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Coffee Talk
Business Observer Friday, Oct. 20, 2006 15 years ago

Coffee Talk

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Coffee Talk:Shareholder: Sell WCI Communities: Basswood Capital Management, a New York-based investment firm that owns 5% of the shares of Bonita Springs-based WCI Communities, says the homebuilding company should sell itself.Hail to the chief: Snagging the most powerful man in the world for your business comes with headaches. Plenty of headaches. But hopefully worthwhile headaches.Michigan real estate developer Brent Virkus, already swimming in the deep end of the downtown Sarasota condo pool, is adding to his ambitious portfolio by starting a real estate investment fund. Technology is the ultimate mixed blessing: Use it right, and it can be the catalyst for explosive revenue growth or an exhilarating new discovery.National foreclosure rates rose in September, but foreclosures in six of Florida's eight Gulf Coast counties served by the Review dropped, according to RealtyTrac Inc.Meridian Development Group is taking advantage of the growth occurring between Tampa-St. Petersburg and Fort Myers.Hedge fund Amaranth Advisors' recent energy-trade blowup was all the talk at a meeting of investment professionals in Naples recently.Some business people are wondering if Pasco County, a bedroom community to the north of Hillsborough and Pinellas counties, is bent on stopping growth.Gevity is going through a management shift of its own.

Coffee Talk

+ Shareholder: Sell WCI Communities

Basswood Capital Management, a New York-based investment firm that owns 5% of the shares of Bonita Springs-based WCI Communities, says the homebuilding company should sell itself.

In an Oct. 17 letter to WCI Chairman Don Ackerman, Basswood's principal, Bennett Lindenbaum, says WCI is trading at a significant discount to its intrinsic value. "WCI and its shareholders would realize this value by selling for a premium to a larger, better capitalized and more profitable homebuilding company."

Lindenbaum says a request for a seat on WCI's board of directors was ignored. He reiterated his request and threatened to seek to replace board members at WCI's next annual meeting.

WCI officials declined to comment on the letter.

Lindenbaum says WCI's stock currently trades about 16% below its initial public offering price from March 2002, while its peers are up nearly 89% over the same period.

Lindenbaum blamed WCI management for operating with excessive leverage while heading into a weakening housing market; continuing to invest in land, land options and stock buybacks even while operating with high debt levels; increasing WCI's share repurchase authorization less than two months after Moody's placed the company's credit rating under review; and agreeing to pay Citibank about $25 million for an option contract to repurchase 5 million shares of the company's stock instead of using the cash to reduce debt.

"We urge WCI's board of directors to take decisive action to prevent any further loss of shareholder value and to maximize the value of the company," Lindenbaum writes.

+ Hail to the chief

Snagging the most powerful man in the world for your business comes with headaches. Plenty of headaches. But hopefully worthwhile headaches.

Over the past four years, Oscar Parsons been seeking the best conferences and speakers for his fledgling Sarasota Bradenton International Convention Center. He's spent $10 million on the shuttered Sam's Club over the past four years for precisely that purpose.

And he caught his biggest fish ever earlier this week: President George W. Bush, coming to town to stump for congressional candidate Vern Buchanan. Bush is scheduled to speak at a rally Oct. 24. It's much more prestigious than past events, which have run from standard boat shows to substandard concerts, such as the one in July from Gloria Trevi, the so-called Madonna of Mexico. (See Review, 8/25/06).

Still, Parsons, an 85-year-old millionaire entrepreneur who has made the convention center's success his last life mission, isn't satisfied with just getting the president. The effort to host the leader of the free world, he's learning, is a lot of work with a little immediate financial payoff. He grumbled to Coffee Talk that he and his small staff, which includes his wife, will be "working ourselves to death." He might even hire a few extra people for the job.

To meet FBI and Secret Service requirements, the center's staff will have to empty the entire 300,000-square-foot facility the day before the event. From then on, all areas of the complex, from the kitchen to the bathrooms to the parking lot, will be under scrutiny. Parsons also needs to find a stage 18 inches off the ground, six inches shorter than normal, and he needs to find the right shade of blue for the curtains. Finally, Parsons had to tell the religious group that was planning a seminar Oct. 24 that they were pushed out.

All this for what Parsons says is a little bit of money. "If we were popular, we wouldn't take it," Parsons says. "But we need the exposure, so we'll take it."

