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Coffee Talk
Business Observer Friday, Jul. 6, 2007 13 years ago

Coffee Talk

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Insurers to governor: What promises?: Seriously, Gov. Crist can't be surprised that homeowner insurance rates didn't drop as far as he and lawmakers predicted, can he?Challenges linger for Gevity: Lakewood Ranch-based Gevity is still struggling to execute its transformation from a professional employee organization driven largely by workers' compensation insurance to becoming a full-service human resource provider for small and mid-sized businesses.Analyst pessimistic on Tech Data: Though he has increased his target price on Tech Data shares, Zacks Equity Research senior retail industry analyst Rob Plaza is keeping his sell rating for the Clearwater-based technology distributor.New headquarters for WCI?: Is WCI Communities relocating?Speculation in Lehigh Acres: Dennis Black, the Port Charlotte appraiser who shined the light on speculative home buying in North Port, has his sights set on Lehigh Acres next.Do you have 1 million square feet?: Commercial real estate brokers at Cushman & Wakefield have identified nine companies scouting sites in Florida that could each handle 1 million square feet of space.

Coffee Talk

+ Insurers to governor:

What promises?

Seriously, Gov. Crist can't be surprised that homeowner insurance rates didn't drop as far as he and lawmakers predicted, can he?

Well, as expected, the best way Crist knows how to deal with that is to bash the industry some more. In last week's dailies around the state, he was quoted saying he's disappointed with property insurance companies, accusing the insurance industry of "breaking its promises" and asking the state to assume more risk on its behalf.

In response, William Stander, assistant vice president and regional manager for the Property Casualty Insurers Association of America, took issue with Gov. Populist.

Promises?

Said Sandler in a July 5 news release: "To be clear, the 24% rate reduction was never a promise made by the insurance industry. This was an estimate from state officials and regulators who failed to realistically portray the reductions consumers could expect.

"Furthermore, the insurance industry did not ask Gov. Crist or the state of Florida to take on more of a role in the insurance market or assume an increased level of risk," Sandler said. "In fact, this decision was made against our recommendations and is seen as a flaw in the current system.

"The only way for the insurance market to work for the homeowners of Florida is to allow the private market to compete on a fair and level playing field. Increasing Citizens Property Insurance Corp. and recklessly forcing more risk upon the state was never advocated for by the insurance industry," he said.

"From the beginning," Sandler said, "we warned that the legislative package rushed through in January's week-long special session would have unintended consequences and would negatively impact the state and homeowners.

Finally, Sandler said, "We, too, take promises seriously, which is why we have repeatedly called for a comprehensive insurance solution that not only addresses consumers' demands for affordable rates but also focuses on the long-term stability and solvency of the insurance market in Florida."

PCI is composed of more than 1,000 member companies. PCI members write more than $194 billion in annual premium, 40.1% of the nation's property/casualty insurance.

+ Challenges linger

for Gevity

Lakewood Ranch-based Gevity is still struggling to execute its transformation from a professional employee organization driven largely by workers' compensation insurance to becoming a full-service human resource provider for small and mid-sized businesses. (See Review, 5/25/07).

The latest news from the company was a mid-year update, which predicted lower-than-projected results on a quarterly and year-end basis. For the second quarter, the company is now projecting earnings of 17 cents a share, two cents lower than initially projected. The readjusted year-end results are are expected to be between 70 cents and 95 cents a share, well off the $1.27 it had originally projected.

The company lists several reasons for the downward projections, including a slight drop in average fees per employee per client, numbers Gevity thought would increase this year. Also, as the second quarter ends, the company says it hasn't turned prospects into clients as fast it would have liked.

Gevity executives, including Chairman and Chief Executive Officer Erik Vonk, say the mission to become a full-service human resource firm is still a good one, and its employees will work toward that goal throughout the rest of this year and in 2008.

To even things out for 2007, the company says it will reduce operating expenses "to better align its cost structure with the company's new strategy."

Shares of Gevity, traded on the Nasdaq under the ticker symbol GVHR, have dropped since the June 29 announcement. On that day, it ended at $19.33 a share, down $2.84. The stock had been trading in the low $20 range for much of June.

What's more, at least one Wall Street firm that tracks the company reiterated a sell recommendation after the news announcement. Analysts at that firm, Roth Capital, also reduced the target price on the stock from $17 to $14.

+ Analyst pessimistic

on Tech Data

Though he has increased his target price on Tech Data shares, Zacks Equity Research senior retail industry analyst Rob Plaza is keeping his sell rating for the Clearwater-based technology distributor.

"We continue to expect Tech Data shares to underperform the market for the next six months," Plaza wrote. His opinion is based on Tech Data trading at a premium compared to California-based and larger competitor Ingram Micro.

"This premium valuation is not justified, in our view," he wrote.

"That said, we are increasing our target price from $30 to $33, which is 14x our fiscal year 2009 earnings per share estimate, to reflect our higher estimates in fiscal 2009," Plaza wrote.

"Nevertheless, we reiterate our sell rating. We think Tech Data will have an extremely difficult time outperforming the market over the next few quarters. We would wait for a more favorable entry point in the low $30s to become positive on the stock."

+ New headquarters

for WCI?

Is WCI Communities relocating?

The Lee County Department of Community Development issued a permit June 28 for the construction of a new $16-million headquarters building for WCI, the struggling Bonita Springs-based homebuilder that has been the target of a takeover attempt by billionaire investor Carl Icahn.

Lee County also issued a permit for an $8.2-million, four-story parking garage in connection with the headquarters building. The building and the parking garage would be near WCI's current headquarters in Bonita Springs.

WCI officials couldn't be reached, but it's unlikely the company will make a move any time soon. The board of directors is working with advisers at Goldman Sachs to sell the company.

+ Speculation

in Lehigh Acres

Dennis Black, the Port Charlotte appraiser who shined the light on speculative home buying in North Port, has his sights set on Lehigh Acres next.

Black plans to canvas Lehigh Acres, which some say contains as many as 250,000 parcels. That's about four times larger than North Port. "I'm hoping to start Lehigh Acres Aug. 1 and be wrapped up by Sept. 15," Black says.

It's likely that Lehigh Acres experienced the same level of home buying speculation as North Port, but Black says he won't know for sure until he and his staff drive by every home for occupancy.

Black says bankers, investors and real estate brokers will find the information useful because it will give them a snapshot of speculation in the market. A high level of speculative activity in Lehigh Acres could indicate the market will take longer to recover. The report will be available at www.lehighacresrevealed.com.

Do you have 1

million square feet?

Commercial real estate brokers at Cushman & Wakefield have identified nine companies scouting sites in Florida that could each handle 1 million square feet of space.

One million square feet is roughly equal to 17 football fields and can accommodate 5,000 office workers.

Gary Tasman, executive director with Cushman in Fort Myers, estimates there are a dozen sites from Tampa to Naples that could accommodate 1 million square feet. An operation of that size would need 100 acres.

In Lee and Collier counties, Tasman estimates there are at least five potential sites. "Whether they're economically feasible to develop is another question," Tasman says.

+ Etc.

After 26 years with TECO Energy, Sheila McDevitt, senior vice president, general counsel and chief legal officer, retired July 1. She plans to consult and devote more of her time to higher education. Charless A. Attal III, vice president and deputy general counsel, replaces her.

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