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Coffee Talk
Business Observer Friday, Mar. 21, 2008 14 years ago

Coffee Talk

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Hooters founders sell restaurants: The Clearwater-based founders of Hooters Inc. have agreed to sell their 22 restaurants for $55.1 million.Bear Stearns debacle traps Sherman: The Bear Stearns collapse has been felt across the globe.Construction firm alleviates growing pains: A Sarasota-based construction company that is pinning its ambitious growth plans on a national focus on renovation and restoration projects is going smaller so it can get bigger one dayWCI chief's home for sale: $14.25 million: Jerry Starkey, the president and CEO of Bonita Springs-based homebuilder WCI Communities, is selling his Naples home, according to the Web site of a real estate agency.Sonberg elected H&K managing partner: Holland & Knight Miami partner Steve Sonberg has been elected managing partner of the 1,150-lawyer Tampa-based firm.Government triggeredeconomic downturn: Jay Brady, the executive director of the Gulf Coast Builder's Exchange, gets paid to look out for the best interests of contractors, developers and construction firms.St. Petersburg builderdevelops hurricane additive: Despite the downturn in the homebuilding market, one Tampa Bay area CEO tells Coffee Talk that he has found a successful niche and a corporate structure that is keeping his workers busy and his companies profitable.Wachovia's Vitner now calls for recession: Wachovia Senior Economist Mark Vitner toured Southwest Florida in February telling investors that

Coffee Talk

+ Hooters founders

sell restaurants

The Clearwater-based founders of Hooters Inc. have agreed to sell their 22 restaurants for $55.1 million.

While most of the money will help the Clearwater founders cash out, the new ownership arrangement is designed as a vehicle for those who stick with the company to play a bigger role in the growth of a brand that did more than $1 billion in sales in 2007.

In 1997, the founders sold the last of the franchise rights for $60 million to Atlanta-based Hooters of America Inc., which controls the 433-store franchise network spread over 28 countries. The founders, however, kept their stores in the Tampa Bay area, Chicago and Manhattan.

The buyer - Chanticleer Holdings Inc., a Charlotte, N.C., closed-end investment fund - agreed to raise the $55.1 million with bank debt and by selling a secondary offering by this summer to acquire Hooters Inc., which will remain based in Clearwater.

Chanticleer will become an operating company, with Hooters Inc. as a wholly-owned subsidiary. Neil Kiefer, Hooters' chief executive, will be named president of Chanticleer and Hooters. Management will remain intact.

+ Bear Stearns

debacle traps Sherman

The Bear Stearns collapse has been felt across the globe. But one major shareholder who likely felt particular pain was Private Capital Management, the Naples-based money management firm.

Private Capital is Bear's fourth largest institutional shareholder, with 5.5 million shares as of Dec. 31, the latest data available. On that date, Private Capital's stake in Bear was $489 million. At $2 a share offered by JP Morgan Chase, that's worth just $11 million.

Private Capital CEO Bruce Sherman or President Gregg Powers couldn't be reached. They rarely comment about their holdings. The firm, a unit of Legg Mason, manages $14 billion in assets, according to a filing on Feb. 14.

A front-page article in the Jan. 8 edition of the Wall Street Journal says the resignation of Bear Stearns CEO James Cayne came partly at Sherman's behest. The move was reminiscent of Sherman's efforts to force the sale of the newspaper chain Knight Ridder in 2006, which created little shareholder value.

Originally established to manage money for the Collier family, Private Capital was a limited partnership owned by its co-founder, Miles Collier, and by its two operating principals: Sherman, who co-founded the company with Collier in 1985, and Powers.

The firm manages money for high-net-worth individuals and institutional investors.

+ Construction firm

alleviates growing pains

A Sarasota-based construction company that is pinning its ambitious growth plans on a national focus on renovation and restoration projects is going smaller so it can get bigger one day.

So small that the company, Kesselring Holding Corp., moved out of 6,000 square feet of space it had been leasing in the John Cannon Homes building in Lakewood Ranch and into 1,200 square feet of space in downtown Sarasota. It had been in the John Cannon space for less than three months before moving out in late February.

The company is also coming off a power struggle in its executive offices and on its board, disagreements stemming partially from how and why the publicly traded company posted a $3.1 million loss on $12.2 million in revenues in 2007.

