Skip to main content
Entrepreneurs
Business Observer Thursday, Oct. 23, 2008 11 years ago

From the Trenches

Share
There are pundits, ivory tower profs and media purveyors of doom, then there are those entrepreneurs and businessmen in the trenches of everyday business warfare. Here is their boots-on-the-ground outlook.

From the Trenches

There are pundits, ivory tower profs and media purveyors of doom, then there are those entrepreneurs and businessmen in the trenches of everyday business warfare. Here is their boots-on-the-ground outlook.

TAMPA BAY

Seth Werner

Chief Executive Officer

Cypress Creek Capital

Tampa/Hollywood

• Regional economy: Werner says the Gulf Coast was hit hard by the housing crisis. The market still has a significant oversupply of homes and condos, and foreclosure rates are still increasing. The financial institutions have had significant write-downs on their mortgage portfolios, reducing the availability of credit. This reduces access to business loans, which will likely slow the economy in 2009, Werner says. That, coupled with a non-seasonally adjusted unemployment rate in Florida hovering around 6.8% - the highest in 13 years - will keep economic growth slow.

• Industry: In the first half of 2009, Werner believes the Gulf Coast commercial real estate market will see increased vacancies from corporate bankruptcies, the implosion of housing-related companies, the completion of new construction and significant blocks of sublease space. Vacancy rates in the Tampa Bay office market are expected to reach about 17.7% in 2009. The leasing market has become extremely competitive for property owners to add or retain tenants. High fuel prices, real estate and credit market downturns, inflation concerns and a push for tenants to reduce their expenses have expedited the process. In 2009, property owners will begin to provide tenant concessions to keep their occupancies up. For acquisitions, Werner forecasts an upward rate on going-in capitalization rates for 2009.

• Business: For Cypress Creek Capital, it will be another growth year in 2009. Over the past few years, its commercial real estate acquisitions were not highly leveraged. Having equity capital available has allowed the company to remain active during this market turmoil. However, in 2009, its biggest challenge will be the bid-ask spread in the real estate market. Sellers remember the peak pricing of their properties and have unrealistic pricing expectations. Cypress Creek will continue to look for commercial properties that meet its investment criteria.

Frank Clemente

Founder, vice president

ConceptBAIT

St. Petersburg

• Regional economy: 2009 will be a little better for the hospitality industry and businesses in beach communities because advertising and promotions will start attracting more people, from in and out of state, Clemente says. "We are one of the worst states in the country in the condition of our housing market, but outside of here, people still see us as a playground," Clemente says. "Places to play will be okay." For other segments of the regional economy, he sees it very sluggish for at least three quarters, however the election will erase some uncertainty and middle-class consumers could feel an election-year boost and feel more confident.

• Industry: 2009 will be a steady one for the events industry as companies will be waiting to roll out new services and products. Weddings will still be strong. The corporate side will grow more slowly as hotels and other hospitality businesses offer more incentives. Expect that to get more aggressive, Clemente says. 2010 will be the comeback year for events and hospitality.

• Business: 2008 saw corporate clients cut back on lavish parties and events, and summer business nearly came to a halt. But the bridal business remained strong and the company, which is used to doubling its annual sales, expects to post a 15% rise in revenue in 2008. Clemente sees a continuation in 2009. It will be a challenging year, though, as companies watch budgets carefully. ConceptBAIT will continue to try to grow its successful rental division, where clients can rent spandex linen coverings for tables and chairs for events. By the third quarter in 2009, companies should be ready to spend more for events. "This time next year, we're going to be better, not great," Clemente says.

Mark Anderson

President and CEO

eLogic Learning

Tampa

• Regional economy: Moderating fuel costs will help in 2009, but the unemployment rate is high and there is caution about hiring that may continue next year, Anderson notes. Construction and residential real estate are going to remain flat or take a step back in 2009, but will enjoy a resurgence in 2010. After the election, consumers may be less hesitant in spending, knowing what the get-well program will be, although Anderson is not a fan of bailing out industries. What is encouraging, Anderson says, is going into 2009, there is a greater recognition of the global economic environment and support for more global solutions. "We sneezed and the rest of the world got the flu," he says. It is good news that the economy is getting back to some realism.

