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Coffee Talk
+ Unemployment rose despite tourism
Unemployment rates in Southwest Florida typically decline during the January-April months as the tourism industry hires more people.
But this year, Southwest Florida's unemployment rose in those critical spring months despite a relatively strong tourist season. Gary Jackson, the director of the Regional Economic Research Institute at Florida Gulf Coast University in Fort Myers, is concerned that the unemployment rate could grow substantially this summer as tourism wanes.
Why does this matter? Jackson cites Okun's Law, which says that every one-percentage-point increase in unemployment causes a two- to three-percentage-point decline in gross domestic product. Economist Arthur Okun articulated the relationship between unemployment and GDP in the 1960s.
Jackson, who acknowledges Southwest Florida is already in recession, says he starts to worry when unemployment exceeds 6%, which it already has in Charlotte County. Lee and Collier counties may not be far behind this summer.
+ If you don't like them, join them
A philosophical battle of opinions over the concept of whether setting up auctions to sell homes is a good thing has been brewing on the Gulf Coast for the past year, with Sarasota serving as the epicenter.
The latest twist: Three agents listing multimillion dollar homes and properties in the latest auction work for the real estate firm that has been most critical of the process.
While the move falls short of a Cold War defection, some in the local real estate community, at least the ones that support the auction concept, view it as vindication. Others aren't so sure.
"We as a company do not encourage our clients to go into these," says Tom Heatherman, a spokesman for Michael Saunders & Co. in Sarasota, adding that there is a large downside to auctions that hasn't been reported among the celebratory hubbub of the events, such as delayed closings and prices as low as 30 or 40 cents on the dollar. "But we are at the mercy of our sellers."
That mercy recently pulled three teams of agents into the last place they wanted to be: With properties under their names listed in the latest auction hosted by Sky Sotheby's International Realty, a Sarasota firm co-founded by Chad Roffers, who once worked for Saunders. The auction, held April 11, was the third in the past 12 months hosted by Sky Sotheby's and the first since the company opened a new business unit devoted to consulting with other Sotheby firms in the state considering an auction.
Three of the Saunders & Co. agents with listings at the Sky Sotheby's auction tell Coffee Talk they wanted nothing to do with the process, instead preferring to sell the home the old-fashioned way, by marketing it and pricing it right. It was the sellers themselves that asked, if not outright demanded, to be placed in the auction once Roffers opened it up to non-Sky Sotheby's listings.
"It's definitely not the best way to sell," says Saunders agent Susan Fox, whose client has been trying to sell a home on Siesta Key that was most recently listed for $1.6 million after being decreased from $2.1 million. "It was the seller's wishes, period."
Of course, the agents have an incentive to stick with the listing besides simply following the wishes of the clients. The auction could actually produce a sale - and a commission.
It's that kind of success that has Roffers excited about the future of auctions in the market, despite the criticism. Roffers says the auctions are actually a Realtor's dream come true, with the most realistic and motivated sellers in the marketplace literally under one tent.
"The market will decide if they are good or bad," says David Groelinger, hired recently as a Sky's chief financial officer, partially for his expertise in analyzing auctions in other industries, including high finance. "In tough times, it makes sense to try different things."
+ UT business students
win competition
Chalk one up for business students at the University of Tampa.
UT students who managed a $150,000 university portfolio won first place in the student-managed portfolio competition out of 257 colleges from 69 countries at the Redefining Investment Strategy Education 8th annual Global Student Investment Forum.
The UT students won first place in the graduate division for core-style portfolios based on 2007 results. The forum was held at the University of Dayton March 27 to 29.
The portfolio, the Bailey Student Investment Fund, is valued at $150,000 and is managed by students enrolled in UT's applied investment management class. The Bailey Fund is an equity portfolio that includes individual stocks and exchange traded funds. The fund has been in existence for five years and was established through a $100,000 gift from the Bailey family.
UT previously took second place in the competition.
