When Winter Park-based MMI Development broke ground this month on a 272-unit first phase of Marden Ridge Apartments in Apopka, Michael E. Wright allowed himself a brief sigh of relief.
He'd spent the past four years scaling a political mountain and charting new territory for local infrastructure development to get to this point. All for the privilege to develop 114 landlocked acres that one of the nation's top homebuilders had discarded, and to build a highway interchange on his own dime, with the hope surrounding growth would reimburse him.
As GrowthSpotter detailed in Part I of this Anatomy of a Deal series, Wright saw potential during the depths of the recession in Maitland and Apopka property that most deemed undevelopable. He'd bank more than $7.1 million on deeds alone, and commit millions more to public infrastructure, driven in part by a desire to prove naysayers wrong.
In Part II below, we pick up in 2013, when Wright would get a glimpse into Apopka's future and move quickly to invest:
A HOSPITAL'S COMING
Wright had acquired a pear-shaped 42-acre parcel fronting S.R. 451 and Marden Road in December 2008 for $2.2 million from Centex Homes. He'd previously offer more than $6 million for it in 2006, but was beat at the time by a bidder who never followed through on the purchase.
"When it came back on the market for a 70 percent discount I was there," Wright said. "I guess when you lose a deal, it's meant to be."
He had a history with Centex, having bought 43 acres near Disney World from the company for $2.75 million in 2008 for what would years later be developed as Windermere Cay apartments.
In the years that followed his 42-acre Apopka purchase, Wright kept his eye on an adjacent 72 acres owned by Centex that fronted the Apopka Expressway (S.R. 414).
Fast forward to 2013, and Wright had been negotiating a Letter of Intent with the homebuilder through much of the year for those 72 acres. But a quick glimpse of Florida Hospital's plans that Fall would prompt Wright to pounce on the deal before anyone else could.
At a Central Florida Expressway Authority meeting in October 2013, Angel de la Portilla, head of Central Florida Strategies, Inc. and MMI's governmental consultant, overheard Florida Hospital's Jody Barry tell board members of the non-profit's plans to develop 70 acres southwest of the confluence of three highways -- State Roads 414, 429 and 451 -- less than a mile west of Wright's Centex land.
"Barry wouldn't confirm that day what they would build there, but we assumed it would become what it ultimately has (Florida Hospital Apopka)," de la Portilla said. "I texted Mike from that meeting with the news, and he moved on the land, contacting Centex to get those 72 acres under contract before Florida Hospital announced their plans."
PITCHING AN INTERCHANGE
Both Wright's 42 acres and Centex's 72 were predominantly landlocked, with the only access for highway travelers via a connection northward on Ocoee Apopka Road, exiting on Marden Road and returning south.
Brainstorming began in 2012 for a solution, when Wright and de la Portilla met with the City of Apopka about the need for a S.R. 414 off-ramp at Marden Road. At the time, Apopka's then-mayor John Land said he would endorse an interchange for the Expressway Authority, but the city wouldn't help fund it.
Wright was ready to finance the interchange himself, but the Expressway Authority's first requirement was a $75,000 Interchange Justification Report.
"It was very early in the process and Mike wasn't prepared to spend that level of money yet on the idea," de la Portilla said. "But once the new hospital was announced (in November 2013) and he got the additional (72 acres from Centex) under contract, we moved on that study."
MMI began preparing a nine-month justification report in February 2014 with the help of Kevin Knudsen, civil engineer with Dewberry.
"With all the growth in that area, it was just a matter of running the traffic volumes to prove that a half-diamond interchange with access to the east was warranted," Knudsen said.
The political tide turned in Wright's favor in April 2014, when MMI found a champion for its project in Apopka's newly-elected mayor Joe Kilshimer. He became an early supporter of Wright's vision for an interchange to open land access in the area.
That same month, Apopka designated a special study area for land around Ocoee Apopka Road, and set a moratorium on development through the end of that year.
MMI was one of several large land owners that together contributed $100,000 to Littlejohn Engineering, which analyzed growth and development needs for the area. A key conclusion was that an interchange at Marden Road and S.R. 414 would open up a wide expanse of land to new development.
MMI closed on Centex's 72 acres in September 2014 for $2 million, and now had 114 acres fronting the expressway it needed to solidify access to.
'LEAD, FOLLOW, OR GET OUT OF THE WAY'
"I'd worked many years in local government, but this would be the biggest agreement I'd ever negotiated, so I was really looking forward to it," said Glenn Irby, Apopka city administrator.
"Mike and Angel came in (in early 2015), we got to know each other really well, and we hammered out a deal we thought was good for everyone," he continued. "They wanted the city as a partner and we needed to do it, because in the long run the developer will be in and out as quickly as they can, but the city remains. They wanted to negotiate the best deal they could for profit, and we wanted the best for our community."
After three years of research and a year of negotiations with Apopka, MMI won approval in September 2015 to front the cost and risk to build a $6.5 million interchange at the intersection of Marden Road and the 414 Apopka Expressway.
The City Council approved creation of a new Synthetic Tax Incremental Financing District (STIF) to cover the Ocoee Apopka Road Small Area Study. MMI will front 100 percent of the construction cost and risk for the interchange, and them be reimbursed over 10 years in a few ways.
