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Business Observer Friday, Sep. 10, 2004 18 years ago

From Farmer to Developer

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Manatee Fruit Co., one of the area's larger landowners, changes with the times.

From Farmer to Developer

Manatee Fruit Co., one of the area's larger landowners, changes with the times.

By Sean Roth

Real Estate Editor

At heart, Whiting Preston is a farmer, just like his father, grandfather and great-grandfather. One of Preston's fondest memories involve riding with his dad, Walter, atop a harvester, through the family's flower fields in God's country.

The Preston family's Manatee Fruit Co. owns roughly 2,300 acres along Florida's West Coast and has farmed it for more than a century.

But the world doesn't stand still.

In recent years, Florida agriculture - faced with international competition and citrus canker- has been hit hard. Net farm income has declined in Florida every year since 1999 and is down 45% from $2.7 billion in 1999 to $1.87 billion in 2003, according to the Florida Agricultural Statistics Service.

Preston, 44, a fourth-generation farmer, must find a new way to make money - by developing.

This year, Preston's attention has been evenly divided between the farming and distribution of flowering plants, and real estate development.

"There is a long lineage of ownership here, but over the 100 years my family has changed its business," he says. "It changed because of the conditions they were presented with. Just like we are."

Lemons to condos

Most recently, the Preston name has come up in connection with Arvida's six-year fight to build mid- and high-rise condominiums on Perico Island. The family owns about 350 acres at the center of a legal battle between the developer, the environmental group ManaSota-88, the city of Bradenton and the Manatee County Commission.

But the family's business interests expand beyond that project.

For now, the majority of Manatee Fruit's business remains farming and distribution related. Each year, the company, founded as Manatee Lemon Co. in 1892, grows as much as 20 million cut ornamental flowers - principally gladiolas- and about 500,000 potted-plants to sell as far north as Canada. Its planting and harvesting schedule runs from October to May.

On the distribution side, Manatee Fruit's subsidiary, Cortez Floral, hauls about 10 million flowers annually from growers throughout the world to retail shops and distributors along the Gulf Coast. While the distribution business is only 15 years old, Cortez Floral is widely considered one of the area's largest flower distributors.

"Miami is the largest port of entry of cut flowers into the United States," Preston says. "The majority of those cut flowers come from Colombia, Ecuador and Costa Rica. And so we are in the middle of the divide in providing service to the independent retailers."

He says that about 80% of the cut flowers sold in the U.S. are grown offshore.

Cortez Floral's customers include grocery and retail chains such as Albertson's and Wal-Mart, along the East Coast of the United States.

Preston's two companies work well together because of the synergies of equipment and facilities, and the distinctly different active seasons, he says.

Although Preston would not discuss revenue or profit, he says the two companies employ about 200 people and deliver to about 600 customers.

Time for change

Until the 1980s, Manatee Fruit's real estate transfers happened incidentally in the operation of the flower businesses. But Walter and Whiting Preston were concerned the company was too centralized in agriculture. Then in 1986, Whiting Preston Sr., Walter's father, died and left the company with a hefty estate tax bill.

"My grandfather and my great-grandfather farmed citrus and vegetables," Whiting Preston says. "My father focused in on the cut-flower business, and we started the distribution business. My father still works today. Now we're getting into the development business too. So in order to survive, we have had to change over the course of time. It's something we try to embrace. You either embrace it or it runs you over."

But Manatee Fruit has one huge valuable asset - large swaths of land, some located along the water, running from Manatee County to Collier County. But the company had no direct experience as a developer. So to whom would the company turn? For one, the premier developer in Naples, Westinghouse Communities Inc., which is now known as WCI Communities Inc.

"We partnered with people that we felt had incredible success ... that were reliable ... that were credible and that we felt could perform up to the ideals that we hold dear," Preston says.

Westinghouse was in the midst of developing Pelican Bay, the 6,000-home master-planned community on the Gulf of Mexico in Naples anchored by The Ritz-Carlton Naples and the Registry Resort & Club.

Byron Koste, the former CEO of Westinghouse Communities in Naples who's now executive director of the University of Colorado Real Estate Foundation at the Leeds School of Business, says Westinghouse pursued the property over a two-year period.

"We absolutely went after them," Koste says. "The first time we contacted them they politely declined. We understood; they didn't know us. So without getting overly pushy we suggested a helicopter ride to show them what we wanted to do with the property. We spent a lot of time working with Walter and Whiting."

They finally reached a deal.

Over an eight-year period, from 1990 to 1998, WCI paid Manatee Fruit about $47 million for 1,440 acres. The first part of the property, which became Tiburon, was for $18.2 million - then a record in Collier County. Preston says, however, that capital gains and estate taxes ate up most of the proceeds from the deal.

That property now makes up the well-known golf course communities of Tiburon and Pelican Marsh.

"We learned a lot from that whole relationship," Preston says. "That was the first land-sale development that I was ever involved in. My grandfather bought and sold property and my father did the same. But it was different back then. The whole land-value issue was under a different model."

During that time, the Preston family received another - albeit unpleasant - reason to transfer its land to development. A number of its citrus groves were identified as having citrus canker; it was first time that canker had been found in commercial groves since 1927.

As Manatee Fruit was selling the last of its Naples property to Westinghouse in the late '90s, Manatee County government officials talked to the family about its plans to extend Lockwood Ridge, from State Road 70 to University Parkway, through the family's property.

