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They Broke the Jinx
Atlanta developer Bob Hatfield and Bradenton real estate investor Jan Smith broke the Sandpile jinx with basic business sense and a little luck.
By Sean Roth
Real Estate Editor
Bob Hatfield and Jan Smith say they did nothing special. They just developed the Mainstreet at Bradenton, a 252-unit apartment complex, east of Downtown Bradenton on 26 acres of waterfront land. But others say they broke the curse that had held the waterfront Sandpile property back, and they have set up downtown Bradenton for revitalization.
"This is the tipping point," Bradenton councilmember Bemis Smith says. "For a while there was a feeling that it was almost cursed. There was some speculation that that was why Tropicana (Products Inc.) didn't want to relocate down here. I don't know. There may be some truth to that. There sure were some strange situations. It has been through so many iterations."
Deals have been tried and failed on the property for more than a decade. The most recent one came in 1999, when some of the most prominent and deep-pocketed developers in the area: Benderson Development Co., Bradenton attorney Edward Vogler II, Ron Allen of NDC Construction Co., developer Mark Kauffman and attorney David Band (Bradenton Riverfront Partners LLC) committed to the development of a Regal Cinema multiplex theater on about 26 acres east of the downtown core. As part of the deal, the developers signed a 99-year lease with the city.
Shortly after the announcement, Regal Cinemas pulled out of the development. As it turned out, Regal Cinemas was running into money problems and had to back off its nationwide expansion plans - Regal eventually filed for Chapter 11 bankruptcy protection. The five partners were left holding a 99-year lease with no central anchor.
At about the same time, Hatfield, president of Hatfield Development Co. LLC in Atlanta, was looking at Manatee County for development. He had just completed a revitalization project in Clearwater.
"The job was redeveloping the old Sunshine Mall in Clearwater, one of the first air-conditioned malls in the county," he says. "We bought it out of foreclosure and tore it down. We built 748 apartment units along with some retail space and then sold it off. I was looking for a new place to develop, when someone told me that Manatee County still had some good prices for land."
Hatfield Development has developed about 31 shopping centers, apartment developments, condominium complexes, manufactured-home retirement communities, office buildings and infrastructure in Alabama, Indiana, South Carolina, Tennessee and Florida.
"I saw (the Sandpile) and knew I wanted to develop on it," Hatfield says. "But I was told it was not available. I was told that the city owned it and that there were all kinds of problems with it."
So Hatfield put a contract on land on U.S. 41 near 53rd Street that had three different zonings (industrial, commercial and multifamily) with the hopes of developing it as apartments. Hatfield hired Vogler as his land attorney.
A few months later, Vogler suggested the Sandpile property to Hatfield. "He said, 'I want to show you something,'" says Hatfield. "He asked, 'What do you think you could do on the east side of the railroad?' I suggested an apartment because of the water views."
So Hatfield and Bradenton Riverfront Partners agreed to let Hatfield build the apartments. Hatfield put aside his plans for the U.S. 41 property mainly because of wetland and title problems. He partnered with the backers of several of his other regional projects, but the timing was bad.
Toward the end of 2000, the tech bubble collapsed. Then, after the stock crash and the 9/11 terrorist attacks, the Federal Reserve started cutting interest rates. Lower interest rates encouraged renters to buy; forcing landlords to be more competitive with give-aways and rental prices.
Hatfield needed to raise additional equity dollars. A business associate introduced him to Smith, president of Jan Smith and Co., a Bradenton-based commercial real estate and business investment firm.
Smith and his investor group have provided financial backing for numerous real estate and business ventures in the two-county area, including the Manatee Hospital outpatient-services expansion.
"Bob came to see me three years ago through a mutual acquaintance and showed me the apartment project," Smith says. "We hit it off. He's a Seminole, and I'm a Gator. It was a match made in Heaven. Our sons were close to the same age - in fact they went to same school and were in the same pledge class (at Rollins College). I did ask him for a reference though." After looking at the financials, Smith and several of his investment partners joined the project.
In May of 2002, the developers started construction on the eight-building, $16-million Mainstreet at Bradenton. The project was designed by Tulsa, Okla.-based Parker & Associates and built by the Atlanta firm of Thomason-Stevens LLC.
