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Coffee Talk
Business Observer Thursday, Jul. 20, 2006 12 years ago

Coffee Talk

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WCI Communities: A buying opportunity?: At what point do the stocks of homebuilders become so ridiculously cheap that they're worth buying?Military salute: Sarasota resident Burt Bershon has been recognized for his efforts to bring military academies back to U.S. communities. Bershon, who founded the Sarasota Military Academy in 2002, was recently awarded an Eagle Laureate for creating The Charter Military Schools Development Corp. in late 2003.Former Buccaneer Warren Sapp is back: NFL Star Warren Sapp, a defensive tackle who helped the Tampa Bay Buccaneers win their only Super Bowl, plans to open a HipHopSodaShop on Bruce B. Downs Boulevard, near the University of South Florida.Davis Lucas offers business-ethics insight: Davis Lucas, the chairman of Bonita Springs-based residential developer The Bonita Bay Group, makes few public appearances and when he does, it's usually for the benefit of a local charity.Condominium's loss is apartment's gain: So with the condo conversion market way down, is it truly gloom-and-doom time for the apartment market? Not completely.Paying premium prices at the pump: The high price of gas is reaching into entrepreneurs and executives' pockets yet again.Bleak showing for Florida venture capitalists:Just two Florida firms made Entrepreneur magazine's 2005 list of the top 100 venture capital firms, and both, Palm Beach Capital Partners and HIG Capital Management of Miami, are based in South Florida.
by: Adam Hughes Staff Writer

Coffee Talk

+ WCI Communities:

A buying opportunity?

At what point do the stocks of homebuilders become so ridiculously cheap that they're worth buying?

In the case of Bonita Springs-based WCI Communities, at least three investment firms rate the homebuilder's stock a "buy." Optimists include Bank of America, Deutsche Bank and UBS.

"Some people out there say a lot of the negative news is already priced into the stock," says Steve Zenker, WCI's vice president of investor relations. In other words, the low price of the stock already reflects forecasts of lower sales, especially in its condo division.

WCI recently lowered its earnings forecast and said second-quarter orders fell 42% for its traditional homes and 84% for condos.

The company expects total orders to drop 20% in 2006 compared with 2005. Instead of the 11 to 13 condo towers it expected to sell in 2005, WCI says it will only sell three to five.

By most measures, WCI's stock is relatively cheap (symbol WCI, recent price $15.80).

For example, its price-to-earnings ratio was recently 3.5, compared with 14.5 for the construction-services industry and 19.3 for the Standard & Poor's 500-stock index, according to Reuters. The P/E ratio takes the stock price and divides it by the earnings per share for the last year. Other ratios, such as price-to-sales and price-to-book, also show WCI lower than its peers and the S&P 500.

Although WCI's current price is down 56% from its high of $35.96, no one can say how much lower the stock could drop. What's more, WCI doesn't pay a dividend, so there's no cushion for investors if the stock falls further. Caveat emptor.

+ Military salute

Sarasota resident Burt Bershon has been recognized for his efforts to bring military academies back to U.S. communities. Bershon, who founded the Sarasota Military Academy in 2002, was recently awarded an Eagle Laureate for creating The Charter Military Schools Development Corp. in late 2003.

The Eagle Laureate is a national award presented every eighteen months to an individual who created an organization that is "world-changing."

The former insurance agent and Wharton School graduate created the Charter Military Schools Development Corp. after he founded the Sarasota Military Academy. His goal was to create free public military schools any students could attend. He's also hoping to shape the nationwide education platform for military academies.

Bershon expects the first new academy to open in Palm Beach. The non-profit corporation is also working to get charters for new schools in Ocala and Lake Suzy.

The Eagle Laureate Committee, a group of business owners and high level executives, praised the Sarasota Military Academy model for not only being one of the first schools to mandate drug testing for all students, but also for its financials. The school costs less to operate per student than a typical public high school. It receives funding from Sarasota School District and military uniforms and instructors through the U.S. Army Reserve Officers' Training Corps program.

+ Former Buccaneer

Warren Sapp is back

NFL Star Warren Sapp, a defensive tackle who helped the Tampa Bay Buccaneers win their only Super Bowl, plans to open a HipHopSodaShop on Bruce B. Downs Boulevard, near the University of South Florida.

Sapp, now with the Oakland Raiders, has an agreement with H3Enterprises Inc. to open stores throughout his native Florida.

The 5,000-square-foot Tampa store will feature a central "CyberSports Arena," healthy food items, more than a dozen giant TV screens and large merchandising and entertainment areas. It's expected to open within three months.

Florida's first HipHopSodaShop will be in Orlando, near Sapp's hometown of Apopka. After Tampa, the next store is planned for Miami; Sapp played football at the University of Miami.

Ben Gordon of the NBA's Chicago Bulls and Harlem Hip Hop sensation Juelz Santana recently became principal partners in the flagship HipHopSodaShop store in Harlem.

