The long view of business
For James Seneff and his billion-dollar real estate powerhouse, the social sciences offer as much strategic guidance as hard economics.
The senior living acquisitions converged with an improving economy, a surge in golf rounds played and an early snowfall in the 2012-13 ski season to boost Lifestyle’s lease revenue and cash flow. Lifestyle’s 2012 annual report showed $175 million in adjusted earnings before interest, taxes, depreciation and amortization, a 22% improvement over the previous year. CEO Tom Sittema, who joined the firm three years ago, says he believes the REIT has turned the corner, a view shared by Stubben but tempered by Chereso, who sees “a lot of work ahead” for Lifestyle Properties.
But a drop in share value has led to a class-action suit against CNL. In January, a group of investors who purchased additional stock through the distribution reinvestment program on or after April 1, 2010, sued, claiming CNL sold shares at $9.50 each when it knew the stock’s value was less. Seneff and Sittema both declined to comment on the suit.
A look at holdings in Lifestyle and three other CNL REIT offerings — Growth Properties, Global Income Trust and Healthcare Properties — might leave the impression that the investment firm’s leadership team doesn’t see the puck headed toward Florida. The Sunshine State is barely represented among the vast holdings of properties in the REITs. For example, only one of the 90 senior living units owned by Lifestyle and Healthcare is in Florida, located in Lady Lake near The Villages retirement community.
Sittema says Florida’s scant presence in the REIT portfolios shouldn’t be taken as a sign that CNL isn’t bullish on its home state. “We generally don’t target geographic areas. We target sectors, and then we go where our partners and clients have opportunities,” he says. “We would love to do more in Florida, and we’re striving to do more. We’re planning to do more multifamily development. We have an office building under construction in Winter Park. We’re securing tenants for a new building” in Orlando.
Texas appears to be the land of opportunity in CNL’s eyes. The company’s REITs hold several properties there, ranging from golf courses to apartments to office buildings. “Texas has a strong economy,” Sittema says. “The net migration into Texas is ridiculous. ... It’s a pro-business state; it’s propelled by the energy industry, it’s a favorable tax environment, so there’s a huge net migration and job creation. So it’s a fantastic opportunity for new development.”
While foreign markets interest Seneff, particularly Germany, where Global Income Trust owns retail centers, Seneff says the United States is the place to be right now. “We’re recovering. Prices are going back up. Yields are going up. Rents are going back up. And so it’s a very attractive time to be in the U.S.”
With CNL entering the final decade of Seneff’s 50-year business plan — which he wrote while serving in Vietnam with an Army military police unit — an obvious question involves his future with the company.
Seneff says he has no plans to retire. He’s turned CNL’s day-to-day operations over to Sittema, 12 years his junior. Meanwhile, Seneff devotes his time to asset allocation, “the most important function of business.” The two have known each other for nearly 20 years, a relationship that stems from Sittema’s career as an investment banker at Bank of America in Charlotte. One of Seneff’s children, Tim, served at CNL for 12 years, rising to be president before leaving to head a non-profit. His four other children aren’t involved in the business.
“I don’t think entrepreneurs ever retire,” Seneff replies when asked about leaving CNL. “They might change their job description. But for me, I am executive chairman, and I plan to stay that indefinitely.”