Impact fees MMI would normally pay to develop its property in the coming years will be credited back. And as ad valorum taxes increase within the STIF area -- expected with new development -- 50 percent of that will go to a trust fund established to reimburse MMI for the interchange.
"We started this concept with the city simply agreeing to give us a letter. Now we're fronting the money to build it, and if development occurs as expected the property taxes will go up, and we split those tax receipts over 10 years," Wright said.
The collaborative effort by MMI and Apopka is one of the first examples of an infrastructure Public Private Partnership (PPP) in Greater Orlando, since the Florida Legislature created a PPP taskforce in 2013 to promote ways to fast-track such infrastructure investment.
"Doing something no other developer has done around here was exhilarating," Wright said. "We had meetings with other (stakeholders) from the area at that time, all supported the interchange and all would benefit from it, but none would contribute a cent. I put all of the ($75,000) up myself for that interchange justification report. To me it's lead, follow or get out of the way."
Wright could have developed his Centex land along S.R. 414 and S.R. 451 without the new interchange, but says he was driven as much by the challenge as the prospect of increasing his land value.
"It was the right thing to do, and gave me an incredible sense of satisfaction," he said. "Some people to go Vegas and play cards. I like gambling where my intellect ensures my success, will benefit others and prove the naysayers wrong."
A NEW PARTNER
When Wright met his future multi-family partner in July 2014, he was surprised by the shorts and flip-flops.
He was president of NM Residential, a Cleveland-based family company that owned and operated roughly 20 apartment properties in Ohio and Michigan.
Niederst had recently moved his family to Windermere and took a liking to MMI's Windermere Cay, a 272-unit Class A apartment complex adjacent to Disney World's north entrance that was built in 2013 and fully leased.
Wright's first impression was one of unease: the 27-year-old Niederst pulled up to Windermere Cay driving a Bentley, and stepped out wearing shorts, sandals and a t-shirt.
"I was a bit nervous, I didn't know (the Niederst family)," Wright said. "I'm old school and like to know someone in business a long time and do things verbally with them. If I can't trust someone verbally I have no interest in doing a written deal with them."
But within minutes, Niederst began to win over Wright with his market insight.
"You could tell he knew what he was talking about. Don't judge a book by its cover," Whitaker said. "His style wasn't the norm, but I had a good reference and understood where this family was coming from. He could dress in shorts and flip-flops all he wanted, their money was green."
Niederst eyed Windermere Cay to fulfill a 1031 exchange his company expected to pursue with some Ohio assets up for sale, but didn't see enough value-add potential in Wright's property, which had been open just six months.
Windermere Cay's price point at the time was based on similar cost in the area, and the nearby Citra at Windermere was being used as a comparable, under contract to sell a few months later for $61.5 million, or $170,833 per unit.
"At that price we wouldn't be able to build any equity in the new (Windermere Cay), versus new construction in which we could build equity," Niederst said. "We weren't too interested in doing new construction at the time, but began to warm to the idea."
The two agreed to stay in touch, and in December 2014 Whitaker set up another meeting for Wright at The University Club of Orlando with David Niederst, Michael's father and CEO of the company.
"We got along right away after that meeting," recalled Michael Niederst. "Mike (Wright) is a pretty open guy who will tell you exactly how he feels, and I'm the same. We have a team up in Ohio of 300 people, so for this expansion of our company to Florida a lot rides on my personal feel for people. It's something we'll definitely grow together on."
Fast forward a few months, and in March 2015 NM Residential went under contract to sell a few Ohio properties. Wright got a message from Niederst.
"He asked 'So how many deals you have for me this year?'" Wright recalled. "I said I had four, and he said 'I'll take all of 'em.'"
New construction would be different for NM Residential. Up to that point the company had only acquired existing properties, and done large-scale redevelopment converting hotels into apartments.
"We learned how those big conversion projects could take up to 36 months," Niederst said. "So with a fresh look at MMI's new construction we saw it would have a lot less hurdles than our experience in Ohio, where we had redeveloped about 8,000 units."
The two companies would reach a sale agreement in July 2015, and close on 20 acres in Maitland in September for $13 million, and 30.79 acres in Apopka for $9.72 million this past January.
"In Maitland, everything attracted us there with the business district and expansion of I-4," Niederst said. "It has the potential to be a connecting point for Maitland, with feasibility for professionals to have a live-work-play atmosphere because of MMI's commercial component next door, and Seminole College's long-term expansion plans.
"And in Apopka, with Florida Hospital coming, the housing developments being built nearby and the new interchange, we saw the long-term potential with I-4 expansion of a lot of traffic detouring through that area," he continued. "But our initial lease targets are staff coming to the hospital."
Vertical construction began this month on Phase 1 of Niederst's Marden Ridge Apartments in Apopka, a $47 million investment, with occupancy expected to start in early Fall. At Maitland West ($54 million investment), underground water retention systems are being placed, with vertical construction on Phase 1 to follow and occupancy targeted for First Quarter 2017.
MMI retains control of the 72 acres east of Niederst's apartment property, and should submit a site plan soon to Apopka for a 300,000-square-foot retail power center.
"The 400 cubic yards of dirt we imported to the Maitland West site came from the Apopka site, so these two will be connected forever," Wright said.