Hoffman's return

Hoffman's return

Legendary Gulf Coast developer and investor Al Hoffman Jr. is back

in the real estate game, scouting for deals in Florida. That's a good sign we're nearing a bottom in the residential real estate market.

real estate by Jean Gruss | Editor/Lee-Collier

These are the times when savvy real estate investors such as Al Hoffman Jr. make their shrewdest investments.

The Gulf Coast developer made his fortune in real estate by betting on the business cycles and timing those just right. Hoffman built what eventually became WCI Communities by picking up undervalued real estate assets in the last residential downturn. He sold his stake in the company at the height of the market in 2005 and shortly before he became U.S. Ambassador to Portugal.

Now, Hoffman, 74, is back and has created a new firm called Hoffman Partners that is scouting residential developments throughout Florida. Astute real estate investors will want to watch Hoffman's moves, because those will more than likely signal the real-estate market is close to the bottom.

Hoffman says prices for residential developments need to fall another 5% to 10% before he'll buy. Leading the search is former WCI executive and business partner Charles Brasington.

Hoffman returned to Florida after a two-year stint as ambassador in order to help raise money for the election of John McCain for president. Hoffman is well known for his passion for politics and fundraising for the Republican Party. But the consummate entrepreneur couldn't stay away from business opportunities, either.

"It just so happened that coming back early allows me to get into the revitalization of the real estate industry," he says.

Speaking from his summer home on an island off the coast of Maine, Hoffman talked real estate, economics and politics. The Review caught up with the legendary Florida developer while he was repairing a broken generator that powers his retreat.

Florida real estate and WCI

Hoffman, a Fort Myers resident, won't say exactly how much money he's raised for new residential real estate ventures. When pressed, he says he's raised "enough; we can do a number of deals."

Brasington is scouting sites all over the state, but Hoffman says South and Southwest Florida are particularly attractive. Still, he expects prices for residential developments will decline another 5% to 10% and the real estate downturn will last another six months to a year.

By then, Hoffman Partners will have acquired land cheaply enough to benefit from the eventual rebound. "When new homes are selling for below replacement cost, the market will wake up and realize that," he says.

The stock-market slump has created an opportunity as he bets investors will take their gains from equities and put money into real estate whose values have returned to reasonable levels. "That's ready to start now," Hoffman says. "The real estate fundamentals have readjusted to '03 and '04 prices."

What's more, the economic underpinnings of Florida's real estate haven't wavered. That includes a relatively strong tourism market and the growing wave of retiring Baby Boomers. Hoffman says he's not concerned about the wave of new developments in the planning stages, such as Babcock Ranch in Charlotte County. "They're 30- to 50-year projects. They're not going to impact the recovery in the short term," he says.

Hoffman has watched in dismay as the company he founded got caught up in the residential downturn. "WCI is a great company," he says. "They were building condos; they got caught in the bubble."

Hoffman won't handicap the chances that WCI might have to file for Chapter 11 reorganization, but says: "No company can survive for three or four years without sales," he says. He can't speculate what New York billionaire and WCI Chairman Carl Icahn might do. "I've never done business with him," Hoffman says, though he agrees with Icahn's recent assertions that WCI's land assets are worth more than what investors currently believe.

Hoffman's advice to WCI President and Chief Executive Officer Jerry Starkey: "Illegitimi non carborundum." (That's Latin for "Don't let the bastards get you down.")

Then comes this admission from Hoffman, who made a fortune from taking WCI public: "If I were starting again, I would never take it public." Hoffman speculates Starkey's days are consumed by shareholders and lawyers instead of making sales. "I don't think Sarbanes-Oxley is good for a company," Hoffman says, referring to the post-Enron regulatory burdens placed on publicly traded companies. "Because of the constraints and regulations, it really stifles entrepreneurs."

Still, Hoffman acknowledges he benefited from taking WCI public in 2002. "I was fortunate because when I left in '05 I sold all my stock," Hoffman says. "I came off looking like a hero." And publicly traded homebuilders will have their day in the sun again. "Buying public homebuilding stocks is going to be a great opportunity," he says.

Drill in the Gulf

While the housing crisis is temporary, Hoffman says high energy prices are more permanent threats to the economy. "The real economic problem that we face is our ability to compete on an international basis," he says.

"I think that drilling in the Gulf is necessary, along with all the other measures we must take to diminish our dependence on foreign oil," Hoffman says. Not surprisingly, he says Republican presidential nominee John McCain has the right answers. These include building nuclear plants and finding alternative sources of energy for automobiles.

Hoffman has been working furiously to raise money for McCain, including a recent fundraiser at Galloway Ford in Fort Myers with former Hewlett-Packard boss Carly Fiorina. "I'm working on the national level with a large-donor group and recruiting as many people as I can to host fundraisers for John," he says. "Obama is a formidable money machine," Hoffman says.

"We got a late start to raising coordinated or national money for the party and for the candidate," Hoffman says. "We're up and running now and I'm quite optimistic about it. We raised $15 million in May and we should do better in June."

Hoffman couldn't say whether Florida Gov. Charlie Crist would be McCain's running mate. "He's certainly a contender in the running," he says.

Meanwhile, Hoffman has been a close friend of the Bush family and hinted that Jeb Bush could be plotting a return to public life. "I've never heard Jeb Bush say he'd run for office again," Hoffman says. But, he adds, "Personally, I think he'd do great at whatever public office he sought...Stay tuned."

Euro secrets

Reflecting on his recent posting as ambassador to Portugal, Hoffman says he gained valuable insights on the United States' position in the world. "You're either loved, hated, feared, revered, envied or parodied," he says. "There's no such thing about being neutral."

The perception that Europeans dislike American foreign policy may be exaggerated. "Europeans are socialist," Hoffman says. "I've seen that the Europeans have the luxury of sitting back, expressing oftentimes reluctance to lead or take action in volatile instances, but they will follow."

In the end, Europeans wait for the U.S. to take the lead on tough global issues. "You'll see a lot of complaints about the way the U.S. conducts itself, but privately and inwardly they're happy for the U.S. to take the lead. I've seen that over and over again."

Take the prison camp for terrorism suspects at Guantanamo Bay, for example. "They want us to close Guantanamo, but they don't want to take [the prisoners]." Adds Hoffman: "Everything has a price. Freedom has a price."

What Hoffman says

• On Florida residential real estate: Prices will come down another 5% to 10%. The recovery will start within six months to one year.

• On the economy: The country must wean itself off its addiction to foreign oil by drilling offshore (including in the Gulf of Mexico), building nuclear power plants and developing alternate sources of energy. Housing is a short-term problem that will correct itself.

• Advice for WCI Communities President and Chief Executive Officer Jerry Starkey: "Don't let the bastards get you down."

• On taking a company public: Don't. Regulations on public companies are too stringent for entrepreneurs.

• On Florida Gov. Charlie Crist's chances to be named John McCain's choice for vice president: "He's certainly a contender in the running."

• On a return to public life by former Gov. Jeb Bush: "Stay tuned."

• On Europeans who complain about the U.S.: "Privately and inwardly they're happy for the U.S. to take the lead."