"The holding company's expenses were too large," says Charles Rockwood, hired as a dual chief financial officer and chief operating officer for the company last month. "My charge is to get the burn rate as low we can."

In addition to Rockwood, the company has brought back Kenneth Craig as chief executive officer, a position he held early in 2007. Craig replaces Doug Badertscher, who was fired as CEO Feb. 5 after less than six months on the job.

Three other top officials left the company last month, too, including Virgil L. Sandifer Jr., who had been Kesselring's interim chief financial officer and board members Jim Toomey and Darryl Rosser. Rosser, a former Texas Instruments executive, served on the board for only one month.

News of the company's struggles surprised John Cannon, who had leased the firm space in his 58,000-square-foot building near the University Parkway exit of Interstate 75.

"It was totally unexpected on our part," Cannon told Coffee talk. "The information they had given us was that they were doing very well."

Cannon says he has since heard from some Kesselring executives, who said they will try to come to an "amicable agreement" on the lease they walked out of. The space is currently available, Cannon says.

Kesselring's shrinking-to-grow-later strategy has also done little for the company' shares, which closed March 3 at 10 cents. The shares are traded over the counter, under the ticker symbol KSSH. (For more on Kesselring, see Review on 8/31/07 and 1/4/08).

Rockwood, who has worked in executive positions for accounting and financial firms on the east coast of Florida, says he believes the fundamental strategy of the company is still a winner.

In addition to renovations of commercial properties, from hotels to hospitals, that strategy includes buying other construction related businesses in Florida and Washington state, where it already has a presence.

"We're excited about the future," says Rockwood, echoing similar comments Badertscher made six weeks before he was fired and removed from the company's board. "We think we have a tremendous brand."

+ WCI chief's home for sale: $14.25 million

Jerry Starkey, the president and CEO of Bonita Springs-based homebuilder WCI Communities, is selling his Naples home, according to the Web site of a real estate agency.

Asking price: $14.25 million.

The news spread fast through real estate circles in Naples as speculation mounted about Starkey's future.

Starkey could not be reached for comment and the Collier County Property Appraiser's Web site shows he owns no other property. On March 17, WCI reported a net loss of $578.5 million or $13.77 per share on revenues of $936.4 million.

There was some grumbling within WCI that Starkey didn't list the home with his company's brokerage arm, Prudential Florida WCI Realty. Instead, The Forrest Company Realty of Naples listed the Starkey home in the tony Port Royal neighborhood.

Forrest Company's James Forrest said he was not authorized to discuss details of the listing and referred questions to Starkey.

The listing of 3695 Nelsons Walk on the Forrest's Web site is the same address listed on the Collier County Property Appraiser's Web site as belonging to Jerry and Adria Starkey.

It's a six-bedroom, eight-bath home that measures 10,863 square feet. The waterfront home has a 100-foot floating yacht dock, a four-car garage, a theater/billiard room, and a bar with a wine cellar.

It's a home fit for a homebuilder CEO.

+ Sonberg elected H&K managing partner

Holland & Knight Miami partner Steve Sonberg has been elected managing partner of the 1,150-lawyer Tampa-based firm.

Sonberg was elected during the firm's annual meeting in Orlando, and will begin his five-year term April 15. Sonberg, 60, will replace Howell W. Melton, Jr., who announced last month that he would not seek another term.

A partner with Holland & Knight for the last 15 years, Sonberg served as chairman of the firm's 375-person business law section for the past five years. Previously, he served as a member of the firm's directors committee for eight years, and led the firm's corporate practice in South Florida.

+ Government triggered

economic downturn

Jay Brady, the executive director of the Gulf Coast Builder's Exchange, gets paid to look out for the best interests of contractors, developers and construction firms.

So Coffee Talk wasn't too surprised to hear that Brady thinks "over-regulation by state and local governments was the foundation that led to the current credit, housing market and economic crisis in our state and country."

Brady wrote just that in a recent e-mail to Florida state Sen. Mike Bennett, R-Bradenton. What was an even more enlightening, however, was Brady's recommended reading list for the state senator.

