Winners, Losers and, of course, Real Estate

For the second year running, the housing market continued its slide, taking parts of Southwest Florida’s economy with it.

People lost jobs, investors and home sellers lost money and communities lost businesses. Particularly hard hit were construction and development companies that faced shrinking orders and bloated inventories.

One bright spot, perhaps, was that residential real estate prices dropped to more affordable levels—for buyers who could find mortgages amid tightened borrowing standards. And many in the industry argue that the market slump created a good scenario for investing and finding bargains, relatively speaking.

Some of the region’s publicly traded companies had issues of their own. Class-action lawsuits, falling profits and stocks, and at least one federal probe challenged several corporations that typically had performed well in the global marketplace.

But for all of the negatives, many of the stories from the past year were upbeat. Higher education thrived, with expansion at campuses across Lee, Collier and Charlotte counties.

Shopping choices flourished with the arrival of new retailers and shopping-center growth. And road-improvement projects at some former problem spots wrapped up, easing gridlock. The transportation topper was the beginning of the highly anticipated widening of I-75 between Naples and Fort Myers, a clogged and dangerous stretch of roadway.

We also made it through another hurricane season without a big storm.

Here is a sampling of the winners and losers in 2007, as well as a look ahead in some of Southwest Florida’s major economic sectors.

Real Estate And Development
Loser: The Housing Food Chain
The industry that sizzled continued to fizzle. As fall neared, the number of single-family building permits issued year-to-date in Lee County stood at a paltry 3,911, compared with 11,965 the year before, and home sales and prices suffered there as well. Ditto in Collier and Charlotte counties, although the inventories of homes for sale there were shrinking more quickly than in Lee.

With revenues suffering and home inventories high, builders and developers such as WCI Communities, Centex Corp., Lennar Corp., the Bonita Bay Group and others collectively laid off hundreds of employees.

The struggling market also hurt businesses that catered heavily to real estate clients, including some marketing firms. Once-plentiful construction-related jobs dwindled.

The downturn dashed plans for some major projects. Antaramian Development of Naples, for instance, decided not to purchase the Naples Daily News headquarters on Central Avenue, where Antaramian intended to build homes. And its Renaissance Village, a mixed-use development at the defunct Grand Central Station on Goodlette-Frank Road in downtown Naples, was mothballed.

Losing trend: Foreclosure action
Many investors who were stuck with homes that wouldn’t sell—at least at adequate prices—ended up losing them. Failed subprime mortgages added to the woes, making for some stark statistics. In July, Lee County ranked second nationwide in foreclosure action, with 36.2 filings per 1,000 households, according to www.foreclosures.com. Year-to-date comparisons available in the fall were just as troubling, with Southwest Florida counties reporting triple-digit percentage increases in foreclosure filings.

Loser: WCI Communities
Misfortune plagued the Bonita Springs luxury homebuilder. The company reported a net loss of $49 million for the first six months—$33.1 million of that in the second quarter. Company officials announced they would reduce its workforce, and stockholders took a hit as prices fell from a high of more than $24 a share to less than $5 per share. WCI also went through a highly publicized boardroom drama (see the Public Companies section of this story, p.19).

Alleged losers: First Home Builders of Florida, et al.
Dozens of individuals put up money to buy First Home Builders of Florida properties that would eventually be sold to homebuyers in rent-to-own deals, which were supposed to yield a 14 percent return for the investors. Instead, some lost money when the home-sales market began to tank, creating a rental glut. Investors filed a class action lawsuit alleging fraud against First Home Builders, the late Fort Myers commercial real estate broker Frank D’Alessandro, agent Samir Cabrera and others.

Winners: Developments that could
Despite an anemic residential market, several high-profile, multimillion-dollar projects moved forward.
Tarpon Point Marina, Cape Coral: Grosse Point Development Co. is building the upscale project located on the waterfront in southeast Cape Coral. Condos, single-family homes and a condo hotel are among the residential offerings along with restaurants and shops.

Murdock Village, Port Charlotte: Kitson & Partners, developer of Babcock Ranch, sealed a deal with the county to purchase the 1,100-acre Murdock Village. There, it plans to build 3,500 homes as well as retail and other commercial space.

Imperial Landing, Bonita Springs: The city council gave the OK to Antaramian Development’s plans to develop 5.3 acres on Old 41 Road, creating a downtown area with shopping, dining and residences.

