Low-Ender

Low-Ender

By Sean Roth | Real Estate Editor

Warren Hickernell learned real estate from the bad guys. As a federal postal inspector in the 1970s, a significant part of Hickernell's job was tracking down crooked builders and land investors in the Poconos, a resort community in eastern Pennsylvania. These were guys that would trench off a section of land and then sell off the lots through high-pressure boiler-room tactics. When they had their customer's money, it was time to shut off the phones and go bankrupt.

To catch these crooks, knowing the financials of business wasn't good enough; you had to know real estate. And once Hickernell did, he started putting people away.

"I always thought it was amazing that they would cheat people," Hickernell says, "when it was so easy to make money in real estate legally."

Today, Hickernell's real estate education stems from his jobs as head of the development company Elite Program Services Inc. and as a commercial Realtor with Prudential Palms Realty. His main focus: redevelopment of rental-resort properties. He buys dumpy, rundown mom-and-pop motels and apartment buildings, remodels them and then either manages them, converts them to condos or condo-hotels. If he sold all of his 12 properties, sales volume would total roughly $100 million. In six of the properties his basis is about $30 million.

Greg Reynolds, one of the two managing members of the former Prudential Cascade Realty and now senior vice president of Prudential Palms Realty, says Hickernell's business division gives the real estate firm an in-house outlet to direct clients to for investments.

"I think part of what makes him so successful is he approaches [projects] very analytically," Reynolds says. "After all, he is a licensed CPA in Georgia. He goes into mishandled properties and brings them way up. People have been doing condo conversion since the early '70s and '80s, but Warren was doing resort-type conversions before it really became popular."

From rats to resorts

Most of Hickernell's projects are funded through his own savings and a mixture of investors' capital and bank financing. These multiple backers have allowed Hickernell to move quickly. Last year, Hickernell purchased nine properties.

In June, Hickernell's Hideaway Investors LLC purchased the eight-unit Mango Bay Hideaway on Longboat Key for $1.4 million. Hickernell plans to sell off the hotel units as condominiums for about $320,000 each.

In August, Minorga Partners LLC bought the 10-unit Calle Minorga apartments complex in Sarasota for $2.8 million. Hickernell says that when he acquired the apartment complex, it was in such a bad state that his staff had to contend with several generations' worth of rats.

"This is right in the middle of the Village of the Arts," he says. "We actually had a contest with the staff to see what team to could trap the most rats. The winner caught 43."

After an extensive extermination process and a complete renovation, Hickernell plans to put the condominium units on the market for about $500,000 each.

Hickernell stayed busy right up to the end of 2005. In the 11 days from Nov. 28 to Dec. 9, Hickernell-directed development groups purchased the 46-unit Bermuda on Osprey in Sarasota, the 17-unit Tropic Isle resort on Bradenton Beach and the 37-unit Siesta Plaza Motel on Siesta Key for $21.3 million. Hickernell is gutting the Bermuda on Osprey's units and redeveloping them as condominiums in the $300,000 price range.

Hickernell is renovating both hotel properties. Units in the Siesta Plaza Motel are being sold off, but it will continue to be operated as a hotel, which in the industry is known as a condo-tel. The Tropic Isle is still being run as a resort.

In early January, another Hickernell-led investment group bought a depressed 29-unit apartment complex on 1045 Cocoanut Ave. in Sarasota for $3.75 million. Hickernell has been in contact with the RMC Property Group, one of the developers of the about $50 million mixed-use Broadway Promenade development, about integrating the apartment complex with the much larger project through a redevelopment and a paved walkway.

"I have between 12 and 15 projects going on right now," Hickernell says.

A gun and expense account

Hickernell is different from the typical Realtor. He has a nine-person staff, including two sales people, devoted to supporting his development interests. As a satellite of Prudential Palms Realty, Hickernell and his staff have outgrown their office in the main Prudential Siesta Key office and relocated to a stand-alone location in the Sawyer Oaks office complex near Clark Road.

It was Hickernell's accounting degree that set him on the road to real estate development. While he was pursuing an accounting degree at Lehigh University in Bethlehem, Pa., the U.S. Postal Inspection Service recruited Hickernell as a federal agent.

"They said, 'How would you like to get to carry a gun and have an expense account?'" Hickernell says. "Our purview was the mail fraud statutes, but it covered just about everything. We worked drugs, theft and fraud cases. I also did protection."

