commercial real estate
Fort Lauderdale's skyline shaper Terry Stiles thinks the commercial real estate market won't be back until at least 2010. And while, he had to lay off employees, he sees enough of a silver lining to plan downtown's tallest tower.
“I’m fairly optimistic because there’s money to be made with opportunities today,” says Terry Stiles, chairman and CEO of Stiles Corp. [Photo: Eileen Escarda]
From his office atop his own Fort Lauderdale office tower, developer and contractor Terry Stiles surveys his hometown skyline — a skyline he had a major hand in building — with an insider’s eye. Valuations, he said, definitely have peaked. “Good example,” he says, gesturing at two gleaming towers across the way. “We used to own those. We sold them for $320” million three years ago. “I think the last guy paid $520. Now they’re back on the market at $460.”
It’s chamber of commerce weather outside, but Stiles sees plenty of clouds in Fort Lauderdale and throughout Florida.
“Good deals can’t get financed today,” he says. Lenders still willing to cut deals are demanding that commercial developers put up hefty personal guarantees, letters of credit in the tens of millions of dollars and as much as 40% equity. Three years ago, 20% and pledging the real estate sufficed. He runs through a list of projects he knows that are having trouble getting financing, and his doleful outlook extends to underlying economic activity. “Until we start creating jobs again, we’re in big trouble,” he says.
Stiles took over leadership of his father’s small residential construction company in 1971, transformed it and saw it boom along with Florida. Since 1990, he has built 2 million square feet in downtown Fort Lauderdale alone. Stiles added full-service real estate and property management services, became one of Fort Lauderdale’s power brokers, a go-to business leader for civic and philanthropic causes and a former president of the National Association of Industrial and Office Properties.
All told, he’s developed 37 million square feet of office towers, corporate parks, shopping centers and government buildings in Miami, Tampa, Orlando, Fort Myers and Jacksonville. In 2007, he set a record of $398 million in revenue. This year, he expects revenue to drop to $220 million. In 2009, he expects to see revenue fall further, to $180 million to $200 million.
Stiles largely avoided the condo boom. Though he built for others, his only development project was the 163-unit 350 Las Olas condo tower. He’s grateful that two more projects he had on paper didn’t pan out. “We would have been right in the middle of this mess,” Stiles says. Meanwhile, condo mania priced him out of the market for downtown land, with condo developers driving the price per square foot above $300, well above the $55 per square foot he paid in 1998.
Stiles stuck with commercial projects and building, but the toll that residential real estate took on credit markets has spilled into the other real estate sectors. Two construction jobs totaling $200 million that Stiles had landed have now stopped. The company let 35 employees go in October. Layoffs are rare at the 320- employee firm, but there’s not much in the works to replace two major projects he’s now finishing, including constructing the 24-story Trump International in Fort Lauderdale. “This is getting to be fairly critical,” he says.