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Economic Developer

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  • | 7:01 a.m. February 11, 2011
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Entrepreneurs. Arun and Amit Maheshwari
Industry. Commercial real estate
Key. Investors recognize low real estate values in Florida, which will lead to a faster-than-expected recovery.

Arun Maheshwari, one of the pioneers of India's outsourcing boom, remembers traveling to his native India in 1996 to set up an operation for a large U.S. firm.

By then, the outsourcing trend in India was in full swing and Maheshwari was facing a big office-space crunch in Delhi, the capital, where building owners commanded premium rents.

So the U.S.-educated Maheshwari took a detour to the central Indian province of Madhyar Pradesh, whose governor was eager to attract some of the outsourcing companies that had brought prosperity to neighboring states.

In return for being the first outsourcing company in Madhyar Pradesh, the state offered Maheshwari the equivalent of $1 million of free rent and direct access to the power grid. “That's the beauty of government partnering,” Maheshwari says.

Maheshwari's trailblazing brought hundreds of jobs to Madhyar Pradesh, making it what The Hindu newspaper hailed a few years later as “the biggest IT outfit between Dehli and Mumbai.” What's more, the effort sparked thousands of additional jobs as more companies followed.

Here's the lesson for Gulf Coast politicians and economic development officials: Like Madhyar Pradesh, the region should do all it can to attract a big company that would add 1,000 jobs or more in a single effort. The resulting publicity would spark others to do the same.

But Maheshwari cautions that it's not going to happen with industries that Florida politicians covet now, like biotechnology. “Biotech is not going to employ millions of people,” he says.

The challenge with technology companies is finding qualified people and the Fort Myers area lacks the talent these companies need. Maheshwari concedes that this was his biggest challenge when he established operations in Madhyar Pradesh. In the end, he says, the lack of a qualified workforce in that state negated any advantage he gained with government subsidies.

Instead, Gulf Coast cities such as Fort Myers should pick a well-established industry that has traditionally created lots of jobs, like insurance and banking, and provide enough incentives to make it worthwhile for these companies to establish a large back-office operation here.

For example, Maheshwari suggests a 10-year tax break for any firm that brings in 1,000 jobs or more. “This place could look like Charlotte,” he says, referring to the banking center in North Carolina. “Looking at it as an outsider, the potential is there.”

Maheshwari doesn't mince words when it comes to this strategy. “You just have to buy them,” he says.

Cleveland Avenue redevelopment

Arun Maheshwari, 66, and his son, Amit Maheshwari, 28, are relative newcomers to the Fort Myers area. Arun Maheshwari retired to Estero when he sold his business two years ago and now invests through his firm, RisingSun Ventures.

Amit recently completed his MBA degree at Florida Gulf Coast University in Fort Myers.

But that pioneering spirit is visible through their acquisition of an office development in one of the most blighted business corridor in Fort Myers: Cleveland Avenue between Edison Mall and downtown.

The Maheshwaris acquired the Cleveland Avenue two-story, 45,000-square-foot building for $775,000 in cash and plan to spend another $500,000 to update it. The previous buyer paid $3.2 million for the property in 2005 before a lender seized it.

The center, to be called Infinite Professional Center, has just two tenants left and homeless people camped out there for a while. But once renovations are completed this spring, it will be one of the few better-quality office buildings around and the base rent will be $7 a square foot.

“There are people who want to serve the neighborhood and this is the only place,” reasons Amit Maheshwari. These include doctors, lawyers and other professionals.

Furthermore, the Maheshwaris won a grant from the City of Fort Myers for $50,000 to help defray the costs of improving the building. It's part of the city's effort to establish a business district on that stretch. “We know the city is serious,” Arun Maheshwari says.

But the center will fulfill another role.

Arun Maheshwari says he may help fund newly created businesses that sign leases in the building, with cash and as much as six months of free rent. “You have to seed entrepreneurial examples for others to follow,” Arun Maheshwari says. “I would offer capital and advice,” he says.

Maheshwari says the key to seeding these businesses is to identify people who live in the surrounding neighborhoods who have entrepreneurial drive. He says he will canvass local civic organizations to help him identify those individuals.

This kind of “economic gardening” by helping local entrepreneurs is the flip side to economic development, Maheshwari says. While the city may be chasing the “big elephant” company that will hire hundreds of people to provide a short-term boost to the economy, the longer-term benefits will come from local efforts such as his that create sustainable growth. “I think the two are complementary,” he says.

Florida will recover faster

Arun Maheshwari doesn't subscribe to the widely held view that Florida's recovery will be a long slog. “It's going to be a quick affair,” he says.

Once people feel more confident, Maheshwari reasons, they'll realize the values for assets such as real estate in Florida have swung too far to the down side. “I really think this situation is not logical,” he says.

Besides the office complex on Cleveland Avenue, the Maheshwaris recently acquired two hotels in Fort Myers. They include a Super 8 motel on Colonial Boulevard, which they bought for $1.3 million, and a Comfort Inn on U.S. 4, which they bought for $1.2 million. Arun Maheshwari estimates that it would cost four or five times the prices he paid to build these hotels today.

Maheshwari says he's keen to buy more distressed properties that have been foreclosed on by lenders. “The larger banks don't even know what they have,” he says.

“The trick is you need stamina,” Maheshwari says. By that, he means buyers should be prepared to pay cash because debt is unavailable and they must be willing to hold onto the properties for three to five years in case the economy doesn't recover as fast as he believes it will. “Everything you do now is hard cash,” he says. “It's a question of risk and reward.”

Maheshwari says the modern infrastructure in Fort Myers and throughout Florida gives it an edge over other U.S. states. “Everything is brand new here. There is no traffic,” he says. “Florida can hold its own against anybody.”

While Maheshwari acknowledges that opportunities might be more plentiful in places such as fast-growing India or China, he says there are opportunities for real estate investors on the Gulf Coast while properties are cheap. In fact, Maheshwari says the only difference between India or China and the U.S. is confidence. “People tend to be either overly pessimistic or overly optimistic,” he says.

Who is Arun Maheshwari?

Like many CEOs who have retired to the Gulf Coast, Arun Maheshwari used to come on vacation from his home in New Jersey.

Maheshwari now lives in Estero, a growing residential area in south Lee County, “for the same reasons it would be a terrific place for employees,” he says.

Maheshwari, 66, is widely considered one of the pioneers of the Indian outsourcing boom. Educated at the elite Indian technology schools that formed the backbone of that country's new economy, he traveled to the U.S. to obtain a master's degree in computer science from Stanford University, an MBA from Columbia University and a Ph.D. from the Wharton School of Business.

Following his U.S. studies, Maheshwari joined Tata Consulting Services in 1974 and was the firm's first head of marketing and business development. Today, the Tata Group is a $100 billion multi-national company.

In 1977, Maheshwari joined consulting firm McKinsey & Co. and then in the 1980s worked with large insurance companies to help them outsource work to India.

In 1996, Maheshwari helped Policy Management Systems Corp., the global leader in insurance software at the time, outsource its operations in India. He then started Fiserv Global Services Group in 2005, growing that operation to 2,000 employees.

Now retired, Maheshwari is the general partner of RisingSun Ventures and actively invests in the technology and real estate sectors.



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