Hickernell worked in the south Philadelphia office and then moved on to the New Jersey office. But he studied for a career in real estate, too.

Once Hickernell learned the basics of real estate, he felt the bug to use it in his real life. He bought a small duplex in Atlantic City for $56,000. Next, he took out a $12,000 home equity loan and acquired a small home near the beach in the resort town of Brigantine, N.J.

"A nearby condominium developer had an existing L-shaped building, but they needed that piece to make a U," Hickernell says. "While he was still trying to negotiate on price, I bought it out from under him and gave the owner her full listing price [of $55,000]. Four weeks after I closed he offered me $4,000 more than I paid."

Hickernell's success as a postal inspector in the New Jersey and south Philadelphia offices led to a promotion to the New York City office. After two more years as a postal inspector, he began working on Wall Street, with stops at several firms. "I didn't care for the cold, and I didn't like working on Wall Street, because you are really controlled by what some government agency might do," he says. "I really felt like I didn't have enough control over the system to make sure my clients were protected."

After vacationing for several years in Miami and working on smaller initial public offerings in St. Petersburg, Hickernell decided to relocate. "Sarasota had been recommended to me, but when I got here I discovered it had just about everything I was looking for," he says.

He moved in 1989 and went to work for the Sarasota accounting firm of Cavanaugh and Co.

Once again, though, real estate became his side job. He would buy a few smaller homes and fix them up to be resold. He eventually moved into rental properties.

'There is no bubble'

Hickernell keeps a low profile. He doesn't market or advertise his practice. "The only concern I have is finding properties that still make sense with all the pie-in-the-sky prices," he says. "Theoretically, with this slowdown we may see some pullback on the asking prices. I've turned down beautiful deals on the beach because the price just didn't work."

Hickernell is extra choosy about his purchase price, because his business model requires it. He wants any project after it is renovated, updated and prepared for sale to be the least expensive property in the neighborhood.

"We sold all of our units in Burns Court Enclave in 15 minutes," Hickernell says. "They were two-bedroom, two-baths for $449,000. We had rented the tent and a bartender for the day so it turned into a party."

Going forward, Hickernell expects more of the same, just not much more. "There had to be a pullback," he says. "This is just a breather in supply. But, there is no bubble. When you look at the demographics of the baby-boomer generation, it's clear that prices are going to continue heading up."

Hickernell also plans to expand a condo-tel management company called Mango Bay Management nationwide. The company, which is being co-owned and operated by Dennis DeSilva, was founded around Hickernell's Mango Bay Beach Resort.

"It would be the same general idea as [ResortQuest]," Hickernell says, "but this would be a much more boutique firm. We are already looking at resorts in North Carolina, Colorado and around the state."

Hickernell is also considering working with a group of Wall Street investors on a larger scale. He also would like to build up a chain of boutique motels. He's in final price negotiations on two "good-sized" resorts, one on the West Coast and the other on the East Coast.

"I really see my job as preserving the low-impact mom-and-pop hotels," Hickernell says. "There is a big movement afloat to tear them down and build high-rises or large mansions, but I'm trying to preserve these. I may not make as much, but this is what I do."

CHARITABLE WORKS

Developer Warren Hickernell is perhaps best known locally for his unique approach to fundraising for the Kiwanis Club of South Sarasota. His wife, real estate attorney Mary Lynn Desjarlais, became president of the organization nine years ago and put him in charge of fundraising.

"The one condition was I didn't want to do things like a pancake breakfast," he says. "I wanted to do what I do. At that point I was fixing up single-family homes."

So Hickernell arranged for the club's foundation to invest $32,000 cash in a fixer-upper home on Kensington Avenue in Sarasota. After investing some additional sweat equity in repairs aided by some junior Kiwanians, the club netted about $4,000. The club successfully flipped four other houses.

After the real estate market took off five years ago, the Kiwanis club invested $50,000 into Hickernell's conversion of The Poinciana on Lemon Bay into the Tiki on the Bay Resort condominiums. The club doubled its money.

The club's most recent fundraising venture with Hickernell was another $50,000 investment in his roughly $2 million purchase of the 13-unit Pearl Beach Motel on Manasota Key. Hickernell renovated it and is running it as a boutique motel.