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Coffee Talk
Better terms
Young companies starting to make money are having an easier time finding additional capital than they have in five years, says Tampa attorney David S. Felman.
Felman, chairman of Hill Ward & Henderson PA's corporate practice, ran down a few of the latest investing trends at the Florida Venture Forum's annual conference last month in Ponte Vedra Beach.
Venture capitalists sunk $2.6 billion into later-stage companies in the third quarter of 2005, according to a survey by PricewaterhouseCoopers, Thomson Venture Economics and the National Venture Capital Association. That was a four-year high, says Felman.
Optimism about profitable exits among investors, through initial public offerings or sales to private-equity firms, is increasing the values of venture-backed companies. But venture investing has held steady since 2003 and has yet to achieve the perhaps unrealistic heights of the tech bubble years of 1999 through 2001.
Still smarting from those years, venture capitalists remain hesitant to plow money into startups with unproven products and untested management.
But more experienced executive teams are starting to field multiple offers from venture firms, Felman says. That is giving veteran entrepreneurs a bit more leverage negotiating investment terms, he says.
For example, later-stage companies aren't being subjected to as many revenue targets or product development timelines in order to obtain subsequent rounds of funding. "Other investors will fund them without the milestones," Felman says.
But that doesn't mean VCs are turning into soft touches again.
They continue to like to take convertible preferred stock in their portfolio companies. That way, Felman says, the VCs have it both ways: If the investment goes bad, the preferred stock gives venture investors a liquidation preference over other creditors and shareholders. If the company prospers, they exercise the conversion feature of their securities and profit from common stock ownership.
Florida Gulf Coast University simulates Wall Street
Business-school students at Florida Gulf Coast University in Fort Myers will learn what it feels like to work on the trading floor of a major brokerage firm.
And they'll make trades with real money.
Students currently invest $200,000 for the university's foundation as part of a graduate class in security analysis and portfolio management taught each spring. When the university's new Lutgert College of Business opens in 2009, they'll be making those trades from a trading floor designed to look just like one at a major brokerage firm. Visitors will be able to see the trading floor as they walk into the building.
Each spring, the foundation gives the students investment guidelines and lets them invest $100,000 in stocks and another $100,000 in bonds. For example, the guidelines say students may not buy speculative "junk" bonds. Under the direction of a finance professor, the students analyze the securities and place stock trades directly with Key Bank, which manages the foundation's stock portfolio, and bond trades with Naples-based bond-portfolio manager Wasmer, Schroeder & Co. Wasmer, Schroeder recently pledged $50,000 toward the trading-room program.
After they invest the money, the students must make a presentation to the foundation's investment committee and defend their purchases. The foundation's endowment is currently about $30 million.
Grande unveiling
Does West Palm Beach-based Kolter Communities have the staying power to make a profit in the tough Sarasota $1 million-plus condo market? We're about to find out.
Early next week, Kolter is slated to debut its plans for The Grande Sarasotan. The 144-unit 18-story high-rise condominium is in most ways a revised version of the planned The Metropolitan development at the same site, 1 North Tamiami Trail, in downtown Sarasota.
In mid-2003, Richard Zipes' New York-based Omni Development Co. Inc. and Tarragon Corp. purchased about 3 acres for $28.7 million to develop 144 upscale condos. The development had a number of critics who disagreed with the size and expense of the proposed units and the lack of local realty representation for the project. In early 2005, Zipes and his partners sold the site to Kolter Property Co. for $40 million.
Since then, The ADP Group has reduced the size of most of the units to between 2,700 and 3,500 square feet and increased the number of parking spaces from 216 to 281. Michael Saunders & Co is marketing The Grande Sarasotan.
However, the new design still calls for units that start at $1.5 million.
Most real estate agents felt the million plus price point was unavoidable based on the purchase price and climbing construction costs. In letters to the City of Sarasota building department in July, The ADP Group president Bruce Franklin estimated total construction costs for the condominium at about $55 million. So excluding other costs, the purchase price and the likely conservative construction costs suggest a fixed $659,722 per unit price. "There are going to be people looking for these properties," says Scott Sosso, president of Prudential Palms Realty. "Obviously they are not going to sell overnight. But there is a market for them."
