June 2016 Special Section

Startups and Real Estate


Written By: Philip N. Kabler, Esq., Bogin, Munns & Munns, P.A., Gainesville office

Startup businesses abound throughout Alachua County, which makes the region a truly exciting place to innovate. Businesses can range from the creation and delivery of daily use goods and services to the pursuit of developing and monetizing the most theoretical and esoteric digital, biotechnical and other leading-edge science-based ventures imaginable.

And, they all have one thing in common. They need to be some place.

Due to the happy confluence of the University of Florida, Santa Fe College and a thriving professional real estate community, there are many workspaces available in North Central Florida to address the needs of budding entrepreneurs through those of seasoned business operators. That variety presents options, and with options come decision points. Let us look, then, at a few of the options and their related decision points.

The basic division of business real estate splits between leasing and owning. But, there is more to “it” than just “that.”

Many new businesses want active operational support in addition to just an address. Our region can help through its many available business incubators. Incubators do offer desk, office and lab space (dry or wet), certainly. But, they also afford their residents opportunities to intermingle with other entrepreneurs in related and completely different fields of endeavor. (This can lead to better or best practices, but that is the subject for another article. Here is a place to start on that topic: www.businessmagazinegainesville.com/leadership-in-business/.) The decision points with incubators are that residents do pay fees to participate, but in turn, they get the value-added benefit of co-location.

It is somewhat challenging to catalog this region’s incubators, but fortunately, Alachua County has provided a good start: www.tinyurl.com/Alachua-County-Incubators. Visiting just that site will introduce entrepreneurs to local incubators such as the Santa Fe Center for Innovation and Economic Development (CIED), the Gainesville Technology Entrepreneur Center (GTEC), the Florida Innovation Hub at UF, the Sid Martin Biotechnology Incubator (UF), Hackerspace, Blue Oven Kitchens, Synogen, and a number of others, including in Newberry and Bradford County. There are additional incubator resources available through the UF Center for Entrepreneurship & Innovation (CEI) and HiveSpace. And very likely, there are others still to be found.

Purchasing and owning real estate can be costly and operationally prohibitive for startups — whether it is a suite in an office condominium, a building unto itself or an entire campus — but not impossible. Certainly, many successful businesses do just that. Ownership entails issues of location, taxes, insurance, financing and upkeep (inside and outside “the house”), among many matters. But, ownership also affords business owners control over the use of their real estate. True, office condominiums are subject to association control about various matters and all real property is subject to at least some government control.

Ownership decision points for entrepreneurs regarding ownership break out largely into financial and managerial issues. Often, real estate buyers borrow money from lenders such as community and national banks and even out-of-area institutional lenders, and those loans require planning to properly address payment schedules, ongoing financial reporting and compliance with other operational covenants. The financial issue for startups is that they may not have the free cash or accessible credit to purchase or pay…just yet. And, all ownership requires operational management — someone has to take care of the lawn, the parking lot, and the electrical, plumbing and mechanical systems. The operational issues for startups are that the startups are — and should be — focused on innovating and monetizing, and they may not have the time, expertise or available funds to properly manage an owned property…just yet. But…there is a profound sense of satisfaction with looking at one’s place of business and declaring, “That is mine.”

So, many entrepreneurs who are past the incubator phase but are not yet prepared to own lease their workspaces. Real property leases are contracts permitting tenants (or lessees, depending upon the “legalese”) to occupy and use real estate for limited (although extendable) periods of time. They include a variety of warranties and covenants running between a landlord (lessor) and a tenant relating to the property (such as build-out, parking, and common areas shared with other tenants); “who” maintains “what”; the amount and types of payments due from a tenant to its landlord and when those payments are due; deposits and their uses; and the consequences if either side fails to observe the terms of the lease. While commercial leases are subject to tenancy statutes, that regulation is in general less restrictive and more open to the parties’ negotiations than with residential leases.

Leasing decision points for startups also break out into financial and managerial issues. Entrepreneurs need to assess and predict their budgetary abilities to pay deposits, rents, and other tenancy-related fees and taxes. They have to either perform or arrange for maintenance activities to be conducted (glamorous “stuff” like air conditioning systems, landscaping and parking lot upkeep, to identify just a few areas). But…leasing often provides a good transition zone between the collaborative and supportive nature of incubators and the fully independent stature of ownership.

It is worth the time for entrepreneurs — at least those past the initial “garage band” stage — to consider consulting with professional commercial realtors. There are many commercial realtors in North Central Florida, and they are well equipped to help business operators evaluate their short-, medium-, and long-term needs against existing and developing properties.

A final and somewhat unrelated note: An excellent general resource for local entrepreneurs is the Gainesville Area Innovation Network. It is worth at least a few minutes to visit gainnet.org to learn about what the organization does and then participate in its opportunities for startups and entrepreneurs.

 

NOTICE: The article above is not intended to serve as legal advice, and readers should not rely on it as such. It is offered only as general information. Readers should consult with an attorney regarding their legal matters, as every situation is unique.

 

BIO:

Mr. Kabler is an incubator resource for the Santa Fe Center for Innovation and Economic Development (CIED), recently taught a course at the UF Warrington College of Business Administration’s Master of Science in Entrepreneurship program and was a member of the Gainesville Area Innovation Network’s board of trustees. He is also the current president of the North Florida Association of Real Estate Attorneys and is the immediate past chair of the Gainesville-Alachua County Association of Realtors Commercial Council. (And, he has played in “garage bands.”)

For more information, call Philip N. Kabler, Esq. of the Gainesville, FL office of Bogin, Munns & Munns, P.A. at 352-332-7688, www.boginmunns.com/gainesvillelawoffice, where he practices in the areas of real estate, business, banking and equine law.

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