• Industry: Web-based training will continue to be a stable industry in 2009, Anderson says. Investment in human capital is now and will be a distinguishing feature. Communication will be key with customers - frequent, accurate messages on the importance of continuing employee training. Clients will continue to watch variable expense costs in 2009. Cash flow will help all training companies, but careful clients will challenge companies' business models. Good business models make money in good and bad times, Anderson says.

• Business: Anderson is cautiously optimistic for eLogic in 2009. Part of the economic slowdown plays into the company's favor: It can save clients' travel costs by having their staff train online. But some eLogic customers, such as those in petroleum and securities, have been hurt and have more limited training funds. eLogic is still building its business and will continue to make subtle adjustments in 2009 on how quickly it gets its products and services out and on its selling process.

SARASOTA/MANATEE

Debbie Layer

Market President, Florida West Coast

BankUnited

Sarasota

• Regional economy: Layer believes the economic hard times will last for most of the next year. "Everyone is feeling the slow economy, which will likely go through 2009," says Layer, an executive with the local division of SunTrust before joining Coral Gables-based BankUnited. Adding to the problems, says Layer, is that "Florida's economy, especially on the Gulf Coast, is heavily reliant on small businesses." Layer is hopeful the strengths that made Florida shine five years ago - climate, cost of living and amenities - will be the focus of the eventual rebound.

• Industry: Layer is keenly aware her field is in the midst of a giant crisis - it's hard to ignore that. "Is this the best time in our industry?" Layer asks. "Obviously it isn't." But taking a page from her past career as a Realtor, Layer is trying to accentuate the positive aspects that could help lead to a banking industry turnaround. Two programs stick out: One is the federal government's Troubled Asset Release Program, which allows the U.S. Treasury to buy certain troubled assets from banks. The other program with potential to help boost the banking sector, Layer says, is the temporary increase in the Federal Deposit Insurance Corp.'s insurance coverage, from $100,000 per deposit to $250,000 per deposit.

• Business: BankUnited, publicly traded on the Nasdaq exchange, is one of several Florida banks to have signed agreements with federal regulators in recent months as a result of capitalization issues. Nonetheless, Layer, who overseas seven BankUnited branches, from Tampa south to Punta Gorda, is taking the marketing approach that sticking with a local community bank during troubled times is the best approach. Layer says the bank recently launched a mortgage assistance program and was also recently approved as a Federal Housing Administration lender.

Patricia Courtois

Partner

Mower Advertising

Sarasota

• Regional economy: Courtois says the pain on the Gulf Coast might be felt a little sharper than other areas, since this area is "so tightly linked to real estate," a theory many other executives share. "As a tourist and retirement destination," she adds, "we also have to weigh the effects of the financial environment on both vacationers and potential new residents." A factor that could inhibit a recovery is what Courtois refers to as the "continuing anti-growth mindset" in the region.

• Industry: The economic slide is taking the advertising industry down with it, says Courtois. For example, the American Association of Advertising Agencies recently released the results of their member survey on the economic outlook. And the outlook is bleak: For 2008, agencies nationwide projected a 1% revenue growth over 2007. Says Courtois: "For all clients - local, regional and national - we're seeing the pressures of a 'perfect storm' of client spending reductions, increased pressures on agency compensation and the cost of attracting and retaining agency staff." Many agencies are trying to fight the storm, Courtois says, by figuring out ways to become even more efficient.

• Business: Mower, which up until a merger in early 2008, was Clarke Advertising, plans on continuing to be one of the leading advertising and branding agencies on the Gulf Coast next year, despite the economic slowdown. "Historically, companies that have maintained or increased their spending on advertising and other forms of marketing communications during recessionary periods have not only grown during the hard times, but have come out of recessions as market leaders," says Courtois says. "We're taking our own advice in that regard." Courtois adds that the firm, which has offices in Atlanta, Charlotte and upstate New York, is "confident we'll see this commitment pay off over the next two years."

