South Florida Legal Guide’s Top Attorneys Handle Important Financial Transactions for Their Clients.
Here are Some Recent Examples.
Asserting Commercial Rights
A fast-growing publicly traded banking company in the New York metropolitan market is making a geographic leap to Florida following a recent $312 million merger and acquisition (M&A) deal.
Michael Mitrione, practice leader, Securities & Corporate Governance, Gunster in West Palm Beach, represented 1st United Bancorp, Inc. and its subsidiary 1st United Bank in the merger with Valley National Bancorp. “This deal will change Florida’s banking landscape,” said Mitrione, who has more than two decades of experience in corporate transactions. “It shows the importance of the Florida market for financial institutions and it continues the trend of consolidation at a time when the regulatory and technology costs of running a banking franchise continue to increase.”
Last May the two boards announced the merger agreement, which is expected to close in the fourth quarter of 2014. The combined company will have approximately $18.1 billion in assets, $12.9 billion in loans, $12.7 billion in deposits, and 225 branches covering northern and central New Jersey, New York (including Manhattan, Brooklyn, Queens and Long Island), and southeast and central Florida.
“Valley has always employed a highly focused geographic growth strategy based on creating long- term shareholder value; however, we ultimately welcomed this tremendous opportunity to expand into one of the premiere growth markets of the United States,” said Gerald H. Lipkin, chairman, president and CEO, in the announcement.
Under CEO Rudy Schupp, 1st United grew to become the seventh largest publicly-held bank headquartered in Florida by deposits, with a strong emphasis on the middle market commercial corporate. “Valley’s substantial resources, similar culture, additional commercial and consumer product lines, and shared growth aspirations, combined with our team of Florida bankers, will make a tremendous contribution to Valley’s future results,” said Schupp at the time.
Schupp added that 1st United has a 21 branch network covering southeast Florida, the Treasure Coast, central Florida and central Gulf Coast regions. Its executive and operations center in West Palm Beach will become Valley’s Florida regional office.
Reflecting on an overall upturn in corporate transactions in the past few years, Mitrione said he has already handled ten M&A deals in 2014. “This one stands out for several reasons besides its size,” he said. “Valley National is a premier banking company that had a strong desired to enter the Florida market. I believe we will see a continuation of that trend.”
Structuring A Complex Project
One of the most complex real estate deals in Miami Beach’s recent history would not have been possible without the efforts of a Bilzin Sumberg team led managing partner John C. Sumberg. The $900 million redevelopment project – which contains almost 2 million square feet of building space including a hotel, two residential condominium towers, a commercial condominium, and related uses – is expected to be completed later this year.
Sumberg and partners Carter McDowell, Jon Chassen, Mitch Widom and Melissa Pallett-Vasquez, represent an entity comprised of Starwood Capital, the LeFrak Organization and Invesco Ltd. in the purchase and renovation of South Beach’s largest oceanfront luxury resort property - including the former Gansevoort Hotel South, now known as the 1 Hotel and Homes South Beach, and the development and sale of 156 residential condominium units.
“We assisted the client in extensive due diligence to price the acquisition and succeed over other competing bidders,” said Sumberg. The acquisition involved extended contract negotiations with both the seller and with the lender having a mortgage on the property, requiring the modification and extension of the mortgage debt. The property consisted of a hotel, 259 residential condominium units and a commercial condominium and adjacent undeveloped property on the west side of Collins Avenue.
“This deal was incredibly complex, due to the building’s size and scope of ownership, with nearly two million square feet owned by four major entities along with a shared facility space,” said Sumberg. “The acquisition required close coordination of multiple disciplines beginning with the due diligence and analysis for the client. The legal team drew on its real estate and land use experience to advise on the permitted uses and ability to reposition the property and obtain needed governmental approvals and permits for the project.
Because the acquisition was from a mezzanine lender that had foreclosed its mezzanine loan, there were multiple bidders for the property and the deal had to be put together within weeks, even though the seller did not have complete documentation on the project. “This put enormous pressure on the legal team to do quick, efficient and thorough due diligence on all aspects of the project,” Sumberg said.
