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Coffee Talk (Sara/Mana)
Babcock deal an 'opportunity' for Morgan Stanley
It's pretty clear now the Morgan Stanley real estate funds that are backing the purchase of Florida Babcock Co. with West Palm Beach developer Syd Kitson are called "opportunity funds" for a good reason.
Their target: achieve average annual percentage returns in the high teens to low 20s. Thomas Hoban Jr., Kitson's president and chief executive officer, says these real estate closed-end funds seek to achieve above-average results for high-net-worth individuals and institutions such as pension funds.
Hoban should know. He worked on $9 billion worth of real estate deals at Morgan Stanley before joining Kitson in 2003. Hoban won't say what kind of returns he expects from the Babcock Ranch deal. "You're expected to get the appropriate risk-adjusted return," he says. "It differs by deal."
The Babcock deal, which is expected to close early next year, took a big step forward Nov. 22 when the state approved purchasing 74,000 acres of the ranch for $350 million, or $4,730 an acre. Earlier this year, Kitson and Morgan Stanley acquired the ranch's entire 91,000 acres for about $700 million, or $7,693 an acre.
South Trail less Friendly
Joe Sandor, Joe Camera and Carmine and Fred D'Ariano, Sarasota-Manatee counties' Friendly's restaurant franchisees, have closed their centrl Sarasota restaurant at 6606 S. Tamiami Trail.
"We're in the process of opening our State Road 64 store and are basically shifting our operation over there," Sandor says. He says that it was a mixture of factors that led the partners to decide to close the restaurant, including the size of the store, which at 6,500 square feet was about 2,000 square feet larger than they preferred.
The State Road 64 restaurant is scheduled to open Dec. 5.
"We had hoped to be open there a lot sooner, but it didn't happen," Sandor says. "Most likely we will have a Sarasota County location within 18 months. We sure appreciate the customers and their patronage of our Sarasota location, and we invite them to visit us at the State Road 64 store."
Although all 32 of the restaurant's South Trail employees have been offered positions at the State Road 64, Sandor expected only 10 to 12 employees to make the change.
The restaurant's last day open was Oct. 31. There is talk the Friendly's partners may already have a contract with another company to sublease the space, although Sandor was unable to confirm or deny the report.
Sarbox bash at FGCU
The acronyms flew at the annual W. Thomas Howard lecture sponsored by Florida Gulf Coast University's business school in Fort Myers recently.
The Sarbanes-Oxley Act - a.k.a. Sarbox and Sox - is the law every senior executive loves to hate. The bashers included Charlie Kleman, chief financial officer of women's retailer Chico's. He says the regulations are "like hitting an ant with a sledge hammer."
The accountant on the panel was more sanguine. Steven Swyers, who serves as the lead global engagement partner for Bank of America at PricewaterhouseCoopers, says his clients typically go through five phases of Sox. Stage one is innocence, in which executives think their company has no accounting deficiencies. Stage two is skepticism of what the law requires. Stage three is anger at the volume of work that's involved. Stage four is fear, sparked by accountants who present evidence of control deficiencies. Stage five is what Swyers calls "value awakening," in which executives finally see the light and realize they now have better financial controls.
And you thought AA meetings were tough to sit through.
Sorry, the lot doesn't go with the building
Buy a building and get that lot for free is what a number of real estate investors initially thought when they went to see the former Badcock Home Furnishings building at 1570 Boulevard Of The Arts in Sarasota. In fact, the number of prospective buyers ogling the vacant lot next to the building was so great that it convinced the lot-owners, Mark Pierce and George Birkhold, to fence it off.
"It's not for sale," Pierce says of the lot. "I'm not saying I wouldn't sell it, but it isn't being listed. We expect to put condominiums there, and we are working on it. But at this point we have no set time schedule."
Lee DeLieto of Michael Saunders & Co. is listing the 18,500-square-foot former Badcock building for $2.5 million.
Everybody and his uncle facing suits
The second annual Litigation Trends Survey of corporate general counsel produced by the international law firm of Fulbright & Jaworski LLP doesn't paint a pretty picture of U.S. corporations and in particular the real estate business. The study, based on 304 interviews with U.S. corporate attorneys, reports that 87% of U.S. corporations are involved in some type of litigation, and the average company faces a docket of 37 lawsuits. The most numerous types of litigation last year were contracts (42%) and labor/employment (38%).
The study also showed that real estate and technology/communications companies were the most likely to have legal budgets of 2% or more of gross revenues. Fourteen percent of real estate companies have legal budgets that total more than 5% of their total gross revenue, and another 20% spend between 2% and 5%. The average real estate company is facing 39 litigation actions, five of which it initiated.
Three years ago the highest incidence of class action cases was found in health care, energy, manufacturing, insurance and technology/communications companies. Last year, the highest incidences of class actions occurred in manufacturing (30%), real estate (20%), energy (19%), finance (19%) and technology/communications (17%).
Houston's Greenwood Surveys, an independent research firm, conducted the corporate counsel 2005 Litigation Trends Survey during June and July.
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