially the Westshore area with a 7.7% vacancy rate. As more people move to the Channelside District, nearby downtown office space is expected to attract more businesses.
In fact, the Central Business District, with an overall vacancy rate of 17%, has an abundance of Class A space with an average asking rate of $20.59 per square foot, about eight cents more a foot than last year, states the report.
Still, the Tampa office market performed well in the third quarter, as shrinking vacancies kept pressure on rental rates for available space. With 10 consecutive quarters of positive net absorption, Tampa's overall direct vacancy has been nearly halved to 10.4%.
Suburban submarkets accounted for 97% of the total net absorption in the Tampa office market. The Westshore, Northwest and I-75 Corridor submarkets saw increased tenant demand and combined for 610,235 square feet of net absorption through the third quarter.
In contrast, the Central Business District achieved 19,663 square feet of net absorption, or only 0.3% of its rentable inventory over the same period.
And third-quarter investment sales activity was strong: 1.7 million square feet of office inventory changed hands with $242 million in transaction value. That's the highest quarterly volume since last year's third quarter when Tampa's office sales peaked at $476 million.
+ Bonita Bay gives more money to schools
Soon after the Bonita Bay Group and the Lucas family recently announced they would spend $1 million to house teachers in Lee County, the company gave out another $104,000 in grants to eight public schools.
Eight schools in Charlotte, Collier, Hendry and Lee counties will share the cash for programs ranging from reading centers to science labs. Thirty-five schools applied for the grants.
So far, Bonita Bay Group's grants to schools totals nearly $500,000.
+ WCI Communities outlook remains grim
Executives with WCI Communities, the bellwether homebuilder based in Bonita Springs, told investors Nov. 7 that the value of new-home orders fell 82% in the third quarter over the same period a year ago.
As a result, WCI President and CEO Jerry Starkey says the company will lay off 15% of the its workforce, or about 450 of the company's 3,000 employees. In addition, he says WCI will sell off amenities such as golf courses and marinas while putting a hold on any more land purchases.
The drop was particularly severe in the condominium segment. In the third quarter, orders for new condos were negative, with nine new contracts and 13 defaults. That contrasts to 333 orders in the third quarter of 2005. "Order growth is weak and we haven't seen indications of any sort of a rebound," Starkey says.
Still, WCI plans to build eight condo towers in 2007 for buyers who contracted to buy the units in the last several years. Defaults could be a problem, executives acknowledged. Typically, the company's default rate is 5%, but they told investors defaults could reach 20% in a worst-case scenario.
The Southwest Florida region is the worst performing area for the company, with a 60% drop in buyer traffic through its sales centers, executives said. WCI has forfeited $14 million in deposits on land contracts it cancelled in the third quarter, including about $11 million for an undisclosed golf course community planned in Southwest Florida.
+ Happy birthday to you, DooleyMack
Sarasota-based construction firm DooleyMack turned 30 years old Nov. 9. William Dooley, Terry Dooley, Ken Smith and Mike McGillicuddy founded the firm - which ranked fourth in the Review's 2006 Top 40 Contractors issue - out of one office in Siesta Key.
Since then, it's had a role in several well-known projects in Greater Sarasota, including the Sarasota County Courthouse and Jail, the Van Wezel Performing Arts Center and the renovation of Ringling Museum of Art. The firm has also expanded across the Southeast, working in areas such as Fort Lauderdale, Atlanta, Dallas and Panama City.
Projects include a $49 million research facility in Davie and a theater and arts center near Jacksonville.
The company has about 160 employees. It had 2005 revenues of $138 million and is projecting about $150 million in 2006 revenues.
What's Ahead
Nov. 15 - The Greater Naples Chamber of Commerce will host Alan Weiss, the chief executive officer of NCH Healthcare System, at a breakfast at the Naples Hilton from 7:30 to 9 a.m. Cost is $20 for members; $25 for guests. To register, visit www.napleschamber.org.
Nov. 17 - Anne Mulcahy, the chairman and CEO of Xerox Corp., will be the featured speaker at a luncheon meeting of the Forum Club at the Naples Beach Hotel & Golf Club. For more details, including membership applications, visit the club's Web site at www.theforumclub.org.
+ Plan for growth, not against it.
Dear Editor,
Thank you for writing your anti-growth and managed growth policies article. Every thing you said is the simple truth.
Why our government officials cannot recognize that they need the private sector to help plan the future and correct their years of problems and waste of money they have created by their anti-growth mentality just blows my mind.
Growth happens with or with out planning. You cannot stop it. It is like life. It's better to plan for the future than to create obstacles as Manatee and Sarasota counties have done for years.
Thank you for your insight.
Samuel M. Coniglio, III
American Sterling Enterprises, Inc.
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