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Coffee Talk
Business Observer Friday, Aug. 18, 2006 13 years ago

Coffee Talk

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CFO politics just plain politicalDoes buy back equal more value?Get & Go Express: convenience stores of the future?SunCoast is SunCoast no moreWCI Communities: No improvement soonDeveloper want to spin Wicker into goldSpeakers added to Technology ConferenceAffordable housing still not affordable Downtown banished from Fort Myers lexiconA One-Man Partnership

Coffee Talk

+ CFO politics just plain political

On Aug. 14, the two leading Republican candidates for Florida's chief financial officer met to debate the issues Sarasota business folks care about (read: property insurance). They instead ended up spending most of their time debating each other over who did what in Tallahassee and when they did it.

The debate, a "Meet the Minds" lunch sponsored by the Argus Foundation, a Sarasota-based business and civic group, started out as an education session on what Senate President Tom Lee from Brandon and state Rep. Randy Johnson from Celebration plan to do if elected to the position. The state CFO slot was created in 2002 to oversee a dozen divisions of the state's office of financial services, such as insurance and banking.

Speaking to a group of about 100 people, each candidate was given a chance to speak for a few minutes about why they are running for the position. Both candidates started off civil enough: Johnson said he's running to "fix this insurance mess." Lee followed up with similar thoughts.

The civility lasted about one minute.

Johnson soon held up a thick book, saying it has 1,200 pages of insurance rules that have made Florida the second most regulated state in the country. He blamed Lee for being part of the establishment causing the problems, saying that the bill was passed late in the night with little debate. Lee said Johnson did nothing to advance the cause of solving the Citizens Property Insurance crisis, even though he had ample opportunities.

The rest of the debate followed mostly the same pattern of sarcastic remarks and biting rebukes, sprinkled in with some questions from the audience.

For some of the time, each candidate was speaking, the other rolled his eyes or cocked his head sideways. There was also the occasional loud, long and deep sigh while one was talking.

Argus Foundation Executive Director Kerry Kirschner was left to try to moderate the debate - a familiar position for the former Sarasota mayor who has bobbed and weaved through his share of political fistfights.

Does buy back equal more value?

Gevity is definitely in a giving mood. Shortly after releasing its second quarter results, the Lakewood Ranch-based Gevity's board of directors decided to sweeten the pot by issuing a new stock repurchase plan and a $0.09 dividend. The additional $75-million share repurchase program is the company's third buy-back in a little less than a year. Designed to increase the company's value to shareholders, the programs has done little to nothing to improve the stock price - hovering around the $25 mark for the past year - or overall worth of the company, (see buy-back performance chart).

The company has had consistent revenue growth the past several years, but in 2005 its growth rate for revenue and net income fell precipitously into the single digits (see Gevity performance).

Answering for Erik Vonk, who was unavailable for comment on Wednesday, Anne-Marie Megela, Gevity's vice president of investor and media relations, explained the buy-back program as confirmation of the company's financial strength.

"We have such financial strength that we can offer a buy back while at the same time keeping our options open not just for potential future acquisitions but also for growing organically," Megela says. "We are in the middle of a multilayer growth strategy that we are currently executing. We will continue to grow profitably while generating additional long term value for shareholders."

The past few months, the local HR/staffing solutions company attracted the attention of big-name investor Peter Kamin, founder of the hedge fund ValueAct Capital Management. Kamin, who acquired some 2,983,384 Gevity shares, is a value player: who buys undervalued or otherwise depressed stocks, betting that the company can turn things around or otherwise increase the stock price.

He isn't a passive investor. His modus operandi is to take a hefty position in a company and then advocate either publicly or privately for management changes to increase performance.

Along with Gevity, Kamin currently holds significant positions in Acxiom Corp., Gartner Inc., Mentor Corp., Catalina Marketing Corp., PRA International, Reynolds & Reynolds Co., Seitel Inc., TriZetto Group Inc. and Valeant Pharmaceuticals International. Kamin is currently a director in Seitel, which provides seismic data and related geophysical services to the oil and gas industry in North America.

Kamin did not respond to Coffee Talk's request for comment.

