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Coffee Talk
Business Observer Friday, Oct. 27, 2006 15 years ago

Coffee Talk

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Are you looking to own an historic Sarasota conglomerate made up of high-end restaurants, grocery stores and gift shops? Here's your chance: Epicurean Life, the parent company of Morton's Gourmet Market. rivate-equity groups have targeted HMA in an effort to take the Naples-based hospital company private.Frank D'Alessandro warns that overleveraged real estate speculators could flood the Southwest Florida residential market, further depressing real estate values.Eric Livingston says he takes a proactive approach to running his company that provides IT help for small- and mid-sized businesses. He bluntly puts it this way: "We go out and be proactive and monitor systems so that they don't crap out in the first place." Ross strategy is to follow the BeallThe 2004-2005 hurricane season has claimed another victim: Albritton Fruit Co.Nearly 90% of high-net commercial real estate investors are confident their investment choice is still the best way of making money.How do nonprofits get by in a competitive business climate?

Coffee Talk

+ A fine sale ofhigh-end stores

Are you looking to own an historic Sarasota conglomerate made up of high-end restaurants, grocery stores and gift shops? Here's your chance: Epicurean Life, the parent company of Morton's Gourmet Market in Sarasota and Lakewood Ranch, as well as Fred's Restaurant, Annabelle's Home & Kitchen and the Tasting Room, is being put up for sale.

If bought as one package, the final price could make for an expensive checkout of $31 million. Epicurean Life officials say the sale could be broken up, too, depending on the buyer and offer.

The current owner is Bill Griffin, a Sarasota entrepreneur who took insurance company Riscorp public in 1996 and later was at the forefront of a company scandal that involved illegal campaign contributions, for which he ultimately served five months in federal prison. Griffin bought the Sarasota Morton's Market in 1997; since then he's replaced the old building on Osprey Avenue with a Mediterranean look and added the other components, including the restaurants, kitchen goods store and J.D. Ford Fine Wines. Griffin couldn't be reached to comment on why he's selling or what his future plans are.

The sale announcement comes just after Epicurean Life's long-awaited expansion, as it's second Morton's Market opened in August on Lakewood Ranch's Main Street; an Annabelle's Home & Kitchen opened there as well, and a Fred's Restaurant is expected to open there soon.

Selling the parent company though, doesn't necessarily mean an end to the expansion, those involved with the company say. The flagship Morton's Market has been sold three times previously and has grown in stature after each sale. Epicurean Life CEO Randy Salser says he hopes whoever buys the business develops a similar growth plan.

The Michael Saunders & Co. real estate juggernaut has been brought in to assist with the sale. Says Saunders: "These business are literally located at the crossroads of where Sarasota's best neighborhoods come together. Whoever takes Epicurean Life to the next level is absolutely assured of a large, affluent and true-blue following."

A Saunders spokesman tells Coffee Talk the new buyer could come from a variety of deep-pocketed sources, from corporate entities to venture capitalists to entrepreneurs with experience in high-end retail. Possible expansions could be to places with similar demographics to Sarasota, such as Naples.

+ Private-equity groups target HMA

Private-equity groups have targeted HMA in an effort to take the Naples-based hospital company private.

In a conference call with analysts on Oct. 24, HMA Chief Executive Officer and Vice Chairman Joseph Vumbacco, told analysts that private-equity investors had recently contacted the company, but he did not say who possible the possible suitors are or if any deal is imminent.

"Our board of directors will diligently review any proposal we receive," Vumbacco says.

Private-equity investors have been circling the struggling hospital industry in search of higher returns. These investors generally buy companies using leverage and restructure the businesses with the aim to sell them later at a profit.

In July, private-equity firms Bain Capital, Kohlberg Kravis Roberts and Merrill Lynch Private Equity agreed to pay $33 billion to buy Nashville-based hospital company HCA. The price was an 18% premium over the closing share price the day prior to the announcement.

HMA operates 57 hospitals in 14 states. The company focuses primarily on rural areas where it is the dominant provider of acute-care services. The company reported third quarter net income of $74.4 million, or 31 cents per share, down 15% from $87.8 million, or 35 cents per share, in the same quarter in 2005.

+ Housing speculators loaded with debt

Frank D'Alessandro, a veteran commercial real estate broker in Lee County and principal with Gates D'Alessandro & Woodyard, warns that overleveraged real estate speculators could flood the Southwest Florida residential market, further depressing real estate values.

In an address to a group of business executives in Fort Myers, D'Alessandro says there are thousands of investors who borrowed too much money to buy inflated properties last year. They'll be squeezed by rising interest rates and falling property values.

