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Coffee Talk
Business Observer Friday, Oct. 26, 2007 12 years ago

Coffee Talk

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Big payout looms for Radiation Therapy: Who says private equity deals are dead?Switching up,not giving up: To a developer with major moxie, bad news is just a niggling detail - even bad news like, say, a seriously slumping housing market, where in particular, downtown Sarasota condo sales are as rare as towels in a nudist colony.Another knock against Hometown Democracy: Add Tampa land broker Bruce Erhardt to the list of business people questioning the wisdom of Florida Hometown Democracy, a statewide ballot movement that, if passed, would require citizens to make all major land-use decisions via referendums.Expansion knows no bounds: Brown & Brown, a Tampa- and Daytona Beach-based insurance company, continued its national expansion march this month with the acquisition of Professional Risk Managers of New York.A complicated simplification: Gevity, the Lakewood Ranch-based human resources outsourcing firm struggling with a battered stock price and more recently, a resigned chief executive, says the answer to its problems is to regroup and undertake a simplified and solidified approach to its business.Exodus continues from troubled WCI: The exodus from the corporate ranks of WCI Communities continues as the Bonita Springs-based homebuilder struggles with a brutal housing market.Atlanta nightclub owner hits the links in Naples: Atlanta-based strip club owner Jack E. Galardi of Galardi South Enterprises, has turned his attention

Coffee Talk

+ Big payout looms

for Radiation Therapy

Who says private equity deals are dead?

New York-based private-equity firm Vestar Capital Partners has offered to buy Fort Myers-based Radiation Therapy Services for $32.50 a share, plus assumed debt, for a deal valued at $1.1 billion. The price is a 50% premium over the closing price of the company before the announcement on Oct. 19. Radiation Therapy is the nation's largest operator of freestanding radiation therapy centers, with 83 centers in 16 states.

Wachovia Securities has committed to providing Vestar with financing for the deal, which is expected to close in the first quarter of 2008. In addition, the company says top management will reinvest "a significant amount" and hold an equity position. Details of that were unavailable, but the top four individual shareholders account for about 40% of the shares outstanding.

President and CEO Daniel Dosoretz controls nearly 3.5 million shares, a stake that's valued at over $112 million at Vestar's $32.50-per-share offer. Other large individual shareholders are due for a significant payout if the deal goes through, according to the latest ownership filings. They include Chairman Howard Sheridan ($74 million), James Rubenstein ($79 million) and Michael Katin ($72 million).

+ Switching up,

not giving up

To a developer with major moxie, bad news is just a niggling detail - even bad news like, say, a seriously slumping housing market, where in particular, downtown Sarasota condo sales are as rare as towels in a nudist colony.

Brent Virkus is just that type of developer. It was only 18 months ago when Virkus, head of the Triton Cos., then based in suburban Detroit, closed on a $36 million deal to buy the former Gold Bank Plaza on South Pineapple Avenue in downtown Sarasota. Six months after the deal, Virkus spoke optimistically about how the top-tier quality of the planned 100 condos would be his competitive edge. He eventually moved the firm's corporate office to Sarasota, too.

But with less then 20% of the 100 condos sold as of early October, Virkus decided to scrap the project, what was initially called One Palm. The developer is also planning to sell the 11-story M & I Bank building next to the property he bought as part of the original deal. Sarasota-based law firm Abel Band and investment firm Morgan Stanley are among the current occupants, as is Triton.

This doesn't mean Virkus is giving up. Instead, he's switching up, saying he will build a hotel on the property. It will still be an upscale, top-tier property, Virkus tells Coffee Talk, declining to name the luxury brand he's in talks with. Virkus says the project will also be designed with several live-in condo-style residences - the current trend in urban hotels.

"I don't want people to get the idea we are abandoning residences," says Virkus, ever the optimist. "But right now condos just aren't selling."

Despite his enthusiasm over the project transformation, Virkus says he's well aware luxury hotel rooms in downtown Sarasota have the potential to replace condos as the Next Big Glut. It's a "big-time worry," says Virkus. But he's still moving ahead, saying he thinks the project will be the first of at least four other planned downtown Sarasota hotels to start construction, hopefully by next summer.