Buy-back performance

Average

Shares Stock Book Value/ Buyback Shares

Date Outstanding Price Share Price Repurchased

6/30/05 30,750,390 $20.03 $615,930,311.70

9/28/2005* $25.33

9/30/05 30,902,004 $27.24 $841,770,588.96

12/31/05 $25.72 $27.16 1,840,802

2/28/2006* $25.18

3/31/06 31,417,902 $24.46 $768,481,882.92

6/30/06 31,824,458 $26.55 $844,939,359.90 $23.62 406,071

8/14/2006* $25.01

* Buyback announcement dates; Source: SEC filings

Gevity Performance

2005 2004 2003 2002 2001

Total revenues $608,797 $585,481 $425,827 $374,654 $332,828

change 4% 37% 14% 13%

Net income (loss) $37,378 $34,618 $15,391 $4,737 ($15,603)

change 8% 125% 225% 130%

Net income per diluted share $1.31 $0.18 $0.62 $0.22 ($0.76)

change 628% -71% 182% 129%

Source: SEC filings

Get & Go Express: convenience stores of the future?

Florida's first fully automated Get & Go Express convenience store has opened in Pasco County and more of the bright red stand-alone buildings are expected to pop up in other Gulf Coast counties.

The 520-square-foot building houses vending machines that dispense sandwiches, drinks, chips, ice cream and DVDs. An off-brand soda, called Olde Town, costs only a quarter. Brand name sodas start at 40 cents.

Entrepreneur Jeff Parsons has patented the vending machine concept. He's selling franchises for as much as $250,000, depending on the number of machines. If a location isn't profitable, the machines can be moved.

In addition to the first location at the Hudson Square Shopping

Center in Hudson, two others are being built in Pasco. And Get & Go Express stores are expected to open in Pinellas and Hernando counties.

Parsons opened his first vending machine cluster in Springfield, Ill., in 2004. The clusters are common in Europe and Japan.

+ SunCoast is SunCoast no more

What does the acquisition of SunCoast Bank, with three locations in Sarasota and Manatee counties, by Starkville, Miss.-based NBC Capital Corp. mean locally?

Well, SunCoast will be no more. The name was expected to be changed to Cadence Bank as of Aug. 17, and W. Bruce Page has taken over as president/CEO from founder John T. Stafford. Page was most recently in charge of SunTrust Bank's Southwst Florida operations, from Manatee south to Collier.

Both Stafford and Ron Foxworthy will remain on the bank's board as vice chairman and chairman, respectively. Page says both executives are a great resource with strong standing in the community.

It seems ironic to Coffee Talk that SunCoast Bancorp, the bank's holding company, was founded in 1999 in response to consolidation of local banks into national financial institutions, and now it's owned by a Mississippi company.

But Page says the local bank will retain its community feel, and will still have decision-making authority on local loans. The bank will now be able to offer larger loans to businesses and retailers.

"One of my main charges is to ensure we don't lose the community bank feeling," Page says.

NBC Capital (AMEX: NBY) paid $20.50 a share for SunCoast common stock, with 45% paid in cash and 55% in NBC's common stock.

In the most recent quarter, ended June 30, SunCoast net earnings declined to $62,000, or 6 cents basic and diluted per share, from $93,000, or 13 cents basic and 12 cents diluted per share, in the same period last year.

Bank officials blame the decline on the cost of legal and professional fees associated with the merger, according to an earnings statement filed with the Securities and Exchange Commission.

SunCoast had $140.3 million in assets on June 30. NBC Capital has offices in Mississippi, Tennessee and Alabama.

+ WCI Communities: No improvement soon

Those who are hoping for a quick turnaround in new-home sales in Southwest Florida may be disappointed.

During a recent earnings call with investors, Jerry Starkey, Bonita Springs-based WCI Communities' president and chief executive officer, says traffic at its residential communities will probably remain down more than 50% in 2006 from last year's levels.

"It continues to be a tough environment," Starkey says. "We don't know, frankly, if this will continue for three quarters or seven or eight more quarters." On Aug. 9, WCI's reported second-quarter net income fell 70% and new orders dropped 62% compared with the same quarter in 2005.

Starkey blamed negative consumer sentiment as the principal cause of the slowdown. In the meantime, he warned that the company plans to reduce marketing expenses and sell off golf courses and other amenities in its communities. Already, the company sold a half interest in its mortgage company to Wells Fargo for an undisclosed sum. As the volume of business drops, Starkey says the company plans to squeeze suppliers and subcontractors for lower costs.

Meanwhile, the company is evaluating its earlier plan to buy back more stock, which has been trading near $15 (its 52-week high was $32). "We're going to have a robust discussion before we take any action," Starkey says.

+ Developer want to spin Wicker into gold

With the market for condo towers at its lowest level in two years, what's a condo developer to do with their time? If you're Sarasota-based U.S. Assets Group, its time to look for projects that are small and unique. The developer behind Longboat Key's Vizcaya and en Provence Lido Key's Orchid Beach Club condominiums, is expected to close in early September on the purchase of the Wicker Inn, 5581 Gulf of Mexico Drive on Longboat Key.