Construction's contribution
If we thought construction was leading economic growth in the Gulf Coast, our area isn't alone. According to Ken Simonson, chief economist for the Associated General Contractors of America, construction nationwide added 46,000 jobs in January, nearly one-fourth of the nation's employment gains. U.S. Bureau of Labor Statistics figures showed seasonally adjusted construction employment set a record for the 12th straight month, reaching 7.46 million. Total non-farm payroll employment rose by 193,000 in January.
Over the past 12 months, construction added jobs at triple the rate of the overall economy, gaining 345,000 jobs or 4.9%, Simonson pointed out. Total non-farm payroll employment grew by 1.6% during that same time span.
Simonson says these are not just extra jobs as a result of post-Hurricane Katrina clean up. He says "Louisiana lost 30,000 construction jobs after Hurricane Katrina hit, and only one-quarter of those jobs had been added back as of December." The Associated General Contractors of America represents more than 32,000 firms.
Poop Power
The solution to the United State's oil dependency may be coming from the University of Florida - via your neighborhood farm. Researchers in Hague are looking into developing a manure management system that produces energy, saves valuable nutrients for fertilizer, cuts greenhouse gas emissions and stops offensive odors.
Ann Wilkie, an associate research professor with UF's Institute of Food and Agricultural Sciences, says "it's not often that one technology can solve several major problems, but our innovative animal manure management system is a sustainable option for dairies and other livestock operations that produces renewable energy and protects the environment."
To demonstrate the technology at a working dairy farm, a large-scale anaerobic digester at UF's 500-cow Dairy Research Unit in Hague is now generating biogas from manure flushed from animal barns and milking parlors. The patented waste treatment technology is being made available for licensing by UF's Office of Technology Licensing.
Clarification
Coldwell Banker Commercial real estate agents Jag Grewal and Michele Fuller represented the buyer, Stamford Computer Group, in a deal to purchase a 3,000-square-foot office building on Main Street in downtown Sarasota. Their names were omitted from a real estate story in the Feb. 10 issue of the Review.
What's ahead ...
Feb. 20 - The Argus Foundation's Annual Golf Tournament starts off with a shotgun start at 12:30 p.m. at the Sara-Bay country Club on 7011 Willow Street. Registration starts at 11 a.m. and lunch will be served at 11:30 a.m. The cost is $150 for an individual golfer and $600 for a foursome. Call (941) 365-4886 for more information.
Feb. 21 - The Central West Coast Chapter of the Florida Public Relations Association will host the presentation "Handling Local & National Media in the Jessica Lunsford Case," presented by Citrus County Sheriff's Office public information officer Ronda Hemminger Evan, from 11:30 a.m. to 1 p.m. at Marina Jack, 572 Marina Plaza, Sarasota. The cost for the luncheon is $18 for members and $25 for non-members. Call (941) 953-3772 or pre-pay using PayPal at www.cwcfpra.com.
Feb. 22 - The Economic Development Corporation of Sarasota County and the Florida West Coast Resource Conservation and Development Council will host "Natural Capitalism," a seminar presented by the Rocky Mountain Institute, from 8:30 a.m. to 12:30 p.m. at the Manatee Community College Center for Innovation and Technology, 7131 Professional Parkway E. in Lakewood Ranch. The seminar will focus on how to integrate smart growth and sustainable economic development and strategies for building stronger local economies. Cost is $65 and includes the book, Natural Capitalism: Creating the Next Industrial Revolution. E-mail [email protected] or (941) 309-1200, Ext. 203.
Feb. 28 - The Greater Brandon Chamber of Commerce is hosting a pre-legislative session reception from 6 to 7:30 p.m. at the chamber's headquarters, 330 Pauls Drive, Suite 100, Brandon. Legislators from Hillsborough and Pinellas counties will be at the reception, as will other business owners. Call (813) 689-1221 for more information.
March 3 - The Stetson University College of Law and the Media and Communications Law Committee of The Florida Bar will sponsor an all-day media law conference "Media Law: Privacy, Publicity & Privilege," for journalists, public relations professionals and attorneys at the Tampa Law Center, 1700 N. Tampa St. Tuition discounts are available. To register or learn more about the conference, visit Stetson's Office for Continuing Legal Education online at www.law.stetson.edu/cle or call (813) 228-0226.
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