Interview: Todd Fultz, Managing

Decent value

Two key advantages for the Tampa Bay region is the price of land and the lack of restrictions on what can be done with property

What sets Tampa Bay apart from the other areas in Florida that Plaza Construction services? Tampa has an advantage because the land is still a decent value. In Tampa, developers are also not as constrained regarding what they can do with their property, which can be attributed to that fact we are still very much a small city. There is still a sense of community in Tampa, and when people move here they can feel it. There are great opportunities here for construction companies and developers because the region has three unique centers of business in St. Pete, Clearwater and Tampa. Each one offers something a little different, and they all are starting to work together to create a truly unified region. Todd Fultz Managing Director – Central Florida, Plaza Construction

Have you observed any change in demand due to the Opportunity Zone legislation? While I believe that the legislation will be great for our industry, until more people understand how to take advantage of the Opportunity Zones, this will be a longterm, slow-moving process. When they were trying to move the Rays’ stadiums to Ybor, they were looking to take advantage of an Opportunity Zone present there. We will see more movement like this because of the economic incentives that are associated with these zones.

How can businesses in the construction industry help themselves to be more recession proof? The best way a construction business can protect itself is to diversify its business geographically and by product type. For instance, we are working on three residential condos, two hotels and four other commercial-type projects. The key is to try and maintain a presence in a couple of different sectors, and the way to keep that balance is just to be diverse. .

What factors have contributed to the growth Plaza Construction has experienced in Tampa Bay over the last year? A lot of that growth can be attributed to the economy and opportunities presented by the Tampa Bay region. We have been able to take advantage of those aspects through the relationships we have established in our community. We differ from the competition in the region because our company was started by a developer, so we think like a developer thinks. We are transparent and open in the way we do business, and we never try to sneak anything past our customers. The key has been to treat our customers as partners, but that also means we have to find customers that treat us like partners as well.

( ) exploding with real estate activity and in turn bringing up prices.

But not everyone is happy about the expansion. In December, Hillsborough County commissioners agreed with citizens to impose a 270-day moratorium on building on rural land in locations like Wimauma and Balm, south and east of Tampa. Citizens of the area are concerned this kind of development creates urban sprawl and causes residential developments to be built before the supporting infrastructure can be installed. No ongoing projects will be affected by the moratorium, but this is sure to be an issue that crops up again for developers in the years to come.

Impact fees are a critical part of real estate, to ensure local emergency services have the correct resources to respond in a timely manner to any incidents. But authorities are taking new steps to ensure their counties and cities are the most attractive for developers by providing incentives that essentially waive these fees. In November, Lakeland commissioners waived more the $400,000 in impact fees for Blue Sky Communities, which is building an 84-unit affordable housing project on Griffin Road.

Opportunity Zones Since the 2017 Tax Act, dozens of Opportunity Zones have been created in the Tampa Bay area to spur investment in depressed areas by giving investors big tax breaks. Developer PTM Partners plans to start construction in May 2020 on its redevelopment of the Furnish Me Vintage property at 1246 Central Ave that it bought for $13 million, and it was the Opportunity Zones that brought the company to St Petersburg. Core Investment Management also invested in two Tampa

projects and one in South Florida in Opportunity Zones, with one of the Tampa developments worth an estimated $500 million to $1 billion.

But although Opportunity Zones have piqued the interest of many developers, they seem to agree that the zones alone are not enough to spur investment: the deal needs to make sense on a standalone basis and the tax breaks are an added bonus. This is especially true because there is still so much uncertainty surrounding the issues. For starters, the final regulations of the Tax Cuts and Jobs Act still need to be ironed out, and there is still no guarantee this federal initiative will be followed by authorities at a state or local level.

Financing trends Financing is an issue that almost all constructors need to contend with, but since the economic crash in 2008, banks are more cautious. During the last boom for example, banks might loan 75 percent or more; today, it’s about 60 percent. The memories of overdevelopment are still fresh in the minds of lenders and this is causing developers and construction companies to get creative when sourcing funding for projects.

One way that projects are being funded is through the personal wealth of ultra-high-worth individuals. This is the case for Tampa’s Water Street mixed-use development, backed by Bill Gates and Tampa Bay Lightning owner Jeff Vinik. But even this option needs collateral, and for that Vinik has leveraged the Amalie Arena, with a $102 million loan against its value to contribute to the $3 billion plus district. Another $664 million construction loan for the 50-acre project will come from Bank OZK.

And Kolter Urban, which purchased the lot adjacent

James Fox President – Maddox Group

Twenty years ago, a traditional o©ce space would consist of o©ces around the perimeter with a cafe in the middle and a conference room. The problem is everyone was in their o©ce behind closed doors. Today, there are a few o©ces for executives with associates in the middle in a sort of cube-farm. I think businesses really like this approach because it brings continuity to the team, and camaraderie to the o©ce. I believe the few coworking spaces that have tried to launch never really panned out and there are questions that still need to be answered. I still believe it is a great idea, but there might be too much inventory on the market.

to Hilton St. Petersburg Bayfront Hotel, is partfinancing the deal by allowing the hotel rights to 205 parking spaces within the parking garage of its new 35-story luxury condominium tower called Saltaire. The deal for the 1.65-acre space was worth $17.5 million, $8 million of which was paid in the first tranche.

