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Coffee Talk
Business Observer Friday, Oct. 13, 2006 15 years ago

Coffee Talk

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Coffee Talk: Business tax climate: We're one of the best: Florida might be one of the best states in the nation when it comes to business tax climates, but there's always room for improvement.Help us find the top tech companiesBigger fish to Swallow: A pair of infant technology companies based in Sarasota were recently sold to bigger players in their respective fields - but their fathers will still have a say in each firm's continued growth.Fort Myers airport seeks hotel developer: More than 7.5 million people passed through Southwest Florida International Airport last year and chances are many of them stayed at nearby hotels.Global Signal deal is a nice pay day: Wall Street gurus, investment bankers and investors weren't the only ones happy to see Sarasota-based Global Signal bought by rival cell phone tower company Crown Castle International in a $4 billion cash and stock deal Oct. 6. Bad-news press spins it negative again: A gloomy report, titled "Housing at the Tipping Point" by Moody's Economy.com, recently got a lot of press when it forecast double-digit percentage price declines for residential real estate in Southwest Florida.A chain of coffee stores that got its initial idea in Seattle is getting ready to take on the Sunshine state. Obviously, it isn't omnipresent Starbucks.

+ Business tax climate: We're one of the best

Florida might be one of the best states in the nation when it comes to business tax climates, but there's always room for improvement.

The Tax Foundation says political candidates should make the state's business tax climate even more competitive and watch the economy grow more.

Florida ranked fifth among the top 10 best states to do business, according to the Tax Foundation's 2007 tax climate index released Oct. 10. In fact, Florida and the other nine states have faster growth rates in population, employment, output and personal income.

No. 1 on the list is Wyoming, followed by South Dakota, Alaska, Nevada, the Sunshine State, Texas, New Hampshire, Montana, Delaware and Oregon.

But there's always room for improvement.

Tax Foundation economist Curtis Dubay urges states whose "coffers are filled to the brim" to change their tax systems and improve the business climates for years to come.

Oh, and those with the dubious distinction as the 10 worst states are Minnesota, Maine, Iowa, Nebraska, California, Vermont, New York, New Jersey, Ohio and Rhode Island.

Help us find the top tech companies

Technology is the ultimate mixed blessing: Use it right, and it can be the catalyst for explosive revenue growth or an exhilarating new discovery. Maybe even both. Still, harnessing the right technology for the right cause can be a maddening experience.

Either way, technology is cool. And that's what makes the Gulf Coast Business Review's annual Technology Innovation Award issue a blast. Going on its fifth year, the Review is again seeking nominations for the best innovations in technology. This is the first year the awards are being expanded to cover the Review's entire coverage area, from Tampa Bay to Naples.

We are looking for achievers who create or apply technology to a business or not-for-profit venture in a way that changes an industry, creates greater profits or efficiencies or improves quality of life in a meaningful way. It doesn't matter what industry. Past winners and runners-up include medical device manufacturers, a firm specializing in international security and even a fertilizer company.

Basically, if the technology meets the criteria, then the Review wants to know about it.

Nominations should include the particulars of the company and the technology, along with contact information, including phone numbers and e-mail. Please send questions or nominations to Managing Editor Mark Gordon at [email protected].

Bigger fish to Swallow

A pair of infant technology companies based in Sarasota were recently sold to bigger players in their respective fields - but their fathers will still have a say in each firm's continued growth.

The companies - MOVO Mobile, a marketing firm that utilizes cell phone technology, among other tools, and Highwall Technologies, a wireless security firm - were launched under Startup Florida, a Sarasota-based business incubator and venture capital firm for technology companies.

Naples-based Neighborhood America bought MOVO Mobile, while Boston-based MobileSecure Inc. acquired Highwall. Principals in each deal declined to disclose sale prices.

Startup Florida co-founder Rich Swier has run Highwall since its 2003 inception, and despite a significant mission change in 2004 - from selling hardware to software - the company was halfway through 2006 without having made a profit. Highwall was a 2004 finalist for the Review's Technology Innovation Award.

Swier acknowledged he would have liked to sell Highwall to some of the industry's top wireless security players, such as IBM or Symantec. But Swier, who will help MobileSecure through the transition and serve on the company's board, looks at the deal as a second baby step to the original launch. "It's your classic food-chain purchase," Swier tells Coffee Talk. "Eventually we hope we get bought by a whale."

The MOVO deal follows a similar breakdown, as a company with greater reach and resources bought the smaller, technology savvy startup. Neighborhood America markets and sells software to businesses, media and government entities looking to set up or improve social networking sites.

