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Business Observer Friday, Jan. 23, 2004 17 years ago

Millionaires Club

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The four finalists for developing a project at Palm and Cocoanut avenues appear to have the experience and the funds to deliver.

Millionaires Club

The four finalists for developing a project at Palm and Cocoanut avenues appear to have the experience and the funds to deliver.

By Sean Roth

Real Estate Editor

After Lindell Investments Inc. and the PatrinelyGroup LLC withdrew their proposal to develop the city-owned property at Palm and Cocoanut avenues in downtown Sarasota, the field has narrowed to four potential developers. While the city's reviewing committee is likely to put a great deal of emphasis on the proposals themselves, the developers behind the projects all share one unifying factor: seven-figure plus revenue.

The four development groups submitted financial statements to show city reviewers they are capable of large-scale development, and the statements clearly show that they have considerable backing. Some of the statements are not as detailed as others, but they are interesting nonetheless. The proposals are ranked by the score awarded by the city's review committee.

Plaza Verdi

Rank: 1st (score 11)

Potential developers: Ersa Grae Corp., Houston; Kraft Construction Co. Inc., Naples; and The ADP Group Inc., Sarasota.

"Each of Ersa Grae's projects are normally held in a single asset subsidiary, jointly owned with various investors.

"The sell out value of Ersa Grae's projects are in excess of $500 million. The net asset value of current projects is about $175 million. Ersa Grae has banking relationships with various financial institutions providing construction lending. In addition, Ersa Grae has access to a variety of institutional and individual investors, who are recruited either as mezzanine lenders or equity partners to augment and enhance the construction loan.

"The ownership and financial structure of the proposed Plaza Verdi will most likely be very similar to Five Points Plaza through a special purpose single asset Florida LLC or partnership."

The Palm

Rank: 2nd (score 13)

Potential developers: Southcoast Partners Inc., Boca Raton, and LB Jax Development LLC, Jacksonville.

"Financial capacity of development team. The projects highlighted below are for the most part completed projects with actual construction commitments financing that have been achieved and successfully paid off by the principals of Sarasota Main Street. Palmetto Place, Bridgeside Place and the Highland Beach Club are all excellent real examples of our ability to achieve highly competitive construction financing commitments with prominent lenders such as Bank of America, Ohio Savings (AmTrust Bank), or General Electric Capital Corp.

"We are in serious discussions with each of the above referenced lenders with our proposed Thirteen Fifty Main mixed-use project one block to the south of the Palm site. Each of these lenders as well as other local lenders like Sarasota/Colonial Bank, AmSouth and United Bank have expressed significant interest in financing The Palm with us. The reasons for their strong interest are that they believe in us as experienced urban-oriented developers of complicated public-private developments.

"The principals all have unblemished financial statements with limited current debt levels and they believe in the growth and future of downtown Sarasota with a well-conceived and well-executed project such as The Palm.

"Another very important measure of the financial capacity and overall strength of the development team to perform is the local experience and financial capacity of the general contractor with annual revenues in excess of $250 million. Development team general contractor, Kraft Construction Co., has demonstrated 35 years of experience in organizing and completing complicated urban mid-size projects such as The Palm. Kraft's Sarasota office is currently constructing the One Hundred Central (Whole Foods) project, Plaza at Five Points and will build our Thirteen Fifty Main project. In addition, Kraft Construction has been the general contractor for the city of Sarasota, Sarasota School District and Sarasota County."

Southcoast Partner projects:

Palmetto Place Condominiums, Boca Raton; started 2000; $53.5 million; Ohio Savings (AmTrust Bank).

Bridgeside Place, Fort Lauderdale: started 1998; $53 million; Bank of America.

Highland Beach Club, Highland Beach: started 2003; $27 million; General Electric Capital and Bank of America.

Worthing Place Apartments: started 2000; $45 million; SunTrust (pending).

Merrill Lynch Building: started 1998; $7 million; Bankers Trust.

Smith Barney Building: started 1997; $1.5 million; Bankers Trust.

1801 Military Trail: started 1999; $12.0 million; Guaranty Federal Bank.

LB Jax Development projects:

W.A. Knight Building: started 2000; $1.5 million; Wachovia National Bank, Jacksonville DDA and Duval County HFA.

West University Avenue Lofts: started 2003; $3 million; SunTrust National Bank and private limited partner equity investor.

Barnett Bank Building: started 2004; $26 million; City of Jacksonville, private limited partner equity investor, federal historic tax credit investor and first mortgage lender Wachovia National Bank or SunTrust National Bank.

Thirteen Fifty Main: scheduled to start construction in the summer; $50 million; conventional financing by a local Sarasota lender, such as Sarasota/Colonial Bank, AmSouth or United Bank.

The three principals - William Morris, Christopher Brown and Michael Langton - have a combined net worth of about $23.2 million.

Unnamed redevelopment plan

Rank: 3rd (score 21)

Potential developers: Arcadia Land Co., a Delaware company with offices in Wayne, Pa.

"Statement of equity investment capability: Each of the Arcadia principals has accumulated significant personal wealth, but Arcadia Land Co. is a private company ¦ with limited capitalization.

"Rather than use Arcadia as an investment vehicle, the principals choose to create a project - specific partnerships - initially capitalized with their own funds, but typically garnering significant capital from development or investment partners. This will be the case in terms of the Palm Avenue redevelopment.