+ Another knock against Hometown Democracy

Add Tampa land broker Bruce Erhardt to the list of business people questioning the wisdom of Florida Hometown Democracy, a statewide ballot movement that, if passed, would require citizens to make all major land-use decisions via referendums.

In his third quarter market overview report to clients, Erhardt raised the following points:

• How will local governments do land-use changes to schools, wastewater plants, landfills and other perceived uses that neighbors could defeat?

• It would be very easy for voters to vote 'no' on every land use change. That would be easier than learning about and studying each change and making intelligent decisions.

• This will also slow economic development when it comes time to convert agricultural land to other uses.

+ Expansion

knows no bounds

Brown & Brown, a Tampa- and Daytona Beach-based insurance company, continued its national expansion march this month with the acquisition of Professional Risk Managers of New York.

The PRM Group, with annual revenues of about $4.5 million, works in the property and casualty, surety, and group benefits insurance agency business in the New York City metropolitan area.

That adds to its New York presence, which includes offices in Buffalo, Rome, Albany, Jamestown, Rochester and Long Island.

The expansion is not focused on geography, but instead on talented, well-performing people, said CFO Cory Walker.

"We make acquisitions based on whether they are good insurance folks," Walker says. Brown & Brown is in 36 states and employs 250 people in the Tampa Bay area.

The company is ranked by Business Insurance magazine as the sixth-largest independent insurance intermediary in the United States and worldwide.

+ A complicated

simplification

Gevity, the Lakewood Ranch-based human resources outsourcing firm struggling with a battered stock price and more recently, a resigned chief executive, says the answer to its problems is to regroup and undertake a simplified and solidified approach to its business.

Yet within that strategy, the company, one of the biggest Manatee County employers, faces a tricky core challenge: It says it wants to simplify things, but at the same time it wants to provide more services. For example, in the aftermath of the Oct. 19 resignation of former chairman, CEO and one-time turnaround superstar Erik Vonk, spokesman Patrick Lee says the firm still plans on "trying to provide something for all small businesses."

And in company press statements, interim chairman Michael Lavington says the company intends to develop new business lines in addition to growing its co-employment model, which in of itself is multi-faceted, offering companies services from payroll to providing benefits such as health and workers' compensation insurance.

So, in summary, Gevity's strategy is to refocus and simplify by being all things to all of its clients, all the while recruiting new customers.

Coffee Talk has to wonder: Is there a square peg somewhere in the company's headquarters employees will try to ram into a round hole?

And speaking of challenges, Lavington isn't actually a U.S. citizen, which could complicate him taking over the chief executive post. Lavington, who lives parts of the year with his American-born wife in Bonita Springs, is a British national with a tourist visa that allows him to be in the U.S. That visa is a good enough to serve on a corporate board, even as chair, says Lee but Lavington will need a temporary working visa to officially be named Gevity's CEO.

Not surprisingly, Gevity's top officials don't think the transitional challenge is all that complicated. Going from Vonk, a Dutch-born, big-picture, visionary-type leader to Lavington, an English-born, nuts and bolts, execution-focused leader, is a natural step in the Gevity's progression, the company says.

In keeping with the do-everything theme, Gevity says it intends to follow through on some other aspects of its on-going strategy. Internally, it will continue reducing operating expenses, for instance, and externally, it will continue its sales efforts to turn prospects into clients.

Still, Wall Street analysts and investors don't share the company's optimism. Shares of the stock, traded on the Nasdaq exchange under the symbol GVHR, have been slowly dwindling since May, going from the $20 range to just under $12 on Oct. 22.

As for Vonk - who in 2002 was widely credited with resurrecting Gevity from consecutive years of significant losses and was also named a "superstar in human resources outsourcing" by HRO magazine earlier this year - both the company and the executive say there are no hard feelings.

Vonk, 54, will receive more than $1 million in severance pay, while Gevity board member Jonathan Kagan, in a press statement, says Vonk's "enthusiasm for our business and entrepreneurial spirit has created a valuable legacy."

+ Exodus continues

from troubled WCI

The exodus from the corporate ranks of WCI Communities continues as the Bonita Springs-based homebuilder struggles with a brutal housing market.

The latest departure: David Hart, WCI's vice president of government relations. Hart is moving to Tallahassee, where he will spearhead the six-person government-affairs team at the Florida Home Builders Association.