The deal, one that entrepreneurial veteran and MOVO co-founder Dan Miller calls one of the easiest he's ever been a part of, began last year when Neighborhood America CEO Kim Kobza was in the audience during a MOVO presentation at a California technology conference. Miller and Kobza began talking and both liked the possibilities of partnering. "It made more sense for us to merge," Miller says, citing the geographical connection and Neighborhood America's 250 clients.

Miller and MOVO's two other founders, David Rippetoe and Robert Cesaric, will have leadership positions with Neighborhood America. Both Miller and Swier will continue their involvement with Startup Florida.

+ Fort Myers airport seeks hotel developer

More than 7.5 million people passed through Southwest Florida International Airport last year and chances are many of them stayed at nearby hotels.

Now, the airport hopes they'll stay a little closer. Coffee Talk has learned the airport wants to develop a hotel on airport grounds and it is seeking "letters of interest" from qualified individuals or firms who might be willing to take on the project.

There are no details yet on how big the hotel will be or where it will be located. However, the hotel market in Lee County has been quite strong in recent years, with average occupancies and room rates recovering from the travel downturn that followed the terrorist attacks in 2001.

Meanwhile, the airport is on a quest to diversify its sources of revenue. It owns 700 acres of land that it plans to develop for a variety of uses, including office parks.

Global Signal deal is a nice pay day

Wall Street gurus, investment bankers and investors weren't the only ones happy to see Sarasota-based Global Signal bought by rival cell phone tower company Crown Castle International in a $4 billion cash and stock deal Oct. 6.

Global Signals' top executives will have shares worth $40 million-plus if the deal goes through as planned early next year at $55.95 a share. Former executives stand to make out even better, holding shares worth more than $90 million.

The list of soon-to-be-wealthy ex-Global Signal executives includes former President David Grain, with 606,631 shares worth $34 million; former CFO William Freeman, with 518,833 shares worth $28.9 million; and former corporate development Vice President Ronald Bizick, with 273,3l06 shares worth $15.3 million.

Current Global Signal Chairman Wesley Edens' 326,729 shares could be worth $18.3 million, and President and CEO Jerry Elliot's 200,000 shares could be worth $11.2 million, the filings show. Global Signal officials, including Elliot, did not return Review phone calls seeking comment on the deal, the largest business transaction in Sarasota history.

A trio of other current Global Signal executives are in line to cash in on $2 million-plus in shares, although not everyone will need big wheelbarrows to carry out their money: Treasurer and Senior Vice President Thomas Guard sold 80,000 shares in August, costing him about $1 million, according to SEC filings.

The Crown Castle offer, worth about 12% more than Global Signal's Oct. 5 closing shares price, according to Bloomberg News, continues an industry consolidation trend. Tower operators across the United States are combining after investments to meet rising demand for mobile services. Bloomberg reports Global Signal competitor American Tower Corp. bought SpectraSite Inc. for $3.1 billion last year, for example, and SBA Communications Corp. acquired AAT Communications Corp. in April.

Global Signal shares have gained 25% this year. Its three biggest shareholders, representing about 40% of the company's stock, approved the Crown Castle deal. Those shareholders are Fortress Investment Funds - co-founded by Edens, Global Signal's chairman - Greenhill Capital Partners LP and Abrams Capital LLC.

At a glance: How crown castle, global signal compare

The table shows operating results for both companies, plus a proforma for the combined companies.

Crown Castle adjusted EBITDA for the

quarter ended June 30: ($ in thousands)

Net income (loss) ($13,335)

Income (loss) from discontinued

operations, net of tax -

Provision for income taxes $507

Interest expense and amortization

of deferred financing costs $37,455

Interest and other income (expense) $2,939

Depreciation, amortization and accretion $69,374

Operating stock-based compensation charges $5,380

Asset write-down charges $1,522

Restructuring charges -

Adjusted EBITDA $103,838

Global Signal adjusted EBITDA for the

quarter ended June 30: ($ in thousands)

Net income (loss) ($16,970)

Depreciation, amortization and accretion $42,648

Interest, net $22,415

Sprint sites integration costs $192

Straight-line portion of revenues ($4,430)

Straight-line portion of expense $8,777

Income tax expense (benefit) $2

Loss on early extinguishment of debt -

Non-cash stock based

compensation expense $4,867

(Gain) loss on sale of properties $74

(Gain) loss on derivative instruments -

Reported Adjusted EBITDA $57,575

Adjustment to comparable

adjusted EBITDA measure (1) ($4,347)

