Some people doubted Steve Kossoff and his then 5-year-old company, Meridian Development Group, could pull off the Winn Dixie challenge in 2006.
The task: Renovate and lease a 907,237-square-foot vacant former Winn Dixie distribution facility in south Sarasota County. But 18 months later, the facility, renamed Meridian Distribution Center, was 75% occupied. It now stands as a regional example of a successful repurposed project.
Kossoff has gone on to have other successes in the region. Tampa-based Meridian now has a portfolio of 1.91 million square feet of industrial and office space spread through Sarasota, Tampa Bay and Raleigh, N.C. The company, with six employees, also manages space in Tampa-St. Petersburg and Buffalo for clients.
Kossoff recently sat down with the Business Observer to talk about his firm and the market. Here are excerpts of the conversation.
How do you and your team do lease deals so quickly?
We are always focused on identifying real estate that’s not functionally obsolescent, that still has attributes that are currently in demand. For example, we chose the Winn Dixie distribution facility because it had 26-foot clear ceilings, which made it functional for warehouse space, and it’s a couple miles from the highway.
Most of your purchases are done in joint ventures with financing partners. How did you find them and establish the relationships?
These were contacts I’ve made throughout the years and connections made because we were interested in investing in the same type of real estate. We became aware of each other through similar circles.
The groups I worked with in 2005-2007 became strictly buyers of distressed debt during the recession. That forced us to look for new commercial partners. After the market came back in 2012 and 2013, we had partners in place to get back on the road.
Where do you see future opportunities?
There are starting to become more opportunities out there between Raleigh and Florida. Some of the companies that waited until the end of the recession are ready to shed assets they would have sold off three or four years ago. The banking and rental markets have come back.
The only problem is acquisitions are more expensive. There are way more buyers for the opportunities that are out there. There are funds and institutional buyers that have big allocations of dollars to invest and are under pressure to deploy that capital.
Why did you choose the geographic spread you have from Sarasota to Raleigh?
We built a large portfolio in Tampa Bay and wanted to diversify it, to spread the risk around a bit.
We found that the market fundamentals in Raleigh were very similar to those in Tampa. It has a very diverse base in a market poised for growth.
What you want in a market is population growth. It’s the tide that lifts all ships. There’s more demand for stores. That retail needs more warehouse space. You have a lot of job growth that means more office space. Florida, which was gaining 1,000 people a day prior to the recession, is probably down to 800 a day now. Raleigh has a population growth that’s only slightly slower than Florida’s.
Where do you get your best ideas?
My best ideas come from looking at other buildings that are similar to what we are investing in. Seeing what the competition is doing or not doing.
For example, in each one of our projects we typically go in and repaint and recarpet it. We will do a functional layout of what they may need. So it has that new car smell. We make it turnkey ready to move in, which can make a pretty real difference. That way it takes a minimal amount of work to make it the way the tenant wants it.
Sean Roth, Research Director