When Gordon Hester foreclosed on Riverside Plaza in Palmetto in 2006, he inherited a highly visible waterfront building that had been tarnished by business failures, lawsuits and bad publicity.
When it opened in 2004, Riverside Plaza was groundbreaking for Palmetto in many ways. Its Key West-meets-BayWalk design added an urban feel to Palmetto’s Manatee River waterfront. Its primary tenants, both startup businesses owned by the building’s developers, Carolyn Waygood and Robert Hierak, were gaining appeal as destinations. While the high-end Evolve Day Spa attracted clients to Palmetto for boutique services, its Smokin’ Martini cigar bar drew nightlife. But Riverside Plaza’s rapid ascension was followed by an even speedier descent. Its owners defaulted on mortgage payments, and were finally shut down by Hester.
Hester is the CEO and CFO at U.S. Funding, which was a partner (along with First National Bank of Manatee—now Whitney Bank) that financed Riverside Plaza. After the foreclosure, U.S Funding eventually won a $1.9 million judgment in Manatee County Circuit Court against Waygood and Hierak. When the 40,000-square-foot building was auctioned about a year ago, U.S. Funding purchased it for $1 million. The firm had invested $7.5 million in Riverside Plaza and its businesses, according to Hester.
“If you come out of foreclosure and you’re looking to flip, the only people to buy want to steal it from you. We thought it was a poor decision at that point to sell,” Hester says. Instead, they worked to turn the building around, investing $800,000 in repairs, legal costs and the hiring of a marketing firm.
While the former owners had tried to attract retail tenants, Hester appraised the structure as better suited for office space. The first level is a covered parking area, and the second level had only been accessible by angled stairs.
He lowered the rental rates from a premium of $26 to $30 per square foot to $15 to $17 per square foot, which is more in line with Palmetto’s rates. In addition, he was willing to negotiate. “There’s a lot of vacancy out there and people are looking to get some concessions. I don’t think people were concerned about the stability issue with us behind it, but they used it,” Hester says. “When we got realistic, and we got visible, that’s when things started happening.”
Within seven months, two partners, Chris Teale and Brian Badger, had taken over the spa, which comprises nearly half of the square footage, and converted it into a fitness center/day spa called Electra Fitness Studio. The cigar bar is now Bella Vista, an Italian restaurant. Maximum Processing.com, an insurance software company, and Keller Williams real estate also leased significant space. “The spa had to deal with the hardest of the turnaround,” Hester says.
“We changed the business model to appeal to a broader segment of the community, says Teale, co-owner of Electra Fitness. In January, the upscale center was offering a new-member special of $53.99 per month with no join-up fee. Electra had signed up 400 members from Bradenton, Palmetto, Parrish and Ellenton in its first six months, and was approaching positive cash flow. “Palmetto is reinventing itself,” Teale says. “People are more willing to cross the bridge.”
“We love the location,” says Kristin Cruz, CEO/team leader at Keller Williams. “We’re so proud of it and Palmetto, not only from an aesthetic point of view, but a growth perspective. We feel like we’re here as it’s starting to explode.”
By 2007, the building that had been losing $50,000 per month was breaking even. “I feel like we have stable tenants,” Hester says. We’ve stabilized the building and looked toward the opportunities from there. How do we turn this thing into more?”
Riverside Plaza is surrounded by a public parking lot, a vacant lot and a marina with retail, all of which are being evaluated as future hotel, retail or office space by the landowners. Palmetto’s historic Old Main Street, at the intersection of Riverside and Sixth Avenue, is welcoming new, mixed-use developments such as Palmetto Town Center, a condo-retail development, as existing merchants band together to market the area for the first time. There’s so much interest in the waterfront and downtown Palmetto that the City Redevelopment Authority takes calls on a daily basis from landowners who are researching their options, says Tanya Lukowiak, executive director of the Palmetto CRA.
Hester is likewise investigating upgrading or developing around Riverside as he rides out the current real estate market. “It looks like a good long-term investment,” Hester says. “If you could turn the clock ahead 10 years, that will be the core of Palmetto.”