Adjusted EBITDA comparable

to Crown Castle $53,228

Pro forma adjusted EBITDA and recurring cash flow for the quarter ended June 30:

($ in thousands)

Crown Castle Adjusted EBITDA $103,838

Pro forma Mountain Union Adjusted EBITDA $4,625

Global Signal Adjusted EBITDA $53,228

Pro forma Adjusted EBITDA $161,691

Annualized x 4

Pro forma Adjusted EBITDA

before synergies $646,764

Transaction synergies $12,500

Pro forma annualized Adjusted EBITDA $659,264

Less: Pro forma interest expense (2) ($316,660)

Less: Sustaining capital expenditures (3) ($14,000)

Pro forma recurring cash flow $328,604

Annualized pro forma site rental revenue for the quarter ending June 30: ($ in thousands)

Crown Castle site rental revenue $169,160

Global Signal site rental revenue $122,467

Pro forma Mountain Union site

rental revenue 6$,530

Pro forma site rental revenue $298,157

Annualized x 4

Annualized pro forma site rental revenue $1,192,628

(1) Crown Castle's and Global Signal's definitions of adjusted EBITDA differ with respect to the treatment of the straight-line portions of revenue and expense. The adjustment removes the net difference of straight-line revenue and expense resulting in a comparable adjusted EBITDA number.

(2) Based on Crown Castle's and Global Signal's current outstanding debt balances and additional borrowings of $550 million related to the transaction.

(3) Pro forma sustaining capital expenditures for Crown Castle and Global Signal based on Crown Castle's 2006 full year outlook.

SOURCE: Crown Castle International Corp. and Global Signal Inc.

Bad-news press spins it negative again

A gloomy report, titled "Housing at the Tipping Point" by Moody's Economy.com, recently got a lot of press when it forecast double-digit percentage price declines for residential real estate in Southwest Florida.

But Coffee Talk took a closer look at the report, and the outlook for the area's residential market isn't all doom and gloom. In fact, the authors' data show a positive five-year outlook for residential properties in Southwest Florida, albeit not a return to the boom.

Take Naples, for example. Homeowners there will realize 6.8% annualized appreciation from now until 2011, the report says. That's twice the rate of inflation. So despite a forecast of a 13.8% drop in prices from the peak in the fourth quarter of 2005 to the trough in the third quarter of 2007, Naples homeowners who hold onto their residences will benefit longer term. Among other factors, the report cites Florida's strong non-housing related employment growth as a positive attribute.

Here is how Gulf Coast metropolitan areas compare based on how much each market is overpriced, dates for the peak and trough in prices, percentage change in prices from peak to trough and the annualized five-year growth in prices from the second quarter of 2006 to the second quarter of 2011:

Metro Percent Price peak Price trough 5-yr. Outlook

Area Overpriced (year/qtr.) (year/qtr.) (% annualized)

Naples 42.9% 2005/4 2007/3 ?13.8% 6.8%

Cape Coral-

Fort Myers 22.9% 2005/4 2007/2 ?18.6% 5.6%

Punta Gorda 32.7% 2006/1 2007/2 ?8.9% 4.8%

Sarasota 29.9% 2005/4 2007/3 ?14% 4.5%

Tampa 26.9% n/a n/a n/a 3.5%

+ Coffee chain's goal: to be #2

A chain of coffee stores that got its initial idea in Seattle is getting ready to take on the Sunshine state. Obviously, it isn't omnipresent Starbucks.

Instead, the name of the latest coffee franchise entry is more apropos for regular Review readers striving to get ahead in business: The Daily Grind. In addition to the coffee-shop staples of custom-grown coffee beans, fresh-baked pastries and a kick-back-and-relax atmosphere, the Florida Daily Grind stores will have some Florida-only specialties, including Italian gelato. The stores will also sell sandwiches and have free Wi-Fi Internet access, something you can't get at Starbucks (you pay for it).

Michael Anderson, a veteran of Wendy's franchise efforts in Maryland and Pennsylvania, is shepherding the Florida franchise effort. He tells Coffee Talk his group is not trying to take down Starbucks and acknowledges that a good portion of the Daily Grind's menu items and look mimic the coffee franchise leader. Anderson is targeting second place, an area where there is more competition.

The Florida market is broken down into nine geographic regions. Anderson says he expects the Sarasota division, which runs from Bradenton to Naples, to be a hot seller. He is looking to find franchisees in the Tampa area, too. Stores are expected to be open by the middle of next year.