Helen Sosso

Owner

Prudential Palms Realty

Sarasota

• Regional economy: In at least one way, Sosso predicts the regional economy, mirroring the national economy, will return to the early 1990s. She says that could happen in lending, as banks continue to squeeze the lending standards that ran amok the past five years. Next year, says Sosso, to get a loan for just about any purchase, "you will have to put a substantial amount of money down."

• Industry: Sosso says 2009 promises to be just as challenging as 2008 for the residential real estate industry. It might even be tougher in some regards, she says, citing the same lending issues. Still, there are some reasons to be positive. For starters, she thinks for the first time since the residential real estate slide began, sellers are finally willing to price their properties in accordance with new market realities. And as those prices settle, the excess inventory will be absorbed, albeit slowly. Sosso also sees a trend rising next year in bulk sales of multiple homes and properties.

• Business: Sosso hopes two new divisions Prudential launched in 2008 will begin paying dividends in 2009. One unit is the international sales office, run by Carla Rayman and Patricia Tan, longtime Sarasota Realtors with extensive experience in selling Florida homes overseas, especially in Europe. Another new division the company recently opened is its real estate solutions section, which includes an auction house. That unit also has mortgage experts who help clients work with banks.

LEE/COLLIER

Tony Lapi

President and Chief Executive Officer

'Tween Waters Inn

Captiva

• Regional economy: Lapi says Southwest Florida International Airport will help the Gulf Coast weather the recession. The Fort Myers airport hasn't seen the massive cuts in airline-seat capacity that rival destinations experienced. "We've got to feel pretty good compared with Las Vegas and Hawaii," Lapi says. Fuel prices will help if they keep dropping. That will make distant drive markets such as Atlanta more affordable.

• Industry: Although not immune, upscale properties will likely be better off than their lower-priced competitors. However, corporate business has been declining and that trend is likely to get worse as corporations cut back on meetings. "Leisure will do better than corporate," Lapi says. In addition, the supply of new hotel rooms is coming on line just as demand is shrinking, putting pressure on room rates. On the Gulf Coast, many of the new hotels are located inland.

• Business: Lapi says it's getting harder to forecast business at his upscale Captiva resort because people book more at the last minute thanks to the Internet. "That window for booking is shrinking all the time," Lapi says. Although bookings for the first quarter are down 8% compared to the same time last year, last-minute business could change that. Lapi says the hotel has had good success booking group business, though it's not tied to corporations. Instead, these groups focus on an activity such as sport fishing or wellness. 'Tween Waters also launched a promotion with discount airline USA 3000 and a 30%-off sale for stays of three nights or longer that will run through April 2.

Todd Gates

Chairman

Gates

Naples

• Regional economy: Gates says you may have to wait another year for the Gulf Coast's economy to recover. "We have to wait for housing," he says. Some markets, such as Tampa, will come back more quickly than those that are more dependent on housing, such as Fort Myers. "From a macro perspective, there's a lot of confusion," he says. "We've got zero consumer confidence, no demand and therefore no supply."

• Industry: "The name of the game is diversification," Gates says. The construction and development firms that survive will be medium-to-large companies that have retained earnings, momentum in the market and build for industries that are still growing, such as health care and assisted-living facilities. There's also some opportunities renovating older buildings. Are we near a bottom? "We're pretty doggone close," he says.

• Business: Gates is willing to travel anywhere there's work. "We're looking at a project now in the state of Washington," he says. "We're willing to travel outside the country in order to survive and prosper." Gates established an office in Panama, where he's building hotels, resorts, condominiums and shops. "We're also looking to do work in Texas and Louisiana because of the remnants of the hurricane," he says.

William Valenti

President and Chief Executive Officer

Florida Gulf Bank

Fort Myers

• Regional economy: Excess inventory in housing will continue to plague the area next year. "I'm afraid that still is going to have a negative and slowdown implication for 2009," says Valenti. The unemployment rate will go higher than the current 9.2%. "What I'm hearing is that folks who held onto their staffs...they're saying, gosh, it isn't getting better," he says. He expects another round of layoffs. "I'm concerned this is going to be a terrible holiday season," Valenti says. Further into 2009, Valenti says low interest rates may help any recovery. "I think we're going to start attracting more money to Florida," he says. "We're laying the foundation."