In Pasco County, commissioners were so supportive of Colwell Avenue Properties’ proposal to build two threestory Class-A office buildings on State Road 54 that they approved nearly $2.94 million in incentives. The project is estimated to cost $27.1 million and will span 21.76 acres, on which it will include on-site parking, access driveways and infrastructure. The development should create 400 direct and indirect jobs, with salaries to the tune of $17.7 million, with a $26.5 million economic contribution to the county.

Residential US homebuilder confidence remains near highs not seen since 1999. The National Association of Home Builders/Wells Fargo Housing Market Index stood at 74 in February, below the 76 figure in December, the highest in two decades and suggesting stable construction growth. Mortgage rates remain low, lending support to residential construction as demand remains strong. Bank of America’s rates for a 30-year fixed-rate mortgage was 3.375% at the beginning of April, mostly unchanged since the start of the COVID-19 crisis.

New private housing units authorized by building permits also rose in 2019, U.S. Census Bureau figures showed. In December last year, the number of authorized new private units was just over 2.2 million units, up from about 1.3 million, or 69%, in December 2018. “The market continues to be strong, and values continue to increase,” Jay Miller, president of J2 Developers, told Invest:. “We’ve seen some plateauing, but we really haven’t seen a softening of the market. That’s due to the fact that interest rates remain very low, and new luxury apartments are so pricey that it continues to be attractive to buy. The key variables are going to be interest rates and employment. As long as employment continues to be strong, and we continue to see in-migration, we are going to continue to see demand for new residential units in the Bay area.”

Commercial and Industrial Commercial and industrial construction is exploding in Tampa, despite rising construction costs, and Tampa’s building boom is expected to continue for several years, especially in mixed-use developments. Orlando and Tampa Bay rank in second and fourth place, respectively in terms of hot spots for new commercial real estate developments, according to EDR Insight.

One notable mixed-use development is the Water Street mega-project, spearheaded by billionaires Gates and Vinik. Colliers International Tampa Bay has been awarded the contract to fill the 1 million square feet of retail and entertainment space within Water Street and Sparkman Wharf, while JLL will oversee the leasing of the office space.

Midtown Tampa is another mega-project spanning 1.8 million square feet of retail, residential, Class A office, entertainment and hospitality space developed by Bromley Cos. Jeffrey R. Anderson Real Estate and Casto Southeast Realty Services spent $500 million to develop a 220,000-square-foot space that will feature retail and entertainment space as well as “lifestyle centers”. The Men’s Wearhouse on North Dale Mabry Highway

was also demolished to make way for Midtown One, a 140,000-square-foot office tower – just a fraction of the 700,000 square feet of office space planned.

And in St Petersburg, the Edge district is taking off. PTM Partners’ announced their intention at the end of 2019 to build the Edge Collective – a co-working space and events venue after acquiring the land in a $13 million acquisition. Tricera Capital, which already owns 10 properties in and around the Edge district, will partner with PTM on the project. The first 11-story, 140-room boutique hotel in the district will be built by DevMar Development under the Marriott Tribute brand. And a two-acre site on 4th Street North will become its own mixed-use development with 100,000 square feet of Class A office space at a cost of about $70 million.

An industrial development will take root in Lakeland after the Brennan Investment Group acquired 165 acres of land on the I4 to build 1.5-million-square-foot CenterState Logistics Park East, the first phase of which is due to be completed by year-end. And a 7,000-acre ranch in Pasco County is to be transformed into an economic engine as a life sciences research building overseen by the H. Lee Moffitt Cancer Center & Research Institute. Known as Project Arthur, the project should cost $191 million.

Looking ahead According to analysts at Wells Fargo, despite apparent headwinds, the Tampa Bay construction industry looks to be strengthening as certain challenges ease. “There has been quite a lot of competition moving into Tampa Bay over the past couple of years, which is a strong indication of how the market in the region is doing. Companies want to be here and as they continue to move into the area, it will be interesting to see how they handle the challenge

The value of all the construction in St. Petersburg in 2019 increased 12 percent, topping $782 million, an all-time record.

of the lack of construction labor,” said Michael Miller, operations manager at Manhattan Construction. “After the last recession, a lot of young people in colleges and universities who were seeking a technical degree and who would have normally come into our industry, were scared by the lack of work and instability in the market at that time. This has created a six-year vacuum within the industry where there were not any new people joining the labor force.” The wild card, of course, is COVID-19 and how long its impact will continue to impact the sector.

Conn Crabtree Senior Vice President & General Manager – Tampa Division Batson-Cook Construction

The growth in the number of people moving to the area is fueling the entire economy. We are seeing it across all market segments, including construction. Multifamily is still strong, while high end hotels and other hospitality products are coming into the market. This demand for high-end products will continue for the near future, which fits in really well with what we do. The most exciting part is the number of companies looking to relocate, expand or bring additional people to the area. Tampa is an easy sell to employees, highly attractive to all age levels and it is a great place to raise a family as well.