Jay Tallman, partner and co-owner with Tom Brown of U.S. Assets Group, confirmed Tuesday his company has a contract to buy the two-acre, 11-unit resort property. He declined to disclose the price and terms of the transaction.

Tallman says the resort will operate through the upcoming season, but he expects to eventually replace the resort with an upscale six-unit condominium project. The property is zoned for three residential units per acre.

"We're probably going to market it this coming season," Tallman says.

If the sale closes as expected, the Wicker Inn purchase marks a departure for U.S. Assets Group. The company has focused over the past decade primarily on large-scale developments. In addition to the Vizcaya, en Provence and Orchid Beach Club, U.S. Assets also developed the Beau Ciel, a luxury condominium in downtown Sarasota. It also is developing the Founders Club, a luxury golf course-residential community east of Sarasota on Fruitville Road, in a partnership with developer/builder Fred Starling.

"This one came up earlier," Tallman says, "but we took a pass on it. But doing six real special condominiums is kind of attractive right now instead of a big tower. From a timing standpoint, it's a good deal for us."

The Wicker Inn was one of two Longboat Key resorts that owners Barry and Wendy Messer listed for sale in December with Michael Saunders & Co. The other property was the Arbors by the Sea, a 1-acre, five-unit resort. The couple originally listed the Wicker Inn at $5.9 million and the Arbors at $3.3 million.

To maximize the properties' potential, Michael Saunders associates Lee DeLieto, a commercial specialist, and Susan McCleod, a residential specialist, marketed both as opportunities either to continue as resorts or for conversion to residential development.

DeLieto says the properties drew multiple bids, with the Arbors by the Sea property selling earlier this summer for $3 million to Arbors by the Sea LLC.

Paul Stanley, a spokesman and partner in the Arbors by the Sea LLC and who has owned property on the Key for nine years, says he and his partners will continue operating the Arbors as a resort and don't plan to convert the property to residential use any time soon.

"It's not a good time now," he says. "We're having fun with it right now and just want to improve on what's there."

Stanley currently is founder and chief executive officer of Tampa-based CardioSleep Inc., a firm that opens and operates sleep centers for cardiology patients who suffer from sleep apnea.

Prior to founding CardioSleep, Stanley was founder and CEO of Questar Imaging Inc. from 1995 to 2000; COO and president of Meditek Health Corp. from 1990 to 1993; executive director of Quantum Imaging Inc. from 1986 to 1989.

Representing the Messers on the sale of the two properties were Lee DeLieto and Susan McCleod, of Michael Saunders & Co. Representing the buyers in both transactions was Andrew Bers, an associate with Prudential Palms Realty on Longboat Key.

The Messers purchased the Arbors by the Sea for $550,000 in January 1991, according to Manatee County property records. They purchased the Wicker Inn for $1 million in December 1993. Property records show Arbors by the Sea has a taxable value of $2.6 million, and the Wicker Inn has a taxable value of $3.38 million.

After listing their properties for sale, the Messers purchased a 23-unit bed-and-breakfast inn in Highlands, N.C.

+ Speakers added to Technology Conference

Four more speakers have been added to the list of presenters at the 2006 Sarasota/Manatee Technology Conference: Integration at the Crossroads. The conference, scheduled for Aug. 31 from 8 a.m. to 4 p.m. at the Hyatt Sarasota, is co-sponsored by the Review; speakers already on the list include Steven Knopik, recently named CEO of Bradenton-based Beall's; Sarasota Memorial Hospital president and CEO Gwen Mackenzie; and the Review's very own editor and publisher, Matt Walsh.

The new speakers include Josh Linker, a 2004 Ernst & Young recipient and CEO of ePrize, an online promotion business that develops Internet sweepstakes and instant-win games; Laurey Stryker, president and CEO of University of South Florida Sarasota-Manatee and a former Florida deputy secretary of labor; Tom O'Neal, founder and director of the University of Central Florida's Technology Incubator and an associate vice president of research at the school; Stuart Rogel, president and CEO of the Tampa Bay Partnership, a regional economic development group; and and Bob Leonard, owner of Bolen Communications, a Sarasota-based marketing and public relations firm specializing in technology companies.

Jeff and Rich Sloan, brothers and entrepreneurs extraordinaire, are scheduled to give the keynote presentation. The Sloans, who are regularly sought out by national business magazines and cable channels, plan to speak about how to succeed as an entrepreneur in a technology-heavy society.

For more information on the conference or to register, go to www.sarasotatechconference.com.