"When we were trying to determine the value for the property, we did an exercise where we laid a plan on the property with some of the local consultants," Preston says. "When we started to tweak the property, we realized this might make a good plan for the property. We sold the land to Manatee County."

Then they sought site plan approval for the Villages of Lockwood Ridge. Approved in October of 2000, it was for a mixed-use development with 600 homes and 146,000-square-foot of commercial space. The plan also included the extension of Honore Avenue - a road that Preston says will be one of the county's more important arterial roads.

With the approvals in place, the Preston family signed a contract with Pat Neal and Centex Homes to sell the land for the development. While the road extension has been a protracted process because of right-of-way and other technical issues, units in Barrington Ridge and Mandalay Bay are said to be selling faster than expected.

Waiting for Perico

Simultaneously, Manatee Fruit made the initial move on what has become its most noteworthy and litigious development - 350 acres on the northern end of Perico Island. The family had owned the property, located just east of the Perico Harbor Marina on the north side of the Manatee Avenue, for 60 years.

"Because we are a family company we have lots of issues that are internal and inherent," Preston says. "We have a strategy to deal with our business plan, the flower business, our succession plan, estate planning and taxes. This piece of property, we saw, was an opportunity to work within our business. It is a unique piece of property. It's valuable. It was also becoming increasingly harder for us to farm it, because of where it's located."

In 1998, the company allowed Bradenton to annex the property, a fairly clear indication that the Prestons planned to develop the property. Shortly thereafter, the Preston family reached a deal with Arvida, the residential development wing of Jacksonville-based The St. Joe Co., to sell the property for a development.

"We had received quite a bit of press from the annexation," Preston says. "They (Arvida officials) called us up and said they wanted to talk to us about this property and so we met with them."

Arvida submitted a site plan for a 900-unit residential plan with about 30 condominium buildings of various heights. The Bradenton City Council approved the site plan, but the development was halted by a lawsuit by ManaSota-88, Concerned Citizens of Manatee County and Manatee County government over building heights, environmental concerns and congestion on the main evacuation route, State Road 64.

On March 5, Arvida reduced the number of residential units to 686 in a total of 13 condominium buildings, including five that reach 10 stories. The Bradenton City Council approved the site plan on June 9, followed by the expected legal grumblings of ManaSota-88 and the county. The county has since filed a complaint with the 12th Judicial Circuit Court to contest the city's most recent decision. The first mediation session between the parties passed on Aug. 28, with no break in the logjam.

While the legal battle continues, the Preston family is left holding the land and waiting.

"Our contract with Arvida is subject to the development," Preston says. "Basically this has had a profound effect on our business ¦ Psychologically within our family it has had an effect on us. We have other things that we are focusing on today. The reality is we still have some palm trees out there. We are considering putting some other plants out there as well."

Although he admits he's biased toward the project, he says he also supports it because of the lack of business vitality in the west Manatee County market.

"If you drive down Manatee Avenue, west of Bradenton, there are self-storage facilities being developed in prime retail commercial locations," Preston says. "That is an indication of the marketplace. We are not building restaurants or shops. That area, because of the way it was developed, is not sharing in some of the same quality developments taking place in other areas of Manatee County. What's wrong with having a quality-development lifestyle in west Manatee? It is a great project, with low density and low environmental impacts."

Preston has become accustomed to the constant challenges over the past six years, he says, adding: "Anytime you have someone challenging you, it is hard to take, but it is just part of my job. You just have to try to understand what the critics are laying out there.

"Given everything that has happened today, we don't regret one single thing. We feel like this is a good project, this is the right project at the right time and the right place."

On its own

Manatee Fruit's newest development, the Bay Ponte at Terra Ceia Bay Country Club, is the Preston family's first turn as a developer. The company owned and farmed the property across Terra Ceia Boulevard from the country club in downtown Palmetto.

"This community had a troubled past," Preston says. "We have watched from across the street - so to speak. There have been three developers that have gone through it. There were a lot of reasons it didn't perform well, including a drop in the real estate market (1989-'91) and marketing problems."

Fru-Con, a German company, decided in about 2001 to divest its interest in the project, so Manatee Fruit put contracts on four parcels.

So far, the company is the sole developer of the $16 million, 36-unit six-story (over parking) condominium tower. The company has no ownership in the clubhouse or golf course, which is owned by the homeowners' association.

To better handle the added demands of development, the Preston family hired a full-time project manager, Carlos Escalante. Twenty-two units in the project, which is being marketed by Wagner Realty, have been sold. Units start in the mid $300,000s and the average sale price in the tower is about $450,000.

"We have recognized the limits of the citrus industry today," Preston says. "We realized we have to move forward."

Preston, the developer, expects to complete construction plans and request the necessary permits this month.

Manatee Fruit also owns property on both sides of the development, including an eight-block single-family subdivision on 21st Street in the country club called Fairway Estates.

"We are working diligently on Bay Pointe and Fairway Estates establishing our credibility within the community," Preston says. "I feel very good about where we are with both types of projects. This year has been very busy, with Arvida going through, and I have taken a lot of time working on that project. We are interested in seeing that any development that occurs on our property is something economically viable and is something that works within the community."

Still, the company plans to keep its roots in agriculture with the flower operation.

"I grew up going to the farm with my dad," Preston says. "It's something that becomes part of your soul.

"It's challenging, but flowers are a great thing to produce. It's one of the only products you can buy that communicates emotion without saying anything ... whether it's sympathy or love."

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