Know When to Hold, When to Fold

Know When to Hold, When to Fold

By Sean Roth

Real Estate Editor

Michael Lepore's history shows he's good at finding the right time to jump into a business. He's also experienced at knowing when to jump out. From newspaper wholesaler to travel agency owner to bus-line operator and eventually real estate developer, Lepore, 67, has moved from one industry to another with seeming ease.

Now after developing a business park and a number of smaller office buildings, Lepore, his daughter and son-in-law, Maria and Ed Bankemper are aiming to add hotel developer and operator to Lepore's list of occupations.

Last week, Lepore and the Bankempers learned their 110-room hotel slated for the southwest corner of Interstate 75 and Fruitville Road in Sarasota will feature a franchise hotel for Radisson Hotels & Resorts.

Compared to, say, Hilton or Sheraton franchises, Lepore says, "We found it was the best operation, There are a lot more Radissons in Florida. In this type of a market, it will really focus more on corporate visitors."

The closest Radisson properties are the Radisson Hotel and Conference Center St Petersburg/Pinellas Park and the Radisson Suite Beach Resort on Marco Island. The former Radisson Lido Beach Resort has since dropped the Radisson franchise name and is known as the Lido Beach Resort.

Lepore says he was drawn into the hotel business because of his difficulty arranging for hotel rooms for executives associated with the cruise bus-line business Cruise Connection, located in one of his buildings in Sarasota International Trade Center. "That and we would have clientele come in from out of town that would want to have breakfast or at least lunch without having to leave the hotel," Lepore says. "We used to send them to the Hampton Inn and later the Holiday Inn in Lakewood Ranch. We couldn't always find availability."

Lepore's market research for the hotel showed that the 11 hotels within 10 miles of his proposed hotel property have an average 82% occupancy rate. At the same time, all but one of the properties had an average daily rate of above $100.

"Once I saw the market study I felt very confident," Lepore says. "There just aren't that many hotels out here. And there's more development yet to come." Surrounding Lepore's hotel will be a new Lowe's store, a proposed DeBartolo Development mall project and the Wal-Mart-Sam's Club complex across the street.

But rather than aim for a standard interstate hotel product, Lepore says his cost of the land forced him to consider a full-service hotel. "If we had bought two years ago, we could have gotten the land for $1.5 million to $1.6 million," Lepore says. "We paid $3.1 [million]. We couldn't afford to make this a $69 product."

Construction is expected to add another $12 million to $13 million, making the total cost to $150,000 per room. "Most limited service hotels want to spend between $75,000 and $85,000 per room," Lepore says.

Most of the management responsibility of the new Radisson has been delegated to Jamie Meades, a hotel consultant and previous Lepore partner, and Lepore's daughter. Meades' job at this point is intended to be short-term, taking the hotel through its first year of operation as executive director.

Bankemper, on the other hand, is being groomed for the general manager job. Although she has no direct hotel experience, Bankemper has worked in her father's Cruise Connections since the early 1990s and most recently as general manager of the Florida operations.

Two years after her father sold Cruise Connections to Coach USA, she was recognized as the Coach USA's Entrepreneur of the Year for 2002. Among other things, at that time Bankemper led the company's quadrupling of its revenues to $4 million.

Newspaper distributor

Lepore's journey to becoming a hotel developer began with his brother in the early 1960s, soon after he graduated from New York University. He and brother Vic first considered retail, "but my preference was a service business," Lepore says, "because then we weren't in the position of sitting and waiting for customers to come to us. With all the savings we had accumulated, borrowed, selling our cars and things like that, we had about $5,000 to start with."

The brothers purchased a small newspaper delivery area for the New York Daily News and the New York Times in Long Island. They had five employees.

"We lived pretty cheaply for a while and made sure almost all of the money we made we reinvested in the business," Lepore says.

Within six years, the company, New York Newspaper Services, had expanded throughout Long Island and into New York City and grown to 250 routes. The company started franchising routes to other companies.

In the mid-'70s, Lepore realized it was time to get out. "The business was changing," he says. "The publishers were being more aggressive and becoming more directly involved in their distribution."

In 1976, Lepore sold many of his routes to the franchisees, left his brother in charge of the remainder of the operation and retired to Sarasota. He was 38.

Typical travel agency

Lepore's retirement lasted almost a year. For a while, he owned Gulf Coast Water Resources, a company that handled commercial water treatments. Lepore's sales manager, whose wife had been a travel agent in New York, suggested opening a travel agency.

"We were just a typical travel agency doing whatever everybody else did," Lepore says. "When I got more active in the company, it just didn't seem to make sense. I saw the amount of time my employees were wasting per customer, and it just didn't seem to ring the cash register."

Lepore started profiling his customers. He found they were typically retirees who wanted to leave on a vacation on almost a moment's notice. As a result, Lepore launched a travel agency based around buying bulk unpurchased cabins within 60 to 30 days of departure from cruise lines and selling them at a discount.

"The cruise ships were not directly marketing as much as they are now," Lepore says. "If they had empty rooms they were pretty panicked."

Lepore eventually opened three travel stores in the Sarasota area. As part of his service to customers, Lepore started chartering buses to get people to and from the cruises. Eventually, he purchased his own buses and spun off Cruise Connection Bus Lines.

"I really felt like the market was changing in the middle of the '80s," Lepore says. "There were several other operations out there; we weren't unique. At the same time, other travel agencies were trying to buy seats on our buses."

Lepore closed the travel agencies and focused on running Cruise Connection. "We were really taking all the risk," Lepore says. "They were buying seats one and two at a time, and we had to make it work no matter how many seats were purchased. Starting out we ran buses for one or two people; we had to. It's really a unique business even to this day."