Sumberg’s team was also involved in the resolution of outstanding litigation, including a contentious settlement with an existing condominium association, which shares the structure on the property, over certain rights and obligations of the master association.
The settlement permitted the Bilzin Sumberg client to invest more than $150 million in improvements to transform the Perry Hotel into the luxury, eco-friendly 1 Hotel & Homes brand being launched by Barry Sternlicht, CEO of Starwood Capital and founder of the W Hotel brand.
With the lawsuits resolved and the retail lease areas recaptured, the buyer was able to proceed with its renovation and redevelopment of the property, according to Sumberg. “Our team has continued to handle all the zoning and permitting issues for the project, which is well under way,” he added. “The 1 Hotel & Homes South Beach is expected to open later this year, and our client is selling large oceanfront condominium units in the north tower.”
Closing an International Banking Transaction
As head of the Latin America Practice Group at Hunton & Williams LLP in Miami, Fernando Alonso has handled a number of complex international transactions. But last year, his legal team had to resort to litigation to achieve a successful closing on an Ecuadorian banking company.
“This was a very unusual deal,” said Alonso, who represented Promerica Financial Corporation, a Panama-based holding company that owns controlling interest in eight banks in Central America, the Caribbean, the U.S., and Ecuador. The Hunton & Williams team included partner David R. Yates in Atlanta, and associate Sarah Klee in Miami.
“Our client wanted to increase its presence in Ecuador and we entered into negotiations to buy Banco de la Producción SA, Ecuador’s third-largest publicly traded lender,” Alonso said. “They signed a letter of intent that included several elements that would be binding. But just before the final document signing, they called us to say that a shareholder had changed his mind and didn’t want to sell after all. That’s very unusual since there are major due diligence costs associated with a banking sale.”
Alonso’s client decided to press for a closing and filed suit in New York against the Ecuadorian banking company. “We wanted to enforce the letter of intent,” he said. “It put pressure on the seller, who eventually decided to go ahead with the transaction. At that point, we renegotiated the price, reworked the provisions and this time we got to the closing.”
The agreement was signed on October 14, 2013. “This was a visionary investment for Promerica’s portfolio and significantly expands its footprint in Ecuador,” says Alonso. “Banco de la Producción is a financially sound and well-run bank.”
After successfully navigating the regulatory approval process in Ecuador, the parties finalized the transaction on March 12, 2014. The total transaction value was confidential.
“In all my years of practice, I never before had to sue someone to get them to the table,” said Alonso. “However, this complex cross-border transaction is a good indicator of the kinds of deals that South Florida attorneys are handling today.”
Creating a REIT
When The GEO Group sought to revise its corporate structure, Stephen Roddenberry led an Akerman team that turned the Boca Raton correctional company into a real estate investment trust (REIT). “We were counsel to the company on its conversion,” said Roddenberry, a partner in the Miami office.
“Historically, REITs were passive real estate holding companies, but their structure provides benefits for income tax purposes.”
GEO owns or leases more than 70 facilities, totaling approximately 47,000 beds, which represent approximately 70 percent of GEO’s worldwide facility portfolio. In order to achieve REIT status, GEO reorganized its operations into separate legal wholly owned operating business units through a taxable REIT subsidiary (TRS). Through the TRS structure, a small portion of GEO’s businesses, which are non-real estate related, such as GEO’s managed-only contracts, international operations, electronic monitoring services, and other non-residential facilities, are now part of wholly-owned taxable subsidiaries of the REIT, while most of GEO’s business segments, which are real estate related and involve company-owned and company-leased facilities, are part of the REIT.
Because REIT rules substantially restrict the ability of REITs to directly or indirectly operate or manage health care facilities, GEO was required to divest all health care facility management contracts under its former wholly owned subsidiary, GEO Care.
In a message to employees, President George Foley called the restructuring “a historic milestone” that enabled The GEO Group to become the first fully integrated equity REIT in the correctional and detention industry. On January 18, 2013, the change was validated when the Internal Revenue Service said GEO Group qualified to operate as a REIT under its reorganized corporate structure.