• Industry: Valenti expects some community banks will close, especially those that got heavily involved in residential-construction lending. "We're going to see more problems at the end of this year and next year," he says. Some out-of-state regional banks may pull out and some community banks may combine. "A lot of the small banks are going to have to look for partners," Valenti says. But because of the potential for more problem loans, it's hard to determine a bank's value to any potential acquirer, he says. The federal government's bailout won't be felt until late in 2009 and regulators are getting tougher, Valenti says.

• Business: Valenti says Florida Gulf Bank stuck to commercial lending when it wasn't fashionable during the boom. "What was in style was residential real estate and construction," he says. "We stuck to the business and professional community." So far, the bank has reported a relatively low amount of bad loans. "We're adding to reserves just in case, because I don't know what's coming," he says.

John McGarvey

President and CEO

McGarvey Development Company

Fort Myers

• Regional economy: McGarvey believes 2009 will be a flat year because companies are uncertain about the future. Relocations and expansions are on hold until the financial markets stabilize. "The uncertainty is freezing people in place," he says. Commercial construction is directly tied to growth in housing. "Homebuilding has to start up again," he says. He doesn't expect supply and demand in residential and commercial space to reach equilibrium until 2010. The recovery will begin in 2011, he estimates.

• Industry: McGarvey expects widespread consolidation and closures as the construction and development industry contracts. McGarvey, who was a commercial developer in New Jersey during the last downturn in the late 1980s and early 1990s, says only six companies, including his, remained out of 16. "The same thing is going to happen here," he forecasts. "There are a lot of people who thought they were developers...they're not going to have the stomach." Meanwhile, out-of-area companies that arrived during the boom likely will leave, too.

• Business: McGarvey says his company is ready for any downturn. "If the deals aren't turning, it's not going to make us get out of the business," he says. "If we have to take it on the chin for a few years, we'll do it." McGarvey doesn't plan to develop commercial buildings next year and will focus on filling the ones it has built recently. He says about half the available space in the area needs to be absorbed with new tenants before new construction can begin again. "As soon as we get a blip in the market we'll go back to building again," McGarvey says. But, he says, it's not likely to be in 2009.

Marty Miller

President and CEO,

Melitta USA

St. Petersburg

• Regional economy: Miller believes the regional rebound will begin in the third or fourth quarter next year. Companies will find opportunities to reorganize. Consumers will favor domestic manufacturers. Despite the global nature of the economic downturn, the Gulf Coast's tourism industry, which affects many other regional businesses, will continue to benefit from international visitors and the favorable exchange rates.

• Industry: Miller sees the coffee industry trends from 2008 continuing in 2009. People will still buy super premium and lower-level products, but not mid-level brands. It will still require a lot of supermarket shelf space, which companies have to pay for. "In general, I still think people are going to be careful where they are driving to," Miller says. Industry profits will take a hit as companies get more promotional with rebates. Consumers will focus on basic needs first and choose stores such Target, Walmart and Aldi so manufacturers need to be there.

• Business: In 2008, Melitta USA has been 4% ahead in coffee and filter sales, but behind in profitability. Increases in paper and tin costs have challenged Melitta, yet it didn't pass on any price increases. Stores were trying to get more promotion driven. In 2009, as a branded company, Melitta and other companies will turn to promotions more often, Miller says. Consumers used to drive to different stores, now they are driving to one-stop shopping stores, such as Wal-Mart. Consumer behavior has changed and will remain that way in '09. Melitta is well-positioned in stores, but needs to continue to listen and watch consumers in 2009.