D'Alessandro cited the anecdote of a wealthy investor from the tony Port Royal neighborhood in Naples. The unnamed investor bought 80 lots in Lehigh Acres for an average price of $52,000 per lot at the height of the residential boom last year for a total of about $4 million. To do that, he borrowed money by putting a second mortgage on his Naples home. Today, the same lots are selling for about half of what he paid.

+ Welcome to Sarasota, Mr. Livingston

Eric Livingston says he takes a proactive approach to running his company that provides IT help for small- and mid-sized businesses. He bluntly puts it this way: "We go out and be proactive and monitor systems so that they don't crap out in the first place."

Livingston is taking his approach and his business, Private Client Technologies, to Sarasota full-time. He's had clients in the area for the past two years and in early October he moved the company's headquarters from Boston to Lakewood Ranch. Livingston, president and CEO, tells Coffee Talk that Southwest Florida has more of the small businesses - 20 employees or less - that Private Client Technologies thrives on. "It's a much more fertile ground for our business to grow," he says.

Livingston launched the firm in 2002 after working in the IT field for more than 20 years in Boston and Virginia, both for a large company and as a consultant to Fortune 500 firms. Among his other accomplishments, he has an MBA from Yale University; in Boston he supervised an IT staff of as many as 100 people; and he invented a patented technique for managing e-commerce systems.

Livingston says the company's theory of trying to avoid a crisis by providing constant upkeep and service has been catching on. He declined to discuss revenue figures, but says the company has grown 50% in the last three months.

+ Ross strategy is to follow the Beall

Last week, the Review detailed strategies that Bradenton-based retailer Beall's Inc. has been using to continue its stellar annual revenue growth. One method: Converting larger so-called big-box stores, such as shuttered Kmarts, Wal-Marts or Home Depots into new Beall's Department Stores. It's much cheaper than building a new store or expanding an existing store, executives explained.

Now it appears a familiar Beall's foe will be utilizing a similar strategy. Pleasanton, Calif.-based Ross Stores Inc., a low-cost retailer and direct competitor of Beall's 463 outlet stores, bought 46 Albertson's grocery stores recently, including several in Florida and Arizona, where hundreds of Beall's Outlets are located. Ross, parent company of Ross Dress for Less and dd's Discount, expects to convert the grocery stores to its discount retail stores over the next few months. A company spokesman declined to say where the Florida stores are located or how many stores the company bought.

+ Sarasota's Albritton deals with hurricane problems

The 2004-2005 hurricane season has claimed another victim: Albritton Fruit Co., one of Sarasota's oldest family owned businesses. The hurricane-caused damage to the state's citrus crops have led the company, known for its citrus fruit baskets, to close stores in Siesta Key, Longboat Key, Venice and Englewood, says Rich Odato of Odato Marketing Group, which represents Albritton. The company's original store on 5430 Proctor Road in Sarasota will remain open.

The family will look into other farming-related businesses, Odato says, including possibly more cattle ranching.

+ Commercial real estate expectations high

Despite some big-picture worries, such as rising interest rates, nearly 90% of high-net commercial real estate investors are confident their investment choice is still the best way of making money. That was a key finding of a survey commissioned by the Grubb & Ellis Private Capital Group; the poll reported on the habits and predictions of more than 250 people specializing in commercial real estate deals between $2 million to $15 million.

Coffee Talk isn't surprised that commercial real estate investors vote to support themselves. But the strength of the numbers - 89% for real estate, 6% for stocks and mutual funds and 3% for bonds and short-term cash - is surprising, considering the gloomy atmosphere looming around the industry.

"Their faith signifies a belief that commercial real estate is not in a bubble and that investors can continue to earn competitive returns," the survey states. "This finding is significant because private investors typically rely on leverage to a greater degree than their institutional counterparts, so they would be the first to depart in the face of intolerably high interest rates or better returns from other asset classes."

The group had a bigger difference of opinion on analyzing when the hot market will cool off. Forty-two percent say there's one to three years left, while 29% say it will bottom out in less then a year. Still, 19%, called "super optimists" by Grubb & Ellis, expect the good times to continue for more than five years. Those cheery fellows believe "real estate was under-priced through the 1990s," the survey says, "and that the steady decline in cap rates over the past four years represents a 'return to normalcy,' not a speculative bubble waiting to pop."

Finally, the survey suggests the market is turning to the buyer's side. More than a third of the respondents, 36%, said sellers have become more realistic over the last six months and are both less likely to hold out for a high price and are more willing to negotiate to lock in profits.

The Other Half

How do nonprofits get by in a competitive business climate?

Coffee Talk is aware that many executives have responsibilities that go beyond running their own companies. Many serve and volunteer for nonprofit boards and groups, where jobs include setting up salary and benefits for employees, from the CEO on down to the rank-and-file.