It includes both a 2007 Policy Analysis magazine article and book written by Cato Institute senior fellow Randall O'Toole. The article, The Planning Tax: The Case Against Regional Growth-Management Planning and the book, Best Laid Plans: How Government Planning Harms Your Quality of Life, Your Pocketbook, and Your Future, can be found on the Cato Institute's Web site.

+ St. Petersburg builder

develops hurricane additive

Despite the downturn in the homebuilding market, one Tampa Bay area CEO tells Coffee Talk that he has found a successful niche and a corporate structure that is keeping his workers busy and his companies profitable.

His strategy: Hurricane-strength quality at the top end. Build a handful of homes a year along the Gulf Coast and the Bahamas priced $1.5 million or more and reinforce them to withstand high winds and protect them from water damage.

He also owns a number of labor and construction materials firms out of his corporate office in St. Petersburg that support the homebuilding business and keep his costs in check.

"In my market, it keeps my guys working," says David Helms, 50, CEO of Signature Built Homes of St. Petersburg. "We don't need help from a lot of other trades people."

Signature has started building the Tampa Bay area's first home with Helix concrete reinforcement, a steel-fiber additive that makes the residence strong enough to withstand 250-mph storm winds.

"Some homebuilders don't want to incur the expense," Helms says. "They ask how cheap can they build a home. When I look at it, I ask, 'How well can I build a home?'"

Helix - toothpick-sized, coated-metallic wires - will be added to concrete that fills the home's patented Powerwall insulated-concrete-form walls, says Helms. With this mixture, the walls can withstand hurricane winds, will be more energy efficient and quieter than regular block walls.

To test Powerwall, Helms fired 2-by-4s at them with air cannons, to simulate a hurricane. The lumber shattered when they collided with the Powerwall forms. Special roof reinforcements protect the homes from water damage.

Signature's custom, two-story home in St. Petersburg's Old Pasadena neighborhood has four bedrooms and five full baths in 11,090 square feet of living space. Construction is expected to be complete this summer.

Privately held Signature was founded in 2001 by Helms, a Jacksonville native and construction-industry veteran. It builds about five homes a year with revenues of more than $5 million annually.

Signature's corporate philosophy is to build upscale homes that far exceed minimum building codes, using its trademarked Code Plus construction system, which Helms has been working on the past seven years.

That's why all Signature homes qualify for the Institute for Business & Home Safety's Fortified for Safer Living certification program. Homes on the Institute's certification program often receive discounts for homeowner's insurance.

Helms' long-term goals include building a model home with the wind-strength protection, continuing to improve his construction products and educating others in the industry about the value of building safer homes.

Despite the residential slowdown, Helms said the cost of his supplies, such as lumber, concrete and steel, have not come down.

"Not one supplier has lowered his price," he says. "It defies the law of supply and demand.

+ Wachovia's Vitner

now calls for recession

Wachovia Senior Economist Mark Vitner toured Southwest Florida in February telling investors that the country will avoid a recession.

On March 11, Vitner took that back.

"We now have a contraction in GDP in the first half of the year," Vitner said on a conference call that day.

Vitner says the national recession will be mild, with a 0.3% decline in gross-domestic product in the first quarter and a drop of 0.5% in the second quarter. The two major factors for his change of heart: lower income growth and slower consumer spending.

Vitner was one of the last of the major economists to hold off on a recession call and he continued to indicate that his forecast might be wrong.

"It's not a slam dunk that we're going to have a recession," Vitner cautions. One reason for his optimism is that there hasn't been a major decline in employment.

What's more, the government rebate checks this spring will boost third-quarter GDP by 2.5% before settling back to 1.3% in the fourth quarter.

GULF COAST UNEMPLOYMENT

What the data shows: The unemployment rate in every area of the Gulf Coast rose higher than the statewide rate. Areas that include Charlotte and Lee counties experienced the highest unemployment rates while the Tampa Bay and Naples areas had the lowest rates.

What it means: It should be easier to find qualified workers on the Gulf Coast now that unemployment rates are higher. But many of the jobs lost have been in the construction area and it's not clear that these workers are being hired in other industries, such as tourism and health care.

Forecast: Some observers are concerned that the unemployment rate rose in January, which is usually a time when tourism-related businesses are hiring to staff up for the season and when the state sees a drop in the unemployment rate. While a high unemployment rate is good for hiring, retailers feel the pinch of lower consumption because people are concerned about job security.

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