Michael Beaumier

Vice president, West Coast of Florida

Suffolk Construction

Lakewood Ranch

• Regional economy: The economic problems on the Gulf Coast aren't going away soon, Beaumier predicts, joining a chorus of executives with a similar opinion. But taking it past Florida, Beaumier says the problems could be felt in just about every region of the country. For example, Beaumier recalls he read an article in Newsweek magazine last month about the current building boom in Charlotte, fueled in part by Wachovia's growth. Of course, Wachovia's troubles soon surfaced, which will likely stifle that boom. Says Beaumier: "There aren't too many areas in the country that are saying 'we're the place to be.'"

• Industry: The looming problem in the construction industry, says Beaumier, is financing - or lack thereof. Even in early 2008, before the majority of the problems surfaced, Beaumier says banks were requiring 25% equity to provide loans to developers. That number is now up to 40% or as high as 50% in some cases, putting a lot of projects on hold. The lack of working projects, in turn, has led to an increase in bidders for the projects that are scheduled to go forward. In the last few months, Beaumier has seen 40 companies put in paperwork for the pre-bid phase of a project, a seismic increase from 2007. He expects that trend to continue well into next year.

• Business: Boston-based Suffolk, which reported $1.2 billion in 2007 revenues company-wide, doesn't break out revenues by mini-regions. But in Florida, says Beaumier, the company is projecting $450 million in 2009 fiscal year revenues, about $50 million more than last year. The largest project run through local office of Suffolk led by Beaumier in 2009 will be the Loop, a large shopping mall in Punta Gorda.

Sue Wise

Founder, executive administrator

Take Care/Private duty home health care

Sarasota

• Regional economy: From both a lender and a loan recipient perspective, Wise is hopeful that 2009 will be the beginning of a turnaround in the way people do business, if not a total turnaround in the area's economy. Wise watched the unfolding financial market mess of the past few weeks with the financial fortitude of a native Midwesterner, a person, says Wise, who is very careful not to extend herself further than she can pay.

• Industry: As long-term care insurance rates keep rising, Wise projects the home-health care industry will continuing growing rapidly. The problem with that trend, says Wise, is that many facilities open without an understanding of the local marketplace or the nuances of the industry. In the past, that meant offices close almost as frequently as others opened. Wise also projects that more companies nationwide will begin acknowledging the financial and emotional impact elder care has on the workforce in 2009.

• Business: Wise has long held that belief that rapid growth in a health care company is rarely a good thing, as when that happens, care tends to be compromised. Still, Wise is projecting about 7% to 10% growth at the 13-year-old company, which had $15.7 million in revenues in 2007. She also plans to hire a few more people and possibly opening a fourth office, somewhere in either south Sarasota County or Charlotte County. In regards to the problems that caused some of the economic slump in the first place, Wise says she will not over-extend herself to grow. "This recent downturn in the economy has caused us to be even more conservative," Wise says. "What I won't do is go to our clients and say 'we've had losses and now you need to pay more."

E.L. Fox Jr.

President

Fox Electronics

Fort Myers

• Regional economy: Fox may be running a multi-million-dollar business, but he sees a tough regional economy. "I have numerous friends who are on hard times," he says. "I have buddies who are delivering dry cleaning, working in restaurants, 20-hour days." Fox says a recovery may have to wait until the financial markets recover. "Until this meltdown, I actually thought there would be a bottom-out period in the fourth quarter," he says. The job market is so slow that Fox now uses a recruiting firm for every position it seeks to fill. "Otherwise, I'd be getting 200 applications."

• Industry: Fox sells components to makers of computers, cell phones and other electronics. "It looks like it's going to be a tough slog," he says. That's because companies will slow equipment purchases during a downturn. "Businesses are going into survival mode and they're going to cut back," he says. "They only borrow and spend when it's prudent."

• Business: Fox makes oscillators that are faster and less expensive than its competitors. Still, Fox warns his sales force that "every order is going to be a battle." Fox has been there before: Fox Electronics made it through the technology bust and it was quick to keep inventories in check and laid off some employees when it first started seeing the slowdown in April. What about 2009? "With what's going on, it's a total guess," Fox says. One area of promise is set-top boxes that will help owners of older televisions convert the new high-definition signals. One area where Fox will keep spending is research and development. It's the thing that saved the company during the last downturn and will keep its competitors at bay.

Related Stories

Advertisement