Shaped by Recession

REVIEW SUMMARY
CEO. Brian Lucas
Company. Bonita Bay Group
Key. Brian Lucas will lead the Bonita Bay Group into the next development cycle.

If Brian Lucas harbors any bitterness toward detractors or about the fate of his company, he doesn't show it.

The CEO of Bonita Bay Group, the family-owned residential development company based in Bonita Springs, narrowly averted financial calamity in the real estate downturn as residents clamored for club deposits that could have drained the company's reserves.

The downturn tested Brian Lucas, 37, and his father, David Lucas, 63, chairman of Bonita Bay Group, in ways few would have imagined a few years ago. Founded in 1981 by General Nutrition Corp. (GNC) Chairman David Shakarian, Bonita Bay Group became one of the most respected and successful developers on the Gulf Coast, admired for its cooperative stand with environmentalists and the family's generosity to charitable causes.

Bonita Bay Group had sold club memberships to residents in its communities, and promised them full refunds upon request. The company suffered an event akin to a run on the bank when hundreds of residents demanded refunds as the recession peaked a few years ago and new-home sales collapsed. Meanwhile, critics lashed out at the company, often through anonymous online postings.

To raise cash, Bonita Bay Group sold four of its residential clubs to members and land to rivals so it could refund the memberships (80% of resigned memberships have been refunded to date). The Lucas family also bought a Bonita Bay Group loan totaling more than $30 million from a consortium headed by Key Bank that was used to fund the growth during the boom.

“We doubled down on Bonita Bay Group,” Lucas says.

Lucas had the unenviable task of helping his father dramatically cut the size of the company. At its height, Bonita Bay Group had 1,500 employees involved in the planning, development and management of seven large residential communities in Lee and Collier counties. Today, it has 242 employees. The company doesn't disclose revenues, but home and parcel sales dropped from 1,292 in 2005 to 84 last year.

Today, Bonita Bay Group owns and manages two developments in Lee County: Verandah in Fort Myers and Sandoval in Cape Coral. The company also controls some land parcels in the region, though it has abandoned contracts to buy huge tracts of land east of Fort Myers in Hendry County.

Lucas acknowledges the challenge of the last few years, but he doesn't agonize over his decisions. “You have to take refuge with the fact that we did the best we could,” Lucas says.

It may be years before Bonita Bay Group starts new development again. “Today, we're largely a land-holding company,” Lucas says.

If he has plans for future development, Lucas isn't ready to share them in detail now. “Time will tell what those assets will become.”

Lucas is a realist about the current state of affairs, even if the economic picture is slowly improving. “It's a tough world out there. Confidence is shaky,” he says. “We still have an oversupply of houses.”

But when things do improve, Lucas hints that Bonita Bay Group developments aren't likely to resemble the expansive golf-course communities spread over 2,000 acres or more for which the company has been known.

The communities it develops will be smaller, and they may not have golf courses or clubs with steep initiation fees. Lucas is more sanguine about leverage, though he acknowledges the company's forecasts are sure to be more conservative. “Debt and leverage is always going to be an important part of growing a business,” he says.

Another generation

Brian Lucas is part of a small group of young real estate development executives who have gradually taken charge of their companies through the boom and bust. Besides Lucas, this new generation includes Blake Gable of Barron Collier Companies and Brian Stock of Stock Development.

“Everybody has their issues,” says Lucas, who belongs to a group of young C-level executives who are next-generation owners of their business.

The group of eight young business leaders began meeting informally five years ago as a way to share their personal challenges in a confidential setting. “It started with a lot of euphoria,” says John Pollock, senior vice president and Florida regional agency manager with BB&T Oswald Trippe and Company and a member of the breakfast club.

When the boom turned to bust, “it became a support group,” Pollock says.

Pollock confirms the sense of cool that Lucas exudes. “You know there's internal drive there, but it's not in your face,” he says. “He's got a calming personality.”

Lucas and Pollock started running together and recently competed in a half marathon in Cape Coral. Both men pushed each other on the course, though results show Pollock beat Lucas by just more than one minute.

Lucas acknowledges that it's been hard to train since he was named CEO of Bonita Bay Group. He has three children, ages 7, 5 and 3 and runs at lunchtime or whenever he can find some spare time. “It's definitely a stress relief. It's great for thinking,” says Lucas, who prefers to run outdoors rather than on a treadmill.

“Brian is a special friend. He's a good-natured, caring person,” Pollock says. “My wife had surgery at the end of the year and he sent her a card. He didn't tell me he was sending it.”

Tech-savvy CEO

A graduate of Canterbury High School in Fort Myers, Lucas earned a degree in entrepreneurial management with a minor in information technology from Stetson University. From 1996 to 2002, Lucas worked with healthcare companies and utilities as a consultant with Andersen Consulting, now called Accenture.