H3 Enterprises claims it's the first publicly traded company dedicated to the Hip Hop generation.

+ Davis Lucas offers

business-ethics insight

Davis Lucas, the chairman of Bonita Springs-based residential developer The Bonita Bay Group, makes few public appearances and when he does, it's usually for the benefit of a local charity.

But he recently gave some insights into his do-the-right-thing management style when he addressed a group of young real-estate professionals with the Southwest Florida chapter of the Urban Land Institute.

The well-respected developer stressed the importance of integrity, illustrating the point with an anecdote. When the company was developing The Brooks, a residential community in south Lee County, Lucas agreed to sell a piece of commercial property near the entrance to the development.

Another bidder offered $200,000 more for the same parcel the next day. Although Lucas had not signed a contract to sell the property, he says he verbally agreed to the first offer and kept that commitment despite its lower price.

"Our handshake means something," Lucas explained. "We gave our word, we shook hands and that's it."

+ Condominium's loss

is apartment's gain

So with the condo conversion market way down, is it truly gloom-and-doom time for the apartment market? Not completely.

While condos are slumping, current apartment owners in the four-county Tampa Bay-area market of Hillsborough, Pasco, Pinellas and Polk counties can console themselves with a record low vacancy rate of 1.8%. Jason Stanton, senior broker and multi-family investments specialist at Colliers Arnold Commercial Real Estate Services in Clearwater, suggests that in the short term, this could lead to more apartment developments in Hillsborough, Pasco and Polk counties. The roughly 30,000 units that converters took out of the rental market is allowing apartment owners to increase rents.

However, while the news is good, it may not be time to scout new development sites or hit up some bankers just yet. Apartment owners, much like other commercial owners, are getting slammed with huge insurance premium increases, which is keeping much of that rent increase from the profit column. Additionally, investors are starting to dump their condo units back on the markets as rentals, which will certainly have a negative impact on the long-term vacancy rate.

+ Paying premium

prices at the pump

The high price of gas is reaching into entrepreneurs and executives' pockets yet again. At least 75% of executives polled recently by staffing service firm Robert Half International reported taking some steps to reduce the impact of gas prices on employees.

The most common responses were increasing the expense guidelines (47%) and allowing more telecommuting (37%). Eighteen percent say they provide some more unusual - and costly - remedies, including providing transportation for staff, giving employees gas subsidies or flat out giving workers raises to offset the costs at the pump.

And the club of executives dealing with issue in some financial way is only going to get bigger, the survey shows: Among the 25 percent of respondents whose firms aren't taking any action now, one in four said their companies would likely do something if gas prices continue to rise.

+ Bleak showing for

Florida venture capitalists

Just two Florida firms made Entrepreneur magazine's 2005 list of the top 100 venture capital firms, and both, Palm Beach Capital Partners and HIG Capital Management of Miami, are based in South Florida.

New Orleans-based Advantage Capital Partners, which has a Tampa office, also made the list, which relied on the Moneytree Report from PriceWaterhouseCoopers, the National Venture Capital Association (NVCA) and Thompson Financial.

Venture capitalists invested $21.7 billion in emerging companies last year, with $16.4 billion funding established portfolio companies. And an estimated $2.9 billion went to startups or companies less than two-years-old. Data on established companies receiving venture capital for the first time weren't included in the report.

+ Scripps launches new Web site in South Lee County

E.W. Scripps, the company that owns the Naples Daily News, plans to launch a new Web site in August called Coastalbeat.com that targets the booming area around Florida Gulf Coast University in South Lee County.

The newspaper company recently posted a help-wanted ad for a reporter on Craigslist.com, the free service that's muscled in on newspapers' classified-advertising revenues. The posting says Coastalbeat.com will focus on youth culture, entertainment, recreation, nightlife and dining. The Web site says it will launch in August.

Scripps and Gannett, which owns the Fort Myers News-Press, are locked in a battle for readers and advertisers in South Lee County. It's a booming area that sits between Naples in the south and Fort Myers in the north.

+ 'Changing' lanes

The capitalist approach to transportation development in Florida, otherwise known as charging a toll, is hear to stay.

James Ely, the executive director and CEO for Florida's Turnpike Enterprise told a gathering of business executives and community leaders as much at a July 17 talk sponsored by the Argus Foundation, a Sarasota-based pro-business group July 17. Ely says 91% of all new limited-access highways and bridges built in Florida since 1993 have been funded through a toll.

While admitting virtually no one is a fan of paying a road toll, Ely called the policy a necessity to meet Florida's huge transportation shortfall, estimated at $30 billion to cover needs through 2030.

But on the bright side, with the legislative requirement that Florida's Turnpike Enterprise operate like a business, the agency has been making a number of key improvements important to drivers and fiscal conservatives.

The self-supporting agency's operating expenses per transaction has declined since 2001, while at the same time, an FDOT survey shows that 91% of drivers found value or were satisfied with their experience for the toll, a jump of 10% point from 2003.

