Follow the Champs

Follow the Champs

TRENDS by Sean Roth | Real Estate Editor

Commercial real estate pros share their investment insight and where they're putting their money.

Commercial real estate experts usually are working for someone else, using the financial wherewithal of that person or company.

But they have their own portfolios.

Taking a page from the Rich Dad, Poor Dad line of books and the concept of experience being the best teacher, the Review sought out several of the region's top commercial real estate experts to see where they're investing their own funds and their tips for investing like an insider.

F. Fred Pezeshkan

President and CEO

of Kraft Construction Co. Inc., Naples

As head of one of the region's largest commercial construction companies, Pezeshkan knows a thing or two about retail and office development, which he says tends to lead him toward personally investing in that type of product over residential.

"Because of the business I'm in, I like to buy property and develop the commercial," he says. "Some of that's been shopping centers or an office building. In recent years, the trend has been into more downtown/mixed-use products. I own part of an office building in downtown Sarasota and some mixed-use projects in Fort Myers and Marco Island."

Pezeshkan says he has tended to invest south of Tampa, following much the same focus area as his construction company. In the future, Pezeshkan says he plans to invest in residential real estate that the larger builders are looking to divest.

"But you should only buy residential property if you have some use for it," Pezeshkan says. "Do you have a renter? Are you planning to live in it or having your kids live in it? The real opportunity to buy real estate is to have it appreciate, but to do that you have to have an end user and be able to wait for the environment to change."

Overall, Pezeshkan says now is a perfect time to invest in real estate, particularly with the fluxuations in the stock market.

"Take your time, you don't have the same sort of pressures to buy you had two or three years ago," he says. "Be methodical in analyzing your investment."

Pezeshkan likes to develop projects in small groups with partners that have their own expertise in a different area of real estate.

J. Patrick Duffy

President

Colliers Arnold, Clearwater

Commercial brokerage president J. Patrick Duffy says he's slow and deliberate with his real estate investment for the simple reason that he doesn't want to wind up competing with his clients. He says he's currently invested in an office building and an industrial building.

"I would buy into a retail building in a heart beat," Duffy says. "The biggest opportunity right now is buying retail that can be repositioned. You can improve a B right now for a lot less than it costs to buy a brand new A. If you can find a B or a C at a good intersection.... there's a lot of upside."

Still, Duffy urges caution; new buyers truly need to be careful with commercial real estate, he says, because each property is unique and the properties very rarely work as a passive investment.

Pinellas County offers a unique investment opportunity, Duffy says, because of its level of development and shortage of developable land.

"You know nobody is going to try to build a million square feet of anything across from you," he says. "It extremely stable. I also look at just about anything that rings the bay from Oldsmar down to St. (Petersburg)."

Duffy says the Westshore area in Tampa is also still a very safe market for office space, even though in the short term it has the potential of being overbuilt.

Stan Rutstein

Realtor with Re/Max

Gulfstream Realty, Bradenton

Expert retail broker Stan Rutstein chooses to invest principally in retail development, particularly on major east-west roads. He currently has a 71,000-square-foot retail center planned for Morgan Johnson Road and State Road 64 in Bradenton along with a smaller 14,000-square-foot strip center near a Wal-Mart Supercenter on U.S. 41 in Palmetto.

"Development is complicated, so I like to partner with contractors and engineers," Rutstein says. "People who are experts in there own areas."

Gary Tasman

Executive director

of Cushman & Wakefield's

Southwest Florida office, Fort Myers

Gary Tasman says he splits his investments roughly 75% to real estate with the remaining 25% in equities. Tasman is currently invested in an industrial building, a large office building and a retail shopping center. In October, Tasman, his wife and David Stoneburner sold off the 41,000-square-foot retail/office and residential Pewett Center in Fort Myers for $3.18 million.

First and foremost, he emphases his goal of investing in extraordinary locations.

"I'm a pretty cautious investor," Tasman says. " I tend to lean very heavily on the current income stream. ...[C]ap rate is only one part of the equation; there's also the predictability of the income stream from the tenant. I tend to like retail better than office space, but it all depends on the availability. If I can understand it, I'll buy into it. I figure I stand better odds in real estate than anything else. I eat, sleep and breathe it 80 hours a week."

He also always plans to hold his investments for the long term. He held the Pewett Center for eight years and sold it for double the group's purchase price.

"I would never recommend real estate for someone who just plans to resell it quickly to someone else," Tasman says. "Real estate is not a very liquid investment. I always buy it with the plan of holding it."

Todd Gates,

Chairman

Gates, Naples

Diversification appears to be the name of the game for Todd Gates, whose company is not only the second largest construction company in the region but a developer as well.

He also owns a controlling stake in the Fort Myers-based real estate brokerage Gates D'Alessandro & Woodyard LLC. Gates says his company invests money in all the firm's development projects from office buildings to shopping centers to healthcare or condominiums. His company recently opened a new company office in Panama.

He chose to tell the Review about company investments.

"Our philosophy is a small percentage in a lot of larger projects," Gates says. "We're looking around the state and Central America for areas that are underserved. Neighborhoods with lots of rooftops but very few services."

Gates says he first looks at the human factor to any perspective development. He tries to truly evaluate the comfort level of the other individual investors and adapts the project to their specific needs and abilities.

"To every partner there's a different personality," Gates says, "In business there are going to be problems that come up - it's not a perfect world - but reasonable people can work it out and make money. Everything starts with the quality of the person you're investing in."

Investing 101

Some trends emerged from how our experts invest. Here are a few.

1. Develop and invest in partnerships. None of the experts we consulted admitted to putting their money up alone on any development. Spread the risk.

2. Know your strengths and the strengths of your partners. An easy way to make money is to have a partner with built-in real estate experience. Partner with a lawyer and you can save on the cost of legal work. Partner with a construction pro and you can save on the construction and the construction management side of the project. Realtor partners have even - on occasion - been known to market their own projects. It's also extremely important to know your partners' true risk level, business acumen and personality.

3. Diversify both inside and outside of real estate. Spread your money around in a lot of safe areas.

4. Look at retail. These experts and others we asked generally found retail particularly attractive for the near future.

5. Take your time and do your homework.