+ Affordable housing still not affordable

Since affordable and attainable housing have become the buzzwords of the day on the Gulf Coast, Coffee Talk wasn't too surprised to see that an overwhelming majority - 90% - of small business owners and entrepreneurs in Greater Sarasota say the housing market is a failure. What's more, according to the survey commissioned by the Argus Foundation, a Sarasota-based businesses and civic group, almost half of the respondents reported losing employees due to the housing issue and 20% reported delaying expansions.

The reasons the respondents listed for why the problem is now a crisis include the usual suspects: zoning and government regulations not allowing for enough buildable lots for affordable housing; rising insurance rates; high property taxes; and the high costs of construction and land.

Kerry Kirschner, the executive director of the Argus Foundation, says one potential solution is to establish 40-year land leases on lands in public ownership that could be used for housing construction. The long-term lease would allow for a "self regulating price control mechanism on price increases, without need for bureaucratic oversight and government control," Kirschner writes in a statement on the issue. Infrastructure costs and down-payment assistance can be provided by "general obligation bond issues spread over the entire community."

+ Downtown banished from Fort Myers lexicon

Downtown Fort Myers doesn't exist anymore.

The area of Fort Myers formerly called downtown is now the River District. So says the Fort Myers City Council after its redevelopment agency decided it needed a better name to market the area.

City elders hope the River District will one day be part of the lexicon, much like St. Armands Circle, Ybor City and Las Olas. The area hugs the Caloosahatchee River and is bounded by East First Street, McGregor Boulevard to the Edison-Ford Winter Estates, and Martin Luther King Jr. Boulevard to Fowler Street.

Along with the announcement of the new name came these instructions: If you must use the word "downtown," the city asks that you at least use quotation marks. And, please, don't capitalize the "T" in "the" when referring to the River District.

What's Ahead...

Sept. 12 - The Real Estate Investment Society in Fort Myers will host a luncheon to discuss commercial-property insurance. The speaker will be John Pollock, president of Fort Myers-based insurance broker Oswald Trippe & Co. The lunch starts at 11:30 a.m. at the Magnolia Room of Pelican Preserve in Fort Myers. Cost is $25 for members and $35 for guests. Register by Sept. 7 online at www.reis-swfl.org or call Sharon Heston at 239-410-1253.

Sept. 13 to Oct. 4 - The Sarasota County Technical Institute will hold a Managing a Small Business class on Wednesdays from 6 to 9:00 p.m. at the Sarasota County Technical Institute at the corner of Proctor and Beneva Roads, Sarasota. The instructor, Andy Fox, will cover staff selection, operations, and business communications. Cost is $54. Call the institute at (941) 924-1365 ext. 62234.

Oct. 27 - The Apex Award will be presented to a woman who has been nominated by her peers for outstanding achievement in career, community and leadership. The black-tie gala will be held at Harborside Events Center in Fort Myers and it begins at 6 p.m. To register, visit the Web site of the Greater Fort Myers Chamber of Commerce at www.fortmyers.org.

Information

A One-Man Partnership

Success can be as simple as getting the right guy in the right position.

Tony Souza became president of Sarasota's Downtown Partnership in March 2005, at the time, a little-known entity in city politics. But things have changed in a short period as the non-profit group has turned into a major player in downtown development.

When Souza took over, there were 200 members - many who were inactive. Now, 400 residents, merchants and community leaders are involved with the partnership and making waves.

Souza credits the increase to better organization and a system for keeping track of members. "Everything needed to be updated when I came in. Our filing needed to be brought up-to-date and there were a lot of people on the books that weren't active in the group anymore," Souza said. "I think the greatest success on behalf of the partnership is other partnerships we've made. We try to work together and we've been very successful in growing in members and financially."

Souza was also instrumental in moving the group's office to the "cracker cottage" at 1365 Fruitville Road from its old Main Street location. "We didn't own the old building and the owner was not willing to fix it up. The partnership had been there for 10 years, but we had every problem you could imagine," he said. "It's symbolic because we are just over the line in the Rosemary District and it's great because one of the projects we are promoting is the revitalization of Fruitville. We are putting our money where our mouth is."

Souza said that the real crowning jewels of his tenure are the downtown projects the group is involved in. "There is the redesign of Fruitville Road. Creation of a historical district in downtown and the creation of a business improvement district that will provide private funding for clean-up and marketing downtown," he said.

The group also has several upcoming projects including a partnership with the Sarasota Chamber of Commerce that will aid in funding the infant downtown cultural district.

As president, Souza is the organization's sole full-time, paid employee. He just signed a contract for two more years. "I love Sarasota. It has a lot of challenges, but the city is like a teenager growing up to be a beautiful adult," he said. "I am hoping in five years downtown will be considered one of the finest downtowns in the county and I will hope the Downtown Partnership will be partly responsible for part of that."

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