Southwest Florida Housing Market Stalled, But Commercial Real Estate Market Still Hot
The Southwest Florida housing market has seen sunnier times.
The region’s commercial real estate landscape, however, is a different story.
That being said, there is no question that Kevin Heiss and Stephen Scalione have landed in the right place at the right time. Heiss, 27, and Scalione, 23, head the Florida office of Largo Capital, a 17-year-old, Buffalo-based commercial mortgage broker whose revenues are mushrooming thanks to the ongoing commercial real estate boom.
Last year, Largo Capital helped clients across the U.S. come up with $570 million in debt and equity financing. This year, the company is on track to provide more than double that sum.
“So far, we’ve done $730 million out of the Florida office alone and we should pass $800 million by the end of the year,” Heiss said.
Both Heiss and Scalione joined Largo Capital in May 2005. But Scalione was originally employed in the company’s Buffalo headquarters and did not move to Florida until early 2006. As a result, Heiss has participated in more of Largo Capital’s big commercial real estate deals.
“We provided the acquisition financing for Meridian Cos.,” Heiss said. “We helped them get a three-year, $28 million mortgage loan to buy, rehab and re-tenant the complex.”
Heiss said securing the financing looked like it would be a challenge at first because the distribution center was empty.
“Lenders don’t like financing projects that don’t have income streams,” Heiss said.
But thanks to the general strength of the Southwest Florida market, Largo Capital was able to find a lender and close the deal in just 60 days.
“It helped that the market is so tight down here,” Scalione said. “There’s like a 5 percent vacancy. There’s no available space. So it’s easy to see the opportunity.”
Over the years, Largo Capital has developed strong relations with major national lenders, as well as life insurance companies, pension funds and Wall Street conduits. The company can provide from $500,000 to as much money as a client could possibly need, its staff claims.
For example, Heiss helped secure $100 million in joint venture equity for an unnamed Florida real estate developer that is shopping centers all over the state.
“The pension fund that provided the money loved the local real estate marketplace,” Heiss said.
Heiss and Scalione added that relatively low Florida mortgage rates should help to keep the Sunshine State’s commercial real estate market hopping in the year ahead, especially when it comes to office and retail projects.
“People are still coming here. There isn’t enough retail and office space. Just look at the new Target shopping center on University. It just opened and it’s so busy, you can’t get in the place,” Scalione said.
Scalione added that the major impediment to deals in the Southwest Florida commercial market is one of the reasons residential real estate is so pricey – the high cost of land.
“Land prices have to move lower before you see more construction,” he said.