+ A St. Joe company?

The connections between Arvida/St. Joe and EarthMark Cos. LLC continue to grow. First, EarthMark hired Ed Hill as COO; he was formerly the president of operations for Central Florida for Arvida, now known as St. Joe, the largest landholder in the state.

And recently, EarthMark, which is developing the Little Harbor waterfront project in Ruskin that's far from little (featured in the May 12 Review) recently hired Phil Berger, another former St. Joe employee. Berger will serve as vice president of sales and marketing for Little Harbor.

Berger was previously St. Joe Town & Resorts' vice president of sales for Victoria Park in Deland. He was also vice president of sales for two of Arvida Co.'s communities in South Florida.

The firms also share a similar business plan of building larger resort-style developments.

Correction

A real estate story in the July 7 Review should have stated that Paradise Communities hasn't completed plans yet for its downtown Sarasota property on East Avenue. Also, comments from Paradise partner Mike McCanless about pricing were directed to the East Avenue property and the number of townhomes in Valencia at Burns Square is eight.

Letters to the Editor

Passing the FairTax bill would restore freedom

Dear Editor:

Many of the ills mentioned in your article, "We should resolve to restore our freedom," would be fixed by the passage of The FairTax Bill (H25 and S25).

FairTax, when passed, will totally eliminate our federal income tax system with a national sales tax. The IRS will be eliminated and replaced by a much smaller and much less expensive agency. Log on to www.fairtax.org for more information.

A few of the things that FairTax will accomplish:

• FairTax will eliminate federal income taxes, payroll taxes, IRS and the tax code, estate taxes, gift taxes.

• FairTax will untax the poor.

• FairTax untaxes businesses, which will make them more competitive in the world market.

• If American businesses are more competitive, they will also be more profitable and will be hiring more Americans.

• FairTax will encourage American businesses that moved overseas to move back home, putting more Americans to work.

• FairTax will tax the underground economy, which is not taxed now.

• FairTax will eliminate the $250 billion to $400 billion in tax-compliance costs that individuals and businesses are now paying.

• FairTax will truly make government smaller. IRS currently employs  more than 100,000 people with a budget of $11 billion. FairTax will need a budget and employees to monitor and collect taxes but nothing like the IRS.

• Because FairTax is a sales tax, the 50 million annual foreign visitors will be help fund our  government every time they buy something.

• Trillions of dollars in offshore bank accounts will flow back to the  United States, greatly increasing our capital base for business expansion.

• FairTax will totally fund the Social Security and Medicare programs, eliminating the fears of those programs going broke.

• Experts predict that with the first year under FairTax our economy will grow by 10.5%, exports will increase by 26% and capital spending will  increase by 70%.

Alan Greenspan and 75 other noted economists support a national sales tax over an income tax. There are more valid points to pass FairTax, but the most important one is: FairTax is fair for every American!

Godfrey Santini

FairTax Community Coordinator

Fort Myers

BusinessES should quit supporting socialism

Dear Editor:

In response to Matt Walsh's column: "We should resolve to restore our liberty," we indeed are sympathetic to Walsh's call for the recrudescence of liberty in America. Unfortunately, socialism has been alive and well in America for a very long time.

Consider:

• The consolidation of the welfare state under the Social Security Act in the 1960s;

• The undermining of free-labor markets by workforce development statutes since the 1930s, leading to the recent Workforce Investment Act;

• The provision of universal health care for welfare recipients and the elderly through Medicaid and Medicare;

• The expansion of property expropriation prerogatives by local governments as ratified by the Supreme Court;

• The microregulation of business activity through  "economic development," land planning and environmental laws;

• And the massive intrusions and spending on education and welfare through federal statutes such as No Child Left Behind and the Personal Responsibility and Work Opportunity Reconciliation Act.

The idea that socialism has failed in America clearly defies empirical observation. Indeed, it is a reality that dates back before Alexander Hamilton, well into America's colonial period when the states controlled and financed local works, canals and railways.

If business entrepreneurs, proprietors and corporate managers want to fight the good fight, they need to stop nourishing the black beast; stop applying for workforce and economic development grants and subsidies; stop taking "incentives" and vote against tax increases at every turn.

In America, after all, the state is not beyond the grasp of the populist impulse. Let us all commit to the neo-liberal revolution.

Kimble F. Ainslie

President

The Southern Public Policy Institute

St. Petersburg

U.S. is for the people, not for the government

Dear Editor:

I enjoyed your commentary titled, "We should resolve to restore our liberty."  

You have put into words what I, along with many other Americans, have been feeling for quite some time. Your examples of the local and federal abuses of government, its expansion and control of what used to be our inalienable rights are poignant, indeed.  

Please accept my thanks for reminding people why we should remain a country for the people, by the people and not for the government.

Robert A. Morris, III

RAMAR Group Companies Inc.

Sarasota

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