+ Seeking deep pockets for investment fund

Michigan real estate developer Brent Virkus, already swimming in the deep end of the downtown Sarasota condo pool, is adding to his ambitious portfolio by starting a real estate investment fund. Virkus' development company, Triton, bought the former Gold Bank plaza in downtown Sarasota for $36 million in April with plans to build a luxury condo tower on the adjacent property. (See Review, 10/6/06)

The investment arm, called the Triton Property Fund, is seeking high net-worth investors. Virkus and his team hope to raise at least $25 million with the fund; there is a $500,000 individual investment requirement.

Virkus tells Coffee Talk the fund is a key part of Triton's business strategy, as it gives the company a base to act quickly and have a large financial backing when looking at new deals. "Some of the greatest opportunities in real estate come when times are difficult," he says.

While it's common in real estate development to set up investment funds for specific projects, Virkus says the Triton fund is a little different, as it gives investors an avenue to all of Triton's projects. That's an eclectic list that, in addition to the Sarasota project, includes a swanky hotel in Rochester, Mich., condos in Hawaii and office parks in Arizona.

Virkus says a trio of national development industry veterans are part of the fund's board, including Doug Tibbetts, owner and manager of Paradise Properties, LLC; Gary Sligar, Tibbetts' partner with Paradise who has managed 400 million square feet of office space; and Jim Salter, a building and development consultant.

Help us find the top tech companies

Technology is the ultimate mixed blessing: Use it right, and it can be the catalyst for explosive revenue growth or an exhilarating new discovery. Maybe even both. Still, harnessing the right technology for the right cause can be a maddening experience.

Either way, technology is cool. And that's what makes the Gulf Coast Business Review's annual Technology Innovation Award issue a blast. Going on its fifth year, the Review is again seeking nominations for the best innovations in technology. This is the first year the awards are being expanded to cover the Review's entire coverage area, from Tampa Bay to Naples.

We are looking for achievers who create or apply technology to a business or not-for-profit venture in a way that changes an industry, creates greater profits or efficiencies or improves quality of life in a meaningful way. It doesn't matter what industry. Past winners and runners-up include medical device manufacturers, a firm specializing in international security and even a fertilizer company.

Basically, if the technology meets the criteria, then the Review wants to know about it.

Nominations should include the particulars of the company and the technology, along with contact information, including phone numbers and e-mail. Please send questions or nominations to Managing Editor Mark Gordon at [email protected].

Region fares well in foreclosures

National foreclosure rates rose in September, but foreclosures in six of Florida's eight Gulf Coast counties served by the Review dropped, according to RealtyTrac Inc.

Only Collier and Lee saw more foreclosures in September than the same month a year earlier.

RealtyTrac's September 2006 U.S. Foreclosure Market Report shows 112,210 properties nationwide entered some stage of foreclosure during the month, a decrease of less than 1% from August, and a 63% increase from September 2005. The national foreclosure rate was one new foreclosure for every 1,030 U.S. households, the third highest monthly foreclosure rate reported this year.

On the Gulf Coast, Hillsborough and Pasco had the highest number of foreclosures per household at 631 and 546, respectively.

 Florida had 12,946 foreclosures last month, up 41% from the same month last year. That's one foreclosure for every 564 households.

Foreclosures

Sept. '05 Sept. '06 Foreclosures

County Households Foreclosures Foreclosures per households ('06)

Charlotte 79,758 72 55 1,450

Collier 144,536 110 117 1,235

Hillsborough 425,962 769 675 631

Lee 245,405 193 236 1,040

Manatee 264,002 160 119 1,291

Pinellas 481,573 622 490 983

Pasco 173,177 422 317 546

Sarasota 182,467 162 119 1,533

Source: RealtyTrac Inc.

+ Meridian building up Gulf Coast portfolio

Meridian Development Group is taking advantage of the growth occurring between Tampa-St. Petersburg and Fort Myers. The real investment company and Hudson Realty Capital LLC recently announced the $17 million purchase of the Sunplex Business Center.

The Clearwater office building acquisition follows the groups' purchase of the 950,000-square-foot Winn-Dixie grocery distribution center in Sarasota earlier this year. That warehouse acquisition was one of the largest in the Tampa Bay area in more than a decade.

"The overall growth of the whole corridor between Orlando and Fort Myers makes commercial real estate investment in these markets a natural," Meridian's Managing Director Steven Kossoff says in a news release.

Kossoff, who relocated his Buffalo, N.Y. real estate investment company to the Tampa Bay area, says he's working on another acquisition in the area. His real estate investment company now manages 2.2 million square feet of commercial space with a value of about $80 million.