First Street Village, Fort Myers: Cameratta Properties’ project in downtown Fort Myers is under way, with plans for 356 luxury residential units, 38,000 square feet of office space and approximately 105,000 square feet of class-A retail space. A new, 39,000-square-foot Publix is among the tenants.

The town of Ave Maria: The 5,000-acre community is rising around Ave Maria University. When built out, the town—being developed in a partnership of Domino’s Pizza mogul Tom Monaghan and Barron Collier Companies—will have 11,000 residences as well as commercial services, parks and public schools, plus a K-12 parochial school already in place.

Winner: Commercial real estate
The markets for office, industrial and retail properties held their own. Commercial developments are often years in the planning, so projects that were green-lighted in prosperous 2003 or 2004 continue to rise. Among the concerns, however, are rising vacancy rates.

Winner: Charlotte County
In June, Publix paid $7.67 million for 87 acres at the Enterprise Charlotte Airport Park, where the grocer plans to build a job-producing distribution center. And downtown Punta Gorda continues to see new businesses and buildings, such as the mixed-use Sunloft Center, rising where Hurricane Charley wiped out their predecessors.

Loser: Collier County moratorium
Commissioners last spring considered a halt on construction until the county, anticipating statewide property-tax cuts, could decide how to pay for growth. Tax cuts by state lawmakers would certainly reduce revenues for local governments. The county board’s moratorium discussion incensed the development community, which promptly made a strong show of solidarity against the idea. (The legislature passed the tax cut in June. In late July, Collier commissioners dropped talk of a moratorium.)

Such related hubbubs might diminish if the proposed Florida Hometown Democracy Amendment passes. Denounced by developers and planners, it would remove responsibility for planning from local planners and elected officials and require the voters to decide on every comprehensive plan amendment.

Winner: School builders
Southwest Florida school districts are still playing catch-up with student population growth, so contractors, engineers, architects, tradespeople and others involved with school construction have been hard at work.

Real Estate Outlook
The local real estate market is locked in a waiting game.
Buyers have been waiting for prices to fall further and sellers are cautious about dropping them too far, which leaves a lot of inventory to reduce before a recovery can begin.

That leaves the question: When will things change for the better?
Analyst Mike Timmerman says 2008 is not likely to be the year. "It will be a little bit better, but not substantially better," he says.

A turnaround could be influenced by various factors that are in the works, including property-tax reform, a reduction in property insurance and lower interest rates, Timmerman says. If lower prices lead to inventory sell-off, supply and demand will begin to even out, but that probably won’t happen until after the first quarter of 2009, he says.

Broker Michael Hughes, general manager of Naples-based Downing-Frye Realty Inc., believes an uptick will transpire sooner, at least in the Naples area. He and others at the agency see the same prospective buyers looking at or calling about properties they’ve inquired about several times before, and sellers continue to negotiate prices, he says.

"Going into ’08, we’ll have three years of buyers sitting on the fence. A lot of these people are trying to time [a purchase] right," says Hughes. "A lot of them won’t."

His company also has noted an increase in the number of showings.

"Most experts predict [positive changes] during the second half of ’08," he says. "I think it will turn around sooner."

Public Companies
Publicly traded companies in Southwest Florida provided plenty of fodder for salacious headlines. A high-profile takeover attempt, class action lawsuits, a Securities and Exchange Commission probe and shareholder malaise were among the reports. Not all of the news was so dramatic, however. Other companies continued to go about their business, increasing profits and growing.

Loser: WCI Communities Inc.
Talk about boardroom drama. The homebuilder’s worsening financial performance concerned major stakeholder Carl Icahn enough that he tried to buy the company, in the hope of turning it around. In the spring, the billionaire investor, who by that time owned nearly 15 percent of the stocks, made a tender offer of $22 a share.

The board rebuffed the unsolicited bid and placed the company up for sale. But there were no takers. Stock prices plummeted, reaching a low of $4.95 a share on Aug. 3. And losses mounted.
Icahn’s next move was to run his own slate of board candidates at the annual meeting later that month in an effort to take control. The two sides worked out a deal that would name nominees from both camps. The lineup was elected, WCI took itself off the sales block and Icahn became chairman of the board.