A pair of commercial real estate veterans has formed a business born of the recession, to help banks and landlords navigate the miserable market. It could be a big business.
John McKay is well known on the Gulf Coast for his past job as an state senator and an outspoken critic of Florida's sales tax structure.
Some also know MacKay as a developer of medical and office properties in Bradenton and Sarasota.
But McKay is now hoping people, specifically bankers in the region dealing with a growing amount of distressed properties on their books, will get to know him as well. McKay and longtime business partner Ron Allen, president of Bradenton-based NDC Construction, have formed Riverside Real Estate Co. to combat just that problem.
Riverside is one of the first firms on the Gulf Coast set up specifically to work with banks on commercial real estate workouts, receiverships and bankruptcy trustee issues. It's what many in the industry consider to be the next big meteor to smash into the world of banks and commercial real estate.
“Bankers have tried to postpone this day as long as possible,” says McKay, who served in the Florida State Senate from 1990 to 2002, including a term as a president in 2001. “But the day of reckoning is coming.”
That's what Naples developer Kenneth Saundry Jr. was thinking, which is why he recently founded a firm designed to manage properties in the Naples area that are distressed or in foreclosure. Global commercial real estate giant CB Richard Ellis also recently launched a new unit to serve as a receivership for distressed or foreclosed properties, a portfolio that includes a few shopping centers in the Tampa area.
Riverside claims to be the first local company to take the full-service workout and management approach with commercial properties in the Sarasota-Bradenton market. Says McKay: “Riverside specializes in working out difficult real estate situations for investors, banks and owners.”
Riverside also set up a division to work with commercial property owners who are struggling to make sense of the market. That includes services from maintenance and property management to entitlements and modifications of existing permits.
Since officially launching in July, Riverside has picked up contracts to manage 200,000 square feet of property in Manatee County. The portfolio includes office space in the SunTrust building in downtown Bradenton; 60,000 square feet of office space next to Lakewood Ranch Medical Center in east Manatee County; and a medical office complex in west Bradenton, which Allen's company actually helped build several years ago.
Riverside now serves as the property manager and leasing agent for those properties. That is quite a challenge these days, acknowledges Allen, as tenants seek to renegotiate rents and get other breaks when leases come up for renewal. Plus, Allen adds that given the slow economy, “there are less opportunities to bring in new tenants.”
Nonetheless, Allen and McKay are confident their decades of experience working in real estate cycles will be an asset with their new clients. McKay developed his first property in 1972, while Allen began his construction career in the early 1980s.
And Allen recalls that he spent several years working on projects and properties that were part of the fallout from the savings & loan crisis of the 1980s and 1990s.
“At the time, we thought that would be the most real estate issues we would ever see,” says Allen. “But this looks like it will be worse.”