+ Experts warn of hedge-fund blowups

Hedge fund Amaranth Advisors' recent energy-trade blowup was all the talk at a meeting of investment professionals in Naples recently.

The prediction is that more blowups are likely.

"Are more hedge funds going to go down like Amaranth? Absolutely," says Mary Ann Bartels, chief market strategist with Merrill Lynch.

Bartels told the Naples gathering that overall future hedge-fund returns are likely to be lower than in the past because what was once a small coterie of funds has turned into an industry with 8,000 participants. What's more, some funds will likely take greater risks as they try to generate outsized returns so they can stand out from the crowd.

That spells increased volatility for all investors, Bartels warns.

How can investors spot blowups before they occur?

Robert Blabey III, chief operating officer with LJH Global Investments, and Edward Caulkins, chief operating officer with RGM Capital, both of Naples, suggest keeping close tabs on the fund manager and asking tough questions.

For example: How have they managed in a previous downturn? How much leverage are they using in an attempt to goose returns? How liquid is the fund? Are returns coming from risky bets on narrowly focused industries? Are the managers sticking to their investment strategy? When can you take your money out and under what conditions?

Consider it a red flag if you can't get straight answers to these kinds of questions.

Growing anti-growth actions in Pasco

Some business people are wondering if Pasco County, a bedroom community to the north of Hillsborough and Pinellas counties, is bent on stopping growth. County commissioners are considering an exorbitant hike in impact fees that some say would bring development to a screeching halt.

Protesters were expected to show up at an Oct. 18 commission meeting to protest the an spike in fees on commercial building in a county that already has some of the highest property insurance rates in Florida. Impact fees proposed by Pasco consultant Tindale-Oliver & Associates would more than double, triple and quadruple the fees on some projects.

For instance, impact fees on a multi-family unit would rise 264% from $3,611 to $9,533, according to Tindale-Oliver's recommendation.

An e-mail sent to Coffee Talk shows other proposed increases - not the total impact fee - are $1,776,600 for 300 new apartments; $1,152,700 for a 100,000-square-foot office; $1,054,120 for a 40,000-square-foot retail establishment with a bar and restaurant; and $1,016,010 for a 45,000-square-foot supermarket.

Coffee Talk also hears that developers and builders are reluctant to speak out publicly against Pasco government for fear of retaliation against their projects.

A few months ago, county officials butted heads with the Pasco Building Association over Pasco's newly adopted comprehensive growth management plan that builders and developers say is "anti-growth."

The county commission has until Dec. 8 to enact a concurrency ordinance to show how it plans to pay for infrastructure improvements, such as roads, schools and utilities. County officials say rising construction costs will force them to delay road projects if more money isn't raised through impact fees.

Pasco Impact Fees (per 1,000 square feet)

Use Current Proposed Percentage increase

Retail w/bar-rest. $9,128 $35,481 388%

Restaurant $16,540 $53,093 321%

Fast food $46,253 $215,250 465%

Bank $30,208 $78,484 259%

Hardware $6,741 $21,546 319%

Drug store $4,512 $15,639 346%

Supermarket $6,672 $29,250 438%

+ Gevity shuffles own management

Gevity, the Lakewood Ranch-based public company known for advising other businesses on how to improve management structures and techniques is going through a management shift of its own. On Oct. 16, the company said its chief operating officer is resigning and its chief technology officer is retiring.

The changes are the second recent move from Gevity as the company executes what Chairman and CEO Erik Vonk calls their "multi-layer growth strategy." Earlier this month, the company created a North Central region by opening an office in Chicago, with plans to open other centers once a month throughout 2007 in cities including San Antonio and Charlotte.

The latest move, though, hits closer to home. Roy King, the COO, left the company after serving just 10 months on the job. Lisa Harris, the head technology executive who had been with the company in various roles for seven years, announced she will be retiring at the end of the year.

In addition to the departures, Vonk says Chief Information Officer Paul Benz and Chief Marketing Officer Michael Collins will begin reporting directly to him and the roles of two other managers will be expanded. Peter Grabowski, the CFO, will now oversee field operations and benefit programs and Cliff Sladnick, the chief administrative officer, will now manage internal HR and strategic planning.

Shares of Gevity, which trades on the Nasdaq exchange under the symbol GVHR, didn't move much based on the announcement. The price dropped about 85 cents on Oct. 16, but climbed back up the next day. Shares have been trading in the low $20 range since Sept. 18, when the company lowered its 2006 earnings estimate and the stock dropped almost 14%, about $5 a share.