+ Land sales slow,
opportunities continue
Coffee Talk conducted an informal poll of land brokers in the Tampa Bay area and found sales are off substantially during the past year. But there are opportunities and deals being done.
"Things are slower, but we still have a lot of things going on," says Coldwell Banker's Dean Saunders in Lakeland. "The speculators are gone, so now we're focusing on end users. The vulture funds are out looking, but I largely believe their expectations are very unrealistic: Wall Street, spreadsheet driven, not real-estate driven, therefore not many deals are happening on that front."
Don Lombardi, vice president of land and investments for Grubb & Ellis|Commercial Florida in Tampa, told Coffee Talk that he has seen cycles like this in the past, but this one seems more dramatic.
"I use the word 'dramatic' because our basic economics are not as bad as previous years," Lombardi says.
"So much of this is perceptual and translates, unfortunately, to what people hear in sound bites on the news or sight-bites on the Internet," he says. "Land is trading from those who had leveraged land positions to those who can buy with cash. I have not seen a better time to buy land for cash."
Lombardi says it is not a good idea to buy land with leverage unless it's part of a build-to-suit for a credit purchaser or tenant.
Land sales to home builders are off considerably, but the industrial sector is lively and retail is holding its own for now, but likely to decline if the economic picture does not improve, he says.
"Many parts of the market area, Pasco County for example, are extremely overbuilt in the office sector," Lombardi says. "Lots of finished vacant product means that prices are soft and buyers should take advantage of the low interest rates if they need a standalone office condo. Sellers are beginning to lower prices from the unrealistic highs of a few years ago."
Closings for land have fallen back compared to a year ago, maybe 80%, says Bill Eshenbaugh, president of Eshenbaugh Land Co. in Tampa.
"I'd say that's true of closings and the deals are all taking a lot longer, buyers are fewer, taking much longer to think about offers, want a lot longer for inspections, and add a lot of closing conditions that were similar to 2002, but went away in the red-hot markets when demand overran supply," Eshenbaugh says. "Add to that the New York capital markets being leery of new construction for many product types and it has slowed the wagon a lot."
However, that didn't stop Eshenbaugh and his brokers from closing a $2.8 million sale in the past week for client Centex Homes. Centex sold 19 acres in Brandon to Phillips Development and Realty, which plans to build 300 apartments there.
Some people in real estate are frustrated that not all land prices have come down as quick as they would like and some land owners are waiting to get their best price.
"Yes, bulk land sales have slowed down, but the pricing hasn't," says Albert "Chic" Fortna, an Odessa residential land developer. "People are sitting on land, growing citrus. If they have to wait five years, they'll do it to get their price. Raw land pricing hasn't adjusted. I'm only buying one or two a year. If the numbers don't work from the start, they won't work in the end."
+ At least we're not
in Flint, Mich.
There's plenty of dark humor going around these days at real estate gatherings as industry folks try to keep each other's spirits up.
A recent real estate gathering in Estero was no exception, as the panelists tried to make light of the oversupply of residential homes and commercial space in South Lee County.
Charlene Greenblatt, principal and director of retail and office services for Colliers Arnold, joked: "At least we're not in Flint, Mich."
A few minutes later, Bradley Hunter, a housing consultant with Metrostudy, commented on his malfunctioning, crackling microphone: "Was that the housing market crumbling?"
Hunter told the crowd that the South Lee areas of Bonita Springs and Estero were better off than other parts of the county. Picking up on Greenblatt's comparison to Flint, Hunter didn't miss a beat: "At least we're not Lehigh Acres."
+ The guts to
survive the downturn
Another sign of the rough economic times on the Gulf Coast: There has been a proliferation of seminars devoted to surviving an economic downturn.
One of the latest was titled Surviving and Thriving in 2008, hosted April 8 by the Manatee Chamber of Commerce and presented by Karen Magee, a small business consultant who runs a self-named firm in Sarasota.
Magee actually lives and breathes small businesses beyond running her consulting firm, as she also recently co-opened a clothing store specializing in Life is Good merchandise on Main Street in downtown Sarasota.