In November of 2003, International Realty of San Antonio purchased seven of the apartment buildings for $15 million.
"I would consider the Mainstreet at Bradenton very successful," Hatfield says. "(The quick resale) is my mode of operation. We had projected holding it for two more years. I was really surprised. I didn't think the market was stable enough for us to get what we wanted for it. We also didn't have to give away any free rent, which is real unusual. When you add that into the formula you get less value on the capitalization rate."
Meanwhile, Vogler was negotiating with another group to build a condominium development on the northwest end of the property. Those talks eventually broke down, so Vogler went to Hatfield and Smith.
As a test of their future plans, the two partners kept one building, with 36 units on the river, and converted it the Mainstreet Condominiums. All of the small, about 1,000-square-foot, condominiums sold in a little over ten days.
"We learned water views make a difference," Hatfield says. Of course, he says, that wasn't really a surprise.
In this case, the difference amounted to about $75,000 more in the sale price for each unit with a river vew.
Satisfied that a condominium project could work, Hatfield and Smith agreed they would develop the $135-million The Promenade at Riverwalk while Bradenton Riverfront Partners would develop the infrastructure, greenery, a hotel, a new facility for the Manatee County Art League and roughly 120,000 square feet of commercial and office space. John Bell, one of Hatfield's investors in the Mainstreet at Bradenton project, also is taking a more active role in The Promenade as one of the principals of the project.
Asked if the thought of developing what would be a 350-unit condominium concerned the three partners, Hatfield responded: "The apartment component actually provoked more sleepless nights. We build and then sell condominiums in Atlanta, but down here you pre-sell. You don't start construction until you are 50 to 60% sold. Sure there are a lot of upfront costs, such as marketing. But by the time you are ready to open, you usually have enough money to pay back the bank. There is certainly less risk. The caveat with the condominiums was that we needed to be able to buy the land from the city. We needed to be able to sell fee-simple titles."
When the state had transferred ownership of the property to the city, it included a restrictive covenant that the city retain ownership. After a lengthy back-and-forth between the city, the developers and the state, state officials allowed the city to sell the land directly under the condominiums, about 6.3 acres. In an action by the governor and the cabinet, the restrictive covenant was removed. In December of 2002, the city council agreed, in a 4-1 vote, to amend the land lease to sell a portion of the property to Bradenton Riverfront Partners.
At the same time, the city adopted a non-ad valorem special exemption meaning that the city would receive the same rent collection from the 26 acres. The property for the condominiums was deeded to the master developers, Bradenton Riverfront Partners, which in turn, contracted to sell to Smith, Bell and Hatfield.
With the contract in place, Hatfield reconfigured the original concept plan put forth by Bradenton Riverfront Partners.
"We completely redesigned it to have all the units facing the river," Smith says. "They had designed it as 12-story condominiums. We changed that to eight-story buildings."
The county gave the developers' site plan approval last spring and construction on the first building, River Dance, is scheduled for this spring. The building will be listed by Sarasota-based Michael Saunders & Co. So far, about 80 of the 115 units in the first building have been reserved.
"Sales have been phenomenal," Hatfield says. "We have received a lot of attention because of our location. This is the largest thing I've ever done." (The previous record holder was the Clearwater mall redevelopment at about $78 million.) "I want to give a lot of the credit to the mayor and city council. This was not an easy project to put through." Each building will take about 13 months.
"This is going to change the face of Bradenton," Smith says. "This is by far the biggest thing that has happened in one pop in downtown Bradenton. This is going to be a first-rate product for consumers and the city of Bradenton. I like the project. It is an important piece, and, quite frankly, this is the way government and business are supposed to work together."
Overall, including the apartment and commercial components, Smith, Hatfield and Bradenton Riverfront Partner will add a total of about $200 million of new development to the city's tax roles.
"I am very pleased," says Vogler. "We all have a very fun working relationship. It is important to choose partners with such a high-level of integrity. A lot of the tenants will come on board when they start the first building. Our primary goal right now is to find the restaurants for the space. ... We are building a project the whole community can be proud of."
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