Preparing for the big rebound - in '08

Preparing for the big rebound - in '08

Company by Jean Gruss | Editor/Lee-Collier

New head of the Bonita Bay Group, Kitty Green, is not expecting much strength in real estate this year, but is planning for a bounce in 2008, and expects a return to vigorous levels in 2009.

Kitty Green is a realist.

Green, 44, the newly named president and chief executive officer of Bonita Bay Group, won't sugarcoat the downturn in residential real estate. But don't think for a minute that she's capitulated.

First, the bad news: "We're guessing this year will be another bad year," Green says. "Sales are as bad as they've ever been."

The good news: Sales of new homes will turn in 2008 and will regain their strength in 2009, she says.

Green is busy preparing the company for that rebound. The Bonita Springs-based residential developer is planning more than 23,000 homes on 7,670 acres in Southwest Florida.

In addition, the company is scouting land deals as far as Georgia and the Carolinas and it's branching out from its traditional golf-course communities into urban and other types of residential developments. To do that, it has beefed up its planning and development departments by hiring talent from rival development companies that haven't fared as well lately.

To be sure, the current residential downturn has been a shock. But the Bonita Bay Group was well prepared as it recorded its third most-profitable year in 2006 (privately held Bonita Bay Group won't share revenue or profit information). In contrast to rivals, it didn't have great exposure to the volatile condominium market and most of its communities were well established by the time the downturn hit last year.

For example, Bonita Bay Group reported nearly $30 million in sales of furnished model homes in the past 90 days at Mediterra, its 1,697-acre community in North Naples. Even sales of condos have done relatively well. The company reported sales of more than 50 condos in the $2 million-and-above price range last year at Bonita Bay, the only Bonita Bay Group community that includes condos.

Prepared for the downturn

Bonita Bay Group leaders have long been known for being visionaries in residential real estate development in Southwest Florida. David Shakarian, founder and chairman of General Nutrition Corp., assembled more than 4,000 acres in the once-sleepy fishing village of Bonita Springs in 1979 and founded Bonita Bay Group. Shakarian died in 1984, but his son-in-law, David Lucas, a Harvard MBA graduate, took over the business and grew it to what it is today.

The company currently develops seven residential communities totaling more than 10,000 acres from Cape Coral to Naples. It has a stellar reputation for working closely with neighbors and environmental groups, favoring consensus over lawsuits. Its leaders also have the uncanny ability to spot overlooked areas, such as eastern Lee County, that are prime for residential development.

Green, who succeeded Dennis Gilkey in February after his surprise resignation, says the company is better positioned than most because its communities were well established before the downturn and it wasn't incurring the high startup costs of a new community.

What's more, the pent-up demand of buyers from the boom years of 2004 and 2005 spilled over into 2006. Green estimates just 10% of buyers at Bonita Bay were investors. "Our market has been end-users," she says.

Still, contract cancellations have plagued the industry. At Sandoval, its community in Cape Coral, the company saw cancellations last year of about 30%. But in a positive sign, Green says cancellation rates have moderated and she believes the third quarter of 2006 was the low point.

Green says she's thankful Bonita Bay Group is privately held by the Lucas family. That gives the company greater latitude to focus on long-term growth in what is a highly cyclical business, she says. By contrast, neighbor and competitor WCI Communities is publicly held and its management is under fire from corporate raider Carl Icahn as it loses money.

Naturally, the 1,500 employees at Bonita Bay Group have been anxious about the future of the company and part of Green's job is keeping them focused on the future while reassuring them that their jobs are safe. "We just had a series of employee meetings to say that we all need to be doing our very best work," Green says.

Employees know that the Lucas family is invested in the company for the long haul, she notes.

Planning ahead

One advantage of the downturn is that there are talented planners who are looking for work. "We've hired in planning and development," Green says. In fact, Green says every position is filled for the first time in years.

Planners are busy working on more than 23,000 proposed homes in seven communities stretching from Clewiston and LaBelle in Hendry County to the eastern Lee County communities of Alva and southern Charlotte County. The company's next community will be Murphy's Landing in eastern Lee County, a comparatively small 403-home community on 184 acres that will open in winter 2008.

Green acknowledges that the recent downturn may have pushed back some of the larger and more distant projects, such as the 5,200 acres it has under contract with the Paul family in LaBelle. However, Green points out that 7.5 million people live within a two-hour drive of Hendry County.