By the early '90s, Lepore says, the cruise lines themselves were buying seats for their customers on the bus line. Cruise Connection eventually grew to where it was carrying 160,000 passengers annually and providing service to six port cities: Miami, Cape Canaveral, Fort Lauderdale, Tampa, Norfolk, Va., and Baltimore. Around that same time, Maria Lepore joined her father at Cruise Connection.

In 1999, Lepore sold Cruise Connection to Coach USA.

"Long term, I was more interested in starting to develop a real estate firm," Lepore says. "That's where I felt the emphasis should be. [Cruise Connection] was a good vehicle, but it was difficult. Any of the larger bus companies could provide better liability insurance than a smaller operator like us. That and [Coach USA] made us an offer we couldn't refuse."

Transition to real estate

By 2000, Lepore's daughter became general manager of Cruise Connection and stayed on with Coach USA while Lepore set up MPL Properties.

Lepore's first taste of real estate development actually occurred while he was juggling his time with Cruise Connection. In 1992, Lepore, who owned several units in the 214-room resort hotel Palm Bay Beach Resort, led a successful campaign to unseat the board of directors. Lepore felt it was not making necessary improvements to the property. After a lengthy search for hotel consultant, Lepore hired Meades as the board's executive director, which led to an about $8 million renovation project.

MPL Properties has since purchased seven parcels in Sarasota International Trade Center and other properties primarily along Fruitville Road. Eventually, Lepore built three 10,000-square-foot office buildings in the trade center and occupied a portion of one of the buildings himself.

"We were really focusing on the stability of long-term rentals," Lepore says. "In late '90s, 2000, 2001, with the low interest rates, it became obvious that people were more interested in buying their own space so we started selling commercial condos."

MPL Properties developed the three-building Fruitville Business Park on two acres on Fruitville Road between Beneva Road and Tuttle Avenue. The objective, Lepore says, was to sell half the office units and keep the remainder as long-term rentals. All of the available offices spaces were sold prior to the complex receiving its certificate of occupancy in May 2004.

"As opposed to just offering condos for purchase, we are positioned to handle a market change," Lepore says. "This gives us a better diversification so we can follow along with the market. This is much more of a legacy type of business. In that respect, Cruise Connection is much more trendy. Right now, we run a lot of passengers but that could change for a number of different reasons. We are already seeing that the type of people that are taking cruises is changing. Eventually, they might prefer to drive rather than take the bus."

But while selling and leasing office properties is reliable, Lepore says, in many respects he sees it as a boring investment. "What's fun about hotel rentals is you are operating something where you can truly see the cause and effect of your changes on things like advertising and pricing," Lepore says.

Lowe's on the way

Mooresville, N.C.-based Lowe's Cos. Inc. has announced plans to begin construction on a Lowe's store at Fruitville and Cattlemen Roads in Sarasota, with an opening in the first quarter of 2007.

The home-improvement store will have 116,000 square feet of retail sales space and an additional 27,000-square-foot garden center. Company officials say the store will be an initial investment of $18.5 million and create nearly 175 jobs.

Lowe's Cos. operates more than 1,175 stores in 49 states and has stores under construction in Brooksville, central Bradenton, northeast Fort Myers, north Lakeland, Oldsmar, Riverview and Sebring.

WHAT'S NEXT FOR LEPORE

While Michael Lepore's daughter and his partner Jamie Meades develop their Radisson hotel venture, Lepore and his son-in-law Ed Bankemper are finishing up another project: Franklin Field Business Center, a four-building office condominium park on Rhodes Avenue to the northwest of Fruitville Business Park across from Robarts Arena. Completion is expected in October 2006.

After that, MPL Properties has an inventory of properties, all of which are slated for future development - 21 parcels in all throughout Sarasota County. That includes Blackburn Point Business Center, about 10 acres near U.S. 41 and old Venice Road in Osprey and three acres on the future extension of Sarasota International Trade Center Boulevard into Lakewood Ranch.

HOW OCCUPANCY COMPARES

Probable

Rooms occupancy

1. Hilton Garden Inn 115 82%

2. Marriott Residence 78 82%

3. Marriott Springhill 83 82%

4. Marriott Courtyard 81 82%

5. Marriott Fairfield 87 75%

6. Comfort Suites 82 85%

7. Holiday Inn Univ. 128 86%

8. AmericInn 111 82%

9. Homewood Suites 100 85%

10. Hampton Inn 121 85%

11. Country Inn 101 80%

Total 1,110 82%

Source: Jamie Meads, MPL Properties

NEW CHAIN IN THE MAKING?

The Radisson is not the only new hotel planned for near Interstate 75. S.S. Appel & Co. has contracted to purchase two acres on Tara Boulevard just west west of Interstate 75 at State Road 70. The developer plans to build its first Manorhouse Inns and Suites.

Manorhouse Inns are envisioned as boutique, condominium hotels serving the business and vacation traveler.

The three-story hotel model has been designed to look like a manor house from a European estate. The double-door entrance leads to a two-story entry hall. Plans feature one- and two-bedroom suites that can be divided into multiple units for owner, guest and tenant flexibility.

Manorhouse also recently completed a cross-marketing agreement with the Orofino family, which will give the new hotel group an affiliation with the Aurum Hotels chain.

Construction on the first Manorhouse Inn is expected to begin in the spring of 2006, with an expected grand opening before year-end.

Plans are under way for a second Manorhouse to be developed at Tallevast Road and U.S. 301 in Manatee County.