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To Randy Mercer, the Roadhouse Grill steakhouse on College Parkway in Fort Myers always stood out, though not for its sizzling steaks.
Mercer, partner in the office of CB Richard Ellis in Fort Myers, is a longtime commercial real estate broker in the area specializing in office space. Together with Stan Stouder, also a partner in the same firm, they assembled a small group of investors to buy the steakhouse with its 2.7 acres out of bankruptcy court in 2000 for $800,000 with the intention of converting it to office space.
The steakhouse stood out because it didn't fit in on College Parkway, a main corridor lined with office buildings popular with bankers and other professionals. “College Parkway was my home court,” Mercer says. “It's always going to be the financial center of Southwest Florida.”
The College Parkway corridor's office buildings have always performed better than those in other areas of town with below-market vacancy rates and strong rents. During the peak years of the real estate boom, there was virtually no vacant office space on College.
Behind the restaurant was a parcel of land measuring just more than an acre that served as parking. “The real opportunity was the excess land,” Mercer says. “It was like getting a piece of land on College Parkway for free.”
Some commercial real estate brokers stay away from investing in deals, but Mercer says this was too good an opportunity to pass up. “Most times brokers have no creative input into the process,” Mercer says. “That was the fun of it.”
Of course, Mercer could have done without the illness caused when he walked through the restaurant shortly after the group bought it. That's because it had been vacated more than a year earlier with the power disconnected and food left rotting inside the restaurant, including the trademark barrel of now-moldy peanuts. “I developed this outrageous sinus infection, and I literally missed Christmas,” Mercer chuckles. “I know it's because I'd been in there.”
After inspecting the premises, Mercer quickly reached this conclusion: “Let's just take the roof off.” After the roof was removed, Mercer hired a crew with a crane to remove and dispose of all the restaurant equipment, including freezers full of rotten food. “There was nothing to save except four concrete walls.”
Mercer and his partners didn't fully know what their project would entail. “You just don't know what you're going to run into. It was just a gut feeling,” Mercer says. “We had no idea how much it would cost us.” In the end, it cost them $250,000 to renovate the restaurant into office space, but they quickly filled it with the offices of CB Richard Ellis.
Mercer and Stouder were able to incorporate design elements they had seen brokering thousands of square feet of office space in the area over the years. For example, they added special roof overhangs so people don't get wet during frequent summer rainstorms.
Despite initial signs of the recession, Mercer and investors broke ground in 2007 on a second 10,000-square-foot building on the excess land. Mercer says they could have built a bigger building, but they were cautious. “A bigger building won't necessarily make you more money,” he says.
And the buildings had a big advantage over their competitors: lots of parking. The newer building has five spots per 1,000 square feet and the first building has nine parking places per 1,000 square feet.
Of course, no one anticipated the depth of the recession, and it took Mercer three years to fill it with tenants. “If anybody can lease it up, I thought I could,” Mercer chuckles. Tenants now include office-furniture purveyor Herman Miller and the Southwest Florida Community Foundation who pay market rents between $15 and $17 per square foot, net of expenses.
Mercer acknowledges the project was time-consuming, but he says the project's creativity was appealing and ultimately will be financially rewarding. “This is part of our retirement,” he says. “I wouldn't change a thing.”
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