What's more, Green forecasts that Florida will gain a big share of the 70 million baby boomer retirees over the next couple of decades. But Green isn't complacent; boomers will likely want communities and amenities that are different from today's offerings. For example, tomorrow's Bonita Bay Group communities may be more pedestrian-oriented, have more traditional designs such as front porches and may not offer the stunning golf courses for which the company is renowned.

Already, Bonita Bay Group has launched communities such as Sandoval in Cape Coral that don't have golf courses. And its Eastwood Village project in urban Fort Myers is designed to be more compact and affordable. "We look at every piece of land for what it ought to be," Green says.

For now, the company is focusing on existing customers for referrals to friends and family. "We're concentrating even harder on our existing customers," Green says. "We haven't asked for the business as clearly."

In addition to existing customers, Bonita Bay Group is helping its builders by spending more on marketing and advertising, including in national newspapers such as The Wall Street Journal. It also is helping builders with better terms on options to buy additional lots, though Green declines to cite what those terms are.

A recent ad in the Journal featured Mediterra and a phone number to call for incentives. These incentives include credits for a portion of the cost to join the golf club, club dues and homeowners' association dues if a customer buys prior to April 8. At Verandah in Fort Myers, builders are funding a $15,000 credit on a golf-membership deposit that is valued at $50,000, for example.

Taxes, insurance and roads haven't had a measurable impact on sales, she says. But that's not to say the issues don't need to be tackled for the future of the region's economic health. Green serves on the board of the Southwest Florida Expressway Authority, which is exploring ways to speed up the widening of Interstate 75. Tolls may be the only answer because funding is not available beyond two additional lanes, she says.

Diversification efforts

Meanwhile, Bonita Bay Group is making a big push to diversify its operations. It is scouting land in the Carolinas and Georgia to diversify geographically and it recently launched two new affiliated businesses, Bonita Bay Group Realty and New Leaf.

Bonita Bay Group Realty is a residential brokerage that focuses on re-sales in Bonita Bay communities. "Who knows our communities better than us?" Green says. The brokerage recently recorded its 100th listing after being open just a few months.

The company also launched New Leaf in January, an amenities management division that will run clubs in Bonita Bay Group and other communities. "In all these cases it's taking expertise we already have and leveraging it," Green says.

Despite a desire to diversify geographically, Bonita Bay Group has not purchased land in the areas it's looking at: coastal and mountain North Carolina, northeast Florida, and coastal Georgia. "I haven't seen any good deals on land," Green says. "Land sellers haven't changed their mindset."

However, the company acquired 263 acres in Alva over the past year for a proposed 3,000-home community, indicating Bonita Bay Group is actively tying up land at a time when many builders are writing off millions of dollars in contracts.

When land prices do fall, you can bet Bonita Bay Group will be aggressive. Consider that a reflection of Green's management style: "I'm very impatient," she says.

REVIEW SUMMARY

Company. Bonita Bay Group

Industry. Residential development

Key. Prepare now for a rebound in 2008.

Who is Kitty Green?

Like so many real estate professionals in Southwest Florida, Kitty Green did a stint at WCI Communities, the Bonita Springs-based homebuilder that is now the target of billionaire investor Carl Icahn.

Green was the director of marketing for WCI from 1991 to 1995 and rose to vice president of business development before she left to join Bonita Bay Group in 1999.

She started as director of special projects for Bonita Bay Group and was promoted to general manager of Verandah, a community east of Interstate 75 in Lee County in December 2000. She was promoted again in 2002 and given responsibility over the company's Cape Coral projects.

In January 2004, Green was named regional vice president for the northern region of Bonita Bay Group. She was responsible for the creation and implementation of the company's business plans for existing and future master-planned communities from north Lee County to Sarasota. That included acquisitions, land planning, entitlement, development, marketing and sales.

Green became president and chief executive officer of Bonita Bay Group in February and is responsible for the company's strategic direction.

She currently serves on the board of Habitat for Humanity, the Foundation for Lee County Public Schools and the Southwest Florida Expressway Authority. She has an MBA from the University of South Florida.

BY THE NUMBERS

Future Bonita Bay Group Communities

Seven Bonita Bay Group residential communities are in the permitting stage. These will double the number of its communities in Southwest Florida.

Project Location Acres Proposed units

Immokalee Road Naples 563 1,400

Eastwood Village Fort Myers 478 2,200

Burnt Store Charlotte County 640 999

North River Village Alva 263 3,000

Paul family property LaBelle 5,200 14,100

Barron LaBelle 24 144

Clewiston Clewiston 502 1,185