"However, intense efforts to arrange their personal financial commitments or to locate financial partners will not proceed until the proposal winner is selected. At that point, Arcadia will reassess the overall capital needs of the project - principally to obtain entitlements and fund pre-marketing - and tap investors who have partnered previous projects of this scale.

"As such, there is no audited financial data to share with the Sarasota (Community Redevelopment Agency). In lieu of this, we invite the agency to review the scale of the most recent projects undertaken and, more importantly, completed by Arcadia. ¦ Essentially the principals and key managers of Arcadia continue to plan and develop high profile projects. ¦

"The acid test for equity funding is simple - if Arcadia believes a project is investment-worthy, there will be no shortage of equity to fund it. At this preliminary time, the Palm Avenue project appears to be financially feasible as a medium-term investment. As due diligence continues to proceed, we anticipate that this will continue to be the case.

Mission, capabilities and experience: Arcadia Land Co. specializes in managing and investing in New Urbanist projects. ¦ Arcadia's expertise is not limited to Greenfield projects. Its most ambitious undertaking to date is the redevelopment of a major portion of downtown Albuquerque, N.M., in collaboration with the city of Albuquerque and a well-known philanthropic foundation."

Downtown Albuquerque redevelopment: The Historic District Improvement Co., an Arcadia affiliate, controls and will redevelop more than 500,000 square feet of retail Class A office space and residential units.

Seaside: More than 80 acres containing approximately 500 homes, 100,000 square feet of retail/commercial and a variety of civic buildings. "Robert Davis' longstanding role in founding and developing Seaside speaks for itself in terms of commitment to excellence and Arcadia's capabilities.

Woodmont, Pa.: A traditional neighborhood development in upscale and affluent Huntingdon Valley, will be the crown jewel of "New Urbanist" development in the Philadelphia area. It is situated on a former nursery site of 44 acres. Arcadia partnered with the owner, the Pitcairn Trust.

Farmview, Pa.: The Greenfield conservation development is a 418-acre site in historic Bucks County. The 322-home subdivision conserved 213 acres of dwindling farmland and made a significant profit.

Little Blue River Valley, Independence, Mo.: Project contains 839 lots in two traditional neighborhood development neighborhoods on 400 acres. The plan includes over 40% of open space, with no removal of perimeter trees.

La Scala

Rank: 4th (score 22)

Potential developers: Sarasota's Benderson Development Co. and Sarasota Commercial Management Inc.

"As of March 31, 2003 (close of the most recent fiscal year), Benderson has completed an independent auditor's report, prepared by Brock, Schechter & Polakoff LLP. ¦ The audit will confirm Benderson's net worth in an amount in excess of $100 million.

"Benderson, and affiliated companies, has been in business for over five decades. Present holdings consist of approximately 800 properties in 35 states with over 40,000,000 square feet of gross leaseable area within its retail division. Additionally, Benderson, through its affiliated companies, owns and operates 23 hotels as franchisees of various hotel companies, including Marriott and Hilton Hotels. Benderson enjoys relationships with nearly 1,700 tenants, 90 lenders, and six major banks.

"Benderson is typically regarded as the largest privately-held open shopping center developer in the U.S. The Benderson financial statement and the track record of its design build contractor, The Haskell Co., confirm existing financial capability to guarantee completion of the project."

Financing ability: "Supported by its substantial net worth, extensive holdings and long-term track record, Benderson enjoys an excellent relationship with 90 present lenders. As of December 2003, Benderson has 356 separate mortgages outstanding for $1.68 billion dollars. These instruments have been placed with the 90 lenders ¦ Benderson's bank dealings include nine-figure relationships with Fleet Bank, HSBC Bank, M&T Bank, Citibank, Key Bank, and Wells Fargo Bank. During 2003, Benderson completed 28 permanent financings for a combined $281 million, five mortgage refinancings for $57 million, and three major pool acquisition financings for $160 million."

"Haskell (the design build contractor) ... (has) annual sales in excess of $700 million ... (and its) current bonding capacity is $600 million. Our bonding capacity for individual projects is $100 million."

Down to Four

Tampa's Lindell Investments Inc. and the PatrinelyGroup LLC, a subsidiary of Crimson Capital Ltd., abandoned plans to compete for the downtown Sarasota project.

The development group's Palm Avenue Galleria proposal called for construction of two 10-story, mixed-use buildings, a five-story commercial office building, a six-level 680-car parking garage and a 400-foot long covered galleria. The Galleria survived short listing by city staff reviewers on Jan. 6 and was ranked third of the eight submissions. It beat out the Arcadia Land Co. and Benderson Development Co. proposals by six points.

Below are excerpts of the letter sent to the city in explanation of the developers' withdrawal from the project:

"Due to the untimely death this past weekend of Tom Cardinal (partner in Cardinal, Carlson + Partners), a critical member of our development team for our Palm Avenue Galleria proposal ¦ we quickly came to the realization that without Tom helping to lead the charge in Sarasota, the very fabric of our project delivery team would be missing the one person whose heart and soul has been poured into this project for years.

"Regretfully, under these sad circumstances, we are no longer in a position to execute the project in a way that would optimize the outcome for the city of Sarasota ... and create the kind of project that Tom originally envisioned."

The letter was signed by Ron Weisser and C. Dean Patrinely.

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