+ Where to find venture capital

It's a common complaint among entrepreneurs: Where do startup businesses find angel investors?

Groups such as the Florida Venture Forum (www.floridaventureforum.org; 813-335-8116) can help, but the advice often boils down to this: Forge relationships. That means networking with people you know and asking for referrals.

"I raised $12 million from friends and family," says Dennis Gormley, president of Naples-based Lehigh Technologies. He and investors were speaking at a Venture Forum meeting in Naples recently.

Mailing a business plan to venture firms probably may not get you too far, either. Steve Lux, a director with Stonehenge Capital Corp. in Tampa, says he receives hundreds of unsolicited business plans in the mail every year.

On their end, angel investors find their job equally tough. "It's very hard to find quality companies," says Al Rossiter, president and CEO of Enterprise North Florida in Jacksonville and chairman of the Florida Angel Investment Alliance. Rossiter also led the formation in 2002 of Springboard Capital, a venture capital firm that targets emerging-growth companies. Above all, Rossiter says management's strength, integrity and character are the most important factors for investing in a startup.

+ Colliers Arnold beefs up Fort Myers office

Clearwater-based commercial real-estate brokerage firm Colliers Arnold continues to build its Fort Myers office, adding more experienced brokers to its firm.

In the latest addition, William Mankin, a 20-year veteran most recently from VIP Commercial in Fort Myers, joined Colliers Arnold as a specialist in industrial properties. Mankin also is the former economic development director for the City of Fort Myers.

Karl Lippek, Colliers Arnold's managing director in Fort Myers, was the firm's top-producing broker in the company's entire network. Last year, Colliers Arnold closed on more than $1 billion in transactions in the area that stretches from Orlando to Tampa, Clearwater and Fort Myers.

Stay tuned. J. Patrick Duffy, Colliers Arnold's president, says he intends to hire more brokers and find a larger office for his growing staff.

+ It takes a real

wise man

It makes perfect sense to Coffee Talk that the new head of a statewide trade association for homebuilders works primarily out of Sarasota and Naples. Those two markets seem to be industry leaders for Florida in good times and bad.

John Wiseman, president of CORE Construction of Florida, takes over the presidency of the Florida Home Builders Association in what most certainly can be described as bad times. Wiseman, officially appointed Oct. 14, will serve a one-year term for the 21,000-corporate-member organization, replacing Len Tylka, a builder and engineer from West Palm Beach.

Wiseman has been active in the FHBA in other roles; he's a past-chairman of the group's governmental affairs committee. He's also served as president of the Collier County Building Industry Association.

Wiseman, whose Florida CORE Construction builds homes in Orlando in addition to Naples and Sarasota, takes over the large trade group as some smaller members struggle to survive in a bruising residential real estate market. Not surprisingly, he says the two giant issues of homeowners insurance and affordable housing will be some of his biggest challenges.

But Wiseman is also pushing to make sure members of the organization are active in defending what homebuilders do. "FHBA and any organization or government body is run by the people who show up," Wiseman says. "We can't develop a bunker mentality. We need to be at the meetings in our community, participating in debates and engaging those who oppose us or our issues."

The new president's construction career began long before he began working for CORE, a national firm that builds in four other states, including Arizona and Texas, the FHBA says. Wiseman's first "job" was as a 10-year-old, moving block for the masons during a construction project at the church where his father was a preacher. He got paid 25 cents per hour.

+ First, take all the

lawyers and . . .

Large U.S.-based companies are spending more time with attorneys, both as defendants and plaintiffs, according to a survey by - who else? - a law firm. The report, by global firm Fulbright & Jaworski, says insurance companies are "litigation Olympians," as overall, the sector faced an average of 1,696 lawsuits, from coverage fights over hurricanes and terrorist attacks to product liability and environmental class action suits. The survey was sent out to in-house lawyers at both public and private companies in 29 states.

Increasing business litigation is part of an on-going trend, despite the efforts of several state governments to curb it. About half of the 311 companies that responded to the survey say they expect to be involved in at least 50 more lawsuits over the next year.

And the increase is not only attributable to lawsuits and depositions. Internal investigations requiring the use of outside counsel are increasing as well, a result of more government rules and regulations, the report states. Nearly two-thirds of the survey respondents reported launching at least one internal probe over the last year - think Hewlett-Packard.

The good news nugget from the report is that big companies have taken the brunt of the lawsuits and connected costs. Firms with revenues of less than $100 million reported only an average of nine pending cases, while lawyers for small businesses say their average dispute totaled only $178,000.

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