"I am excited about a downturn in the economy," says Magee. "It weeds out the poor competitors. It weeds out the people who don't have the guts to tough it out."
But Magee focused her presentation on the fact that it takes a certain skill set to survive and thrive in the downturn, not only guts. Some of those include time-tested skills for dealing with a downturn, such as reviewing every bill to see where you can save money and recognizing that cash - not a line of credit - is the one and only foolproof key to survival.
Another part of the skill set, Magee says, revolves around implementing a new strategy that starts with answering four questions:
• What do you do best?
• What do you do better than your competitors?
• What is in the most demand in the marketplace?
• What has the highest profit margins?
The answers to those questions might seem obvious, but Magee says many entrepreneurs and small business owners still overlook them. And the answers could help a business owner refocus priorities.
"I love tough times," says Magee, "because it really changes our perspective on life."
+ Take the Lee County
pop quiz on taxes
Pop Quiz: How many separate taxing authorities does Lee County have?
Answer: 92.
So is it any wonder that Lee County Property Appraiser Ken Wilkinson is one of the most vocal about capping government spending?
Wilkinson, the father of Save Our Homes constitutional amendment in 1992, also is a member of the Florida Taxation and Budget Reform Commission that recently approved a major ballot proposal in November to cut school-related property taxes and replace them with an increase in the sales tax.
When the real estate market returns, Wilkinson says he hopes a limit on spending will curb massive tax increases like the ones property owners endured during the boom.
+ Forty Carrots center
donation deadline looms
The Forty Carrots Family Center, a well-known Sarasota-based nonprofit group dedicated to early childhood and parenting education, is closing in on a deadline for raising money for its end of a unique commercial real estate deal.
Since it kicked off a capital campaign last fall, the organization has been seeking a total of $1.3 million in donations so it could it could buy its current headquarters building on Tuttle Avenue, a few miles east of downtown Sarasota, as opposed to just leasing space there.
The $1.3 million price would be far below market value and what's more, if the group can raise the money, it will be eligible to receive a $65,000 grant from the William G. Selby and Marie Selby Foundation.
In the first few months of fundraising, the campaign was bolstered with donations from some leading Sarasota businesses and entrepreneurs, including Sarasota-based homebuilder Lee Wetherington and Kim and Charles Githler, who run a Wall Street and financial education seminar company. But with less than a month to go before a May 1 deadline to raise the money, Forty Carrots is about $485,000 short of its $1.3 million goal, increasing the campaign's urgency.
Naming opportunities for the capital campaign are available, in addition to customized bricks and personalized wall tiles. All contributions are tax deductible. For more information, call the center at (941) 365-7716.
ECONOMIC SNAPSHOT
GULF COAST INVESTMENT
What the data shows: Total taxable sales include autos, consumer durables (appliances, hardware), tourism and recreation, consumer nondurables (food), building investment and business investment. The data is for January, the latest month available, and the change is over the same month in 2007.
What it means: It's no surprise that Charlotte and Lee counties have seen the steepest drop in taxable sales considering that the two areas have suffered the most from the real estate downturn. Although Naples, Sarasota and Tampa are down, taxable-sales declines there have remained in the single-digit percentage rates.
Forecast: Consumer confidence needs to rebound before taxable sales begin to stabilize and turn positive. That likely will not happen while the value of homes keeps dropping and the price of oil keeps rising. Consumer spending accounts for two-thirds of the nation's economic activity and the Gulf Coast is probably no exception. Much of the forecast depends on the health of the broader economy and whether any recession is shallow or deep.
January Taxable Sales ($ in millions)
Area Total taxable sales Annual change
Fort Myers $914.2 ‑15%
Naples $594.7 ‑7.8%
Punta Gorda $188.7 ‑18.9%
Sarasota $887.9 ‑9.8%
Tampa $3,261.8 ‑7.5%
Florida $25,699.5 ‑6.9%
Source: Florida Legislature Office of Economic & Demographic Research
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