GEO Group’s shareholders received a special dividend of $350 million, or $5.68 per share, on December 31, 2012, in connection with the change. “We have increased our annual dividends from $0.80 per share to $2.00 per share starting in the first quarter of 2013, which is indicative of our long-term commitment to return value to our shareholders while we continue to pursue quality growth opportunities,” he added.
Since the GEO restructuring, other Akerman clients are considering similar conversions, says Roddenberry, who focuses his practice on corporate compliance and governance issues, public and private securities transactions, mergers and acquisitions, and private equity investments. “We are seeing more use of this tax structure,” he said. “The capital markets so favor dividend stocks that prices typically respond positively to the conversion.”
Financing Research Projects
Three years ago, the Florida Legislature authorized $10 million to help the non-profit Institute for the Commercialization of Public Research create job-producing spin-off companies. However, the legislature didn’t set any standards for spending the money, according to Jonathan Cole, partner, Edwards Wildman in West Palm Beach. “We worked with the institute staff to develop guidelines and parameters for investment of those funds,” he said.
One of the issues was that the legislation didn’t allow the institute to take an equity position in those spin-offs, although the state’s universities do take equity when they license their intellectual property.
“We designed a program with long-term, low-interest unsecured loans and developed a set of rules,” Cole said. “The start-ups could pay us back in five years or when the company was sold.”
Last year, the Legislature appropriated another $5 million for the program and amended the law so the institute could provide equity capital. The result was the Florida Technology Seed Capital Fund, which provides from $300,000 to $500,000 provided the grant is matched by private funds. Since its launch, the program has provided more than $12 million in public capital, which has been more than matched by $40 million in outside funding, said Cole. “This blend of public and private capital is helping to support our economy,” he adds.
For example, the technology seed fund has supported the commercialization of biotechnology research projects from the University of Miami, University of Florida and Florida State University, including a 3D technology that allows a tablet or smartphone to map the inside of a room. “Another technology is a pill capsule with an RFID [radiofrequency identifier] that confirms that you took the medication,” Cole said. “A reader on the wrist picks up that signal and uploads it to the web.”
One part of the program Cole and his team drafted for the institute was the creation of an advisory board with experienced investment professionals who review the proposals and make recommendations for funding. Cole is one of the more than 20 advisors serving on the board. As he said, “This is a way to apply my 40 years of experience in working with entrepreneurs, venture capital providers and emerging technology companies to help the state’s economy.”
Selling an Online Company
Back in 2002, Valerie and Paul Holstein registered a web domain and began operating CableOrganizer.com from their home garage. They soon found a niche selling wires, cables, sleeves, trays, raceways and related products. Through the years, the Fort Lauderdale company developed a worldwide base of more than 250,000 customers, including aerospace and Fortune 500 companies, with millions of dollars in annual sales.
When the owners decided to sell, they turned to Michael G. Platner, chairman, Corporate Practice Group at Lewis Brisbois Bisgaard & Smith LLP in Fort Lauderdale, for assistance. “We helped them hire investment bankers to find and solicit buyers,” said Platner, who works with clients to develop and execute legal strategies for businesses from early stage through maturity and sale or merger. “We also recommended they consider a private equity firm that we recommended.”
Last year, Platner and his team were able to close the deal with the private equity firm in a favorable transaction for both buyer and seller. The names of the parties and the terms of the transaction were confidential. “The owners were able to retire and are now traveling the world,” he said. “In addition, they retained an interest of more than 20 percent of the company, so they have a good upside position for the future.”
After the sale, the private equity firm brought in a “world-class CEO with experience in growing both public and private companies, adds Platner. “The company has already made another acquisition and the prospects look very positive for the future.”
Platner says the firm played a major role in putting the transaction together. “Our role was unusually complete,” he says. “We helped them prepare to sell the company, found suitable investment bankers and the private equity firm. We also handled the negotiations and closed the deal with the lenders as well as the buyers.”
As he says, “This was a great story about how an entrepreneurial family created a company from scratch in South Florida, achieved worldwide success with a vertical product line and sold it to a buyer that will continue to grow the company in the future.”