And, just like in the for-profit world, that task can be a minefield, made only more difficult to navigate by Southwest Florida's phenomenally low unemployment rates. Questions abound, such as what kind of retirement plans to offer, whether to pay employees back who opt out of medical coverage and how and when to give raises.

Staff at the Community Foundation of Sarasota County's Nonprofit Resource Center, a help-center and fundraising arm for local nonprofits, have been hearing those kinds of questions for years. So it recently provided answers in the form of its first comprehensive salary and benefits survey. The group plans to survey the non-profit world again in 2008.

"This provides data so nonprofits can be more competitive in retaining talent," Nonprofit Resources Center vice president Christie Lewis says, adding that several nonprofit organizations have already made changes in benefits and pay packages based on the findings.

The survey, which took about 10 months to compile and was co-chaired by Lloyd Sidwell, a retired non-profit executive who worked in the mental health field, and Kathie Roberts, a retired human resources executive with Federated Department Stores, polled 169 non-profit groups in Sarasota and Manatee counties and 109 responded. Annual operating budgets of the organizations ranged from less than $250,000 to $10 million-plus.

Not only could the survey be helpful for non-profit board members, some of the results could be useful for small business owners and entrepreneurs just getting started.

For example, one survey question probed how organizations determine what to pay a new hire. More than half of the 109 respondents reported using board determination and local studies as a guide, while more than 41% used industry studies and "applicant expectation." Exactly half of the respondents reported using a philosophy of being "at market" when setting salaries, while 13% reported being "slightly below market" and 7% reported being slightly "above market."

Another question delved into how groups determine whether to give raises; 60% of the respondents reported forecasting raises in the coming year of at least 3%. Eighty-six percent say they use individual performance as guide, while other answers generating a response of at least 30% include cost-of-living data, organizational performance and increased responsibilities.

The survey also looked at employee retention methods besides salary, probing different types of methods to keep workers happy. A majority of the respondents reported using parties and public recognition as well as giving out publicity in places like bulletin boards and newsletters. Other benefits include direct payroll deposit (62%); professional dues (45%); and childcare (8%).

Employee benefits are also a hot-button issue for non-profits, with how to tackle healthcare leading the way. One issue not covered specifically in the survey was the somewhat new phenomenon of younger and new hires asking for money in lieu of signing up for employee benefits.

That topic was brought up at a recent informal meeting on the survey hosted by the foundation. For example, Bob Carter, of the Sarasota-based Senior Friendship Center, says he's considering going to a plan that would allow employees to get reimbursed if they drop company provided medical coverage. That plan would be a perk for current and perspective employees, Carter says, as people come to work at different stages in their financial lives. "I think that kind of application has benefits for the for-profit model," he says.

On healthcare overall, 77% of respondents provide medical insurance to full-time employees and of that group, 43 organizations contribute 100% of the costs for each of the workers. Just over half of the respondents, 57%, provide dental benefits to full-timers, while 40% provide vision benefits. About 25% of the overall respondents provide healthcare benefits to employee dependents.

- Mark Gordon

Show them the money

Some highlights from the executive salary portion of the Nonprofit Resource Center's compensation and benefits survey:

CEOs

The average annual salary for CEOs ranged from $39,200 for groups with operating budgets less than $250,000 to $154,200 for organizations with operating budgets more than $10 million. The average annual salary was lowest - $58,000 - for organizations focused on civic community improvement and highest - $92,700 - for organizations focused on health and wellness.

CFOs

The average annual salary for CFOs ranged from $27,100 for groups with operating budgets in the $250,000 to $499,000 range to $90,800 for organizations with operating budgets more than $10 million. The average annual salary for the CFO position was lowest - $49,5000 - for organizations focused on arts, and highest - $64,700 - for organizations focused on health and wellness.

COOs

The average salary for COOs ranged from $37,600 for groups with operating budgets in the $250,000 to $499,000 range to $101,300 for organizations with operating budgets $10 million or greater. The average salary for the COO position was lowest - $55,800 - for organizations focused on arts and highest - $78,000 - for organizations focused on health and wellness.

Source: Community Foundation of Sarasota County's Nonprofit Resource Center, 2006 Nonprofit Compensation and Benefits Survey.

At a glance: Executive benefits and allowances

Benefits/Allowances CEO COO/Associate Director CFO

Automobile provided 14% 3% 2%

Automobile allowance 25% 5% 5%

Cell phone/PDA 62% 27% 17%

Club membership 12% 2% 2%

Professional dues paid 45% 18% 15%

Employment contract 45% 6% 9%

Supplemental vacation 28% 9% 12%

Supplemental insurance 27% 9% 11%

Supplemental retirement 21% 6% 9%

Source: Community Foundation of Sarasota County's Nonprofit Resource Center, 2006 Nonprofit Compensation and Benefits Survey.

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