The Daily Grind is based in Winchester, Va., and a bulk of the chain's 60-plus stores are in that state and Maryland. Other stores have recently opened in Texas, Georgia and California. Florida will be the chain's eighth state.

The chain's founder, Ed Chapman, lived in Seattle in the early '90s, the crescendo of the coffee craze. That's where he first came up with the idea to start his own franchise.

For franchise information, call Mike Anderson at (941) 875-2824 or go to www.dailygrindunwind.com

+ College is banking on banks

St. Petersburg College is the first school in Florida to offer a bachelor's degree in banking, thanks to Ken Cherven, lawyer George Igler and college President Carl Kuttler.

The three men persuaded the college's board of trustees earlier this year to approve the banking degree since there's such rapid growth in Florida's banking market.

Cherven, chairman and CEO of First Community Bank Corp. of America and chairman of the St. Petersburg College Foundation, says the degree was needed because Florida is adding so many banking offices each year.

Fifty students were accepted into the program this school year with another 210 expected to enroll by summer 2008.

+ Expo registration deadline approaching

The deadline for signing up to have an exhibit at the Sun Coast Industry Expo at the Sarasota Bradenton International Convention Center is Oct. 18. The daylong expo, open to Florida-based manufacturers and suppliers and designed as a way of keeping those types of businesses in the Sunshine State, is Nov. 8. The cost to exhibit is $250.

Local organizations behind the expo include the Economic Development Corporation of Sarasota County, the Economic Development Council, Manatee Chamber of Commerce and the Sarasota Manatee Area Manufacturers Association. For more information contact Ronnie Meurs at (941) 309-1200, ext. 203 or send an e-mail to [email protected].

+ Audubon seeks environmental stewards

The Sarasota Audubon Society is seeking nominations for its annual Environmental Business Award, which recognizes businesses that offer products and services that benefit the local environment or minimally impact the environment as compared to other products and services in their class. 

The award is based on several factors, including environmental responsibility visibly embedded in the product or service; making an effort to educate its customers about the importance of sustainability; making environmental stewardship important enough to the business to mention in its promotional materials; and actively promoting methods to reduce, reuse and recycle internally.

For the full criteria or a nomination form, go to the Society's Web site, www.sarasotaaudubon.org or call Susie Bowie at (941) 782-7903. The deadline for nominations is Nov. 8.

Quote of the week

"This is getting stupid." Keith Appenzeller, King Engineering Associates Inc. president, commenting on how his firm once put off expanding to new locations, such as Sarasota, for fear of making mistakes and damaging its reputation. For more on King Engineering and how the firm ultimately decided to grow, see Page 8.

Etc....

After facing a $77,000 loss in the second quarter, Aerosonic Corp. is trying to improve its performance by closing its Wichita, Kan., repair facility by month's end.

Clearwater-based Aerosonic plans to save $500,000 annually by moving 20 jobs to the company's headquarters in a consolidation that is expected to shorten the turnaround of the repair cycle, improving performance and customer service.

In a recent Securities and Exchange Commission filing, David Baldini, chairman, president and chief executive officer, says the move will improve competitiveness and profitability.

What's Ahead

Oct. 19 - The Greater Fort Myers Chamber of Commerce will host its monthly membership luncheon at 11:30 a.m. at The Landings Yacht, Golf and Tennis Club in Fort Myers. The keynote speaker will be Frank D'Alessandro of commercial real estate brokerage firm Gates D'Alessandro & Woodyard. Cost is $20 in advance, $25 at the door and $30 for guests. Register online at www.fortmyers.org or call 239-332-2930.

Oct. 27 - The Apex Award will be presented to a woman who has been nominated by her peers for outstanding achievement in career, community and leadership. The black-tie gala will be held at Harborside Events Center in Fort Myers and it begins at 6 p.m. To register, visit the Web site of the Greater Fort Myers Chamber of Commerce at www.fortmyers.org.

Nov. 2 - The 2006 Southwest Florida Community Blue Chip Business Awards will be held in Naples at 7:30 a.m. and Fort Myers at 11:30 a.m. The awards program recognizes successful small-business owners who have overcome adversity to achieve success and share their stories as models for other entrepreneurs. For more information, visit www.otc1.com or call 239-985-7614.

Nov. 4 - The United German American Committee of the USA will recognize General and Mrs. H. Norman Schwartzkopf as Distinguished German Americans of the Year. The black-tie event will take place at the German American Social Club on Pine Island Road in Cape Coral. The reception begins at 6 p.m. and dinner will start at 7 p.m. Cost is $110 per person. For more information, contact Hermann Voss at 239-945-1802.

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