Before moving to Bonita Springs to join his father at Bonita Bay Group in 2004, Lucas lived in Maryland with his wife, Lee, who was working on the human genome project at the National Institutes of Health.

Lucas has a passion for technology that he shares with others. “He taught me how to text and what all those funny acronyms mean, and now I'm much cooler in my daughter's eyes,” says Susan Watts, who was senior vice president at Bonita Bay Group until 2009 when she left to become executive director of the Real Estate Center at the University of Colorado.

Watts says Lucas' interest in technology isn't limited to the latest gadgetry. “He loves tech in how it can improve things,” she says. “Because of his background with Accenture, he was involved in IT improvements that made everybody's life a lot better.”

That said, Lucas is passionate about personal technology and plants. He laments the poor health of an orchid in his office and keeps an eye on the plants scattered around the corporate headquarters.

Lucas' latest home project: canceling cable and streaming television programs via the Internet using services like Hulu, Netflix and SageTV. He's also testing waterproof headphones and an iPod shuffle made by H2OFriendly so he can swim in the Gulf and listen to music to prepare for his next test of endurance: a triathlon in Naples in June.

Enterprise personification

Like his father before him, Brian Lucas will represent the Bonita Bay Group, or what he calls “the personification of the enterprise.”

Father and son have similar management styles and levelheaded temperaments. “We're both delegators,” Brian Lucas says, though the younger Lucas says he's more involved in the day-to-day management of the Bonita Bay Group.

“He's definitely big picture,” says Watts. “If he trusts you, he delegates quite a bit, but he's always there if you need him.”

Watts says Lucas came to Bonita Bay Group with valuable experience as a consultant with Accenture. “He dives into the details when he needs to. He's very financially astute. I worked with him on our geographic expansion and new office in Jacksonville,” says Watts.

Lucas doesn't dwell on the misfortunes of the real estate bust. “I did get to see two good years,” he chuckles.

The younger Lucas has proven to be a shrewd negotiator, successfully selling clubs to residents in four communities by persuading them they were better off with a solvent company. Lucas points to bankrupt Robb & Stucky: “That's an example of what could have happened.” Members of the resident turnover committees who negotiated the purchase of the clubs “are guys who run businesses and are used to making deals,” Lucas says.

Lucas and his family certainly had to make painful decisions, such as selling TwinEagles, a residential community in Naples that the company launched to great initial success during the boom. The company invested about $100 million but sold it to Naples-based Ronto Group for $11 million late last year.

“When we sold it, it was the right thing to do,” Lucas says now. These are the kinds of risks developers take when they launch communities, spending large sums up front to build out the community, Lucas explains. If TwinEagles had been developed a few years earlier, the results would have been different, he reasons.

The sale of TwinEagles and other recent land deals such as Kitson & Partners' acquisition of Tuscany Reserve, a 450-acre development in Naples, will help the real estate market recover. “You have to reset the floor and value expectations,” Lucas says. “That's what needs to happen.”

Lucas says the recovery in residential real estate could take longer than some hope. “We've got a couple years in front of us,” he says.

But when it does recover, the large, 2,000-acre-plus golf course communities Bonita Bay Group has developed may be a thing of the past. He points to Sandoval, a smaller 524-acre community Bonita Bay Group developed in Cape Coral as a model. It doesn't have a golf course, but it has a park with a children's play area, a fitness center and pool. “There is no pricing power for golf,” Lucas says.

Sprawling residential clubs may also be a thing of the past because they require so much upfront capital and developers can't charge five- or six-figure initiation fees. “That's completely out of touch with the times,” Lucas says. Instead, smaller clubs will offer annual or monthly memberships.

“It's a different way to think about social infrastructure,” Lucas says.

Company snapshot: The Bonita Bay Group

David Shakarian, the founder and chairman of General Nutrition Corp. (GNC), assembled 4,000 acres in Bonita Springs in 1979 and 1980, turning that assemblage into Bonita Bay, the first Bonita Bay Group development.

GNC is the nation's largest specialty retailer of vitamins and herbal supplements, and Shakarian envisioned a community that would be based on the same ideals of health and wellness.

Shakarian died in 1984 and his son-in-law David Lucas, a Harvard M.B.A. graduate who was running a chain of women's specialty stores at the time, took over the family business. The elder Lucas is now chairman and his son, Brian Lucas, is the company's CEO.

Bonita Bay transformed the small fishing village of Bonita Springs and the company developed six other communities in Lee and Collier counties, transforming thousands of acres into lushly landscaped master-planned developments.