Hart has plenty of work waiting for him in the state capital - taxes, insurance, building codes and other issues. On the tax front, Hart says: "Several approaches are very significant and helpful first steps, but the piece that's essential is that there is an overall revenue cap on local government."

On Sept. 25, Christopher Hanlon, WCI's senior vice president and chief operating officer in charge of the condominium-tower division, announced he would resign at the end of the year. Hanlon will oversee the completion of several condo projects, including the closely watched opening of One Bal Harbour in Miami-Dade County.

+ Atlanta nightclub owner

hits the links in Naples

Atlanta-based strip club owner Jack E. Galardi of Galardi South Enterprises, has turned his attention to a significantly sunnier enterprise with his purchase of the Eagle Lakes Golf Club golf course.

Galardi bought the 7,156-yard Naples golf course, 12,000-square-foot clubhouse, driving range and seven acres of commercial/multi-family land from the community developer for $3.1 million. Galardi also assumed a $2.6 million mortgage with Transcapital Bank for the developer.

Chris Matyn, general manager for Eagle Lakes Golf Club praised the sale as a win for the community developer, future and current residents and Galardi.

"This community has a real symbiotic relationship with the golf course," Matyn says. "The golf club has to be good for the community to function. Designing and building a golf course is different from operating it. That wasn't something the developers felt comfortable doing. Mr. Galardi owns dozens of businesses. He's in the hospitality business."

The new ownership's biggest impact on the golf course so far, according to Matyn, has been a more aggressive approach to selling golf memberships in the club.

"The developer had planned to sell out the memberships over seven to 10 years for $30,000 a piece," Matyn says. "The Galardi group plans to sell them for $18,000 to $24,000 a piece much faster than that. Our business model has always been to be a value play."

The developers never intended it to be a country club, but more of a golf destination with good food, he said. "We think our customers know somewhere [else] to get a $13 martini." So far, 48 memberships have been sold.

The 175-acre Eagle Lakes Golf Club was built on top of much of what was the former Boyne South golf course. The community developer, publicly known as Naples Golf Development Co., replaced much of that former course to create a new 18-hole Gordy Lewis-designed championship course, a new clubhouse and a second residential phase of 90 lots. So far 15 of the 90 lots in the second phase have been sold. The golf course and clubhouse are currently open and operating Matyn says and additional landscaping improvements are planned.

Galardi says this is his first golf course purchase, but that he is looking at a number of other golf properties particularly in the Miami area. "It was well kept and maintained and seemed to have good management," Galardi says. "It just seemed to have a lot of good possibilities."

+ Short-sale seminars

multiply

It's OK if you've never heard of a short sale before. After all, the threat of foreclosure on homes in Southwest Florida was almost unheard of before the market turned last year.

Now, not a day goes by without news that real estate agents are jumping into short sales. Seminars on the tactic are sprouting everywhere. For example, Fidelity National Title is presenting one on Oct. 25 hosted by Carla Bonten Realty in Bonita Springs.

A short sale takes place when a bank accepts less than what it's owed from a homeowner who is facing foreclosure. This helps the bank avoid putting depressed real estate on its books and allows the homeowner to avoid foreclosure proceedings. It's a natural response to what is happening in the market and may soften the correction.

Gulf Coast Auto sales for August

Metro Area Taxable sales of autos and accessories ($ in millions) % year-over-year change

Fort Myers $795.9 ?17.1%

Naples $414.7 ?11%

Punta Gorda $154.6 ?15%

Sarasota $806.8 ?11%

Tampa $3,323.5 ?6.4%

Statewide $25,742.1 ?4.6%

Source: Florida Legislature Office of Economic and Demographic Research

What the data shows: It's tough to be a car dealer in Fort Myers, where sales in August fell 17% from the same month a year ago. That is sharply lower than the state's 4.6% drop during that time. The Tampa area is the strongest for auto sales along the Gulf Coast, both in volume and year-over-year comparisons.

What it means: The real estate downturn is more severe in the Fort Myers area, which may explain why sales are down more sharply there than in other areas of the Gulf Coast.

Forecast: Auto sales should track the real estate market. When that sector improves, consumers are likely to feel more confident about buying big-ticket items such as cars.

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