Investors sell off Clearwater real estate portfolio, citing 'government instability' as catalyst for departure
By Breanne Williams
Tampa Bay Business Journal
Published: Apr 2, 2024

As Clearwater’s new mayor and two new city council members were sworn in Monday at the city’s main library, two prolific real estate investors were finalizing the sale of their entire Clearwater portfolio two blocks away.

Daniels Ikajevs, developer and co-owner of The Ring Workspaces, and Festus Porbeni, a downtown property owner who once served on the Downtown Development Board, told the Tampa Bay Business Journal they have sold their entire respective portfolios in a combined $57.75 million deal. They declined to disclose the buyer, and a deed has not yet been filed for the transaction.

The sale includes the One Clearwater office tower, two buildings on the 500 block on Cleveland Street, the retail spaces within the Water’s Edge condominium building, the building at 413 Cleveland St. and a handful of vacant parcels throughout the city.

The duo, who once had a vision of transforming Clearwater into an international destination for commerce, residents and visitors, said the “massive government instability” has created an environment that is no longer welcoming to businesses.

Message of instability

Porbeni said the city’s community redevelopment agency has had five directors — including two interim directors — and two city managers since 2022.

“To cap it off, we had Mayor Frank Hibbard quit on the dais,” Porbeni said. “He said city council was making financial decisions that would have a long-term impact and ramifications for Clearwater. But they were just discussing these things, not voting. And he quit because of that. You should not quit as a leader. You should stay, fight and decide what way to go forward.”

Hibbard’s abrupt departure sent “shockwaves across the business community,” according to Ikajevs.

“As an investor, would you invest in a place where you have that type of government instability?” Ikajevs asked.

The frequent leadership changes within city hall have made it nearly impossible for developers to present new ideas and projects, he said. As soon as they begin the tedious process of pitching an idea, their point of contact quits or is fired, and they have to start fresh with the new face that is appointed to the position.

“It’s a nonstop adjustment, and it makes your investment unstable,” Ikajevs said. “Investments are a balance between risk and reward. Obviously, being in the city of Clearwater has not been very rewarding.”

A lack of vision

Porbeni has been a property owner for 10 years and said he was drawn to downtown Clearwater due to its proximity to the beach and the sense of community he felt from the residents. However, as the years passed, he watched storefront after storefront close. He said he is “greatly disappointed” in how the city has handled development in its downtown core.

The $84 million Imagine Clearwater project that renovated Coachman Park was completed in July 2023, and Porbeni said it has failed to convert visitors into repeat customers for businesses downtown. He said people come during events but then leave and don’t return until another large event occurs. The project, Porbeni said, is “not a silver bullet” for downtown and has roughly the same impact on surrounding businesses that the park had before the redevelopment.

Ikajevs was one of three developers vying to redevelop two city-owned properties on the downtown waterfront, known by many as The Bluffs project. The city selected another team — Palm Harbor’s The DeNunzio Group and New York-based Gotham Property Acquisitions — to build what was initially proposed as a $400 million development on the sites.

Since being selected, the team has asked the city to allow them to scale down the project as it is no longer financially viable in the current market.

“Those are the very best of the city’s properties,” Ikajevs said. “It is prime real estate, and I think city council had one shot at getting that right. The question now is, did they get it right? I’m a numbers guy and post-referendum, roughly the last 18 months, I can share with you that there are more companies that have left downtown Clearwater than have come to downtown. What does that say about the confidence in the vision?”

One of the properties included in the sale is the One Clearwater tower, which Ikajevs owned. Since 2018, the city has leased space in the tower as a temporary City Hall. When the RFP for the Bluffs was released in 2022, Ikajevs said they were just shy of 90% occupancy in the tower. Now, occupancy is hovering in the 60% to 70% range.

“If the Imagine Clearwater and Bluffs projects are going to revitalize downtown, why are companies leaving?” Ikajevs asked. “We have a lack of vision in downtown Clearwater. We don’t have a cohesive plan to attract businesses to downtown. These projects are patches; they’re not a true plan. We don’t know what we’re investing in; we don’t know who runs the city because of the frequent changes. At some point, your passion and interest in downtown start fading away.”

City says enthusiasm for Clearwater's future is at an "all-time high"

Clearwater Mayor Bruce Rector told the Business Journal that the city does not agree with the way Ikajevs and Porbeni characterized the “current enthusiasm what is going on in downtown Clearwater.”

“We don’t think they told the full story,” Rector said. “There are a lot of other factors on their decision to leave downtown and take their investment out of downtown and it’s not the way they portrayed it.”

The mayor pointed to Ikajevs' failed bid to develop the Bluffs property as one potential reason for the departure. Rector also refuted the claim that companies are leaving Clearwater due to their perception of an unstable business climate. He said he has known Ikajevs for years as the company he worked for was a tenant in One Clearwater. His company wanted to remain in the building but he said they were “unable to work out lease terms” and ultimately had to leave.

Ikajevs said negotiations with Rector's company lasted for more than two years and the company ultimately chose to terminate its lease early and left before the end of its lease term.

“There’s a lot going on in the market," Rector said. "Everybody knows commercial office space, the demand for it has not come back after the pandemic. That’s not just Clearwater, that’s everywhere. To blame, or to give us as an excuse for [Ikajevs] deciding to make what is apparently a good business transaction for him is just unfair.”

He said the new city council has a “forward-looking focus, a pro-business, pro-investment focus and attitude.” He said they want investment to come not just to downtown but to the rest of the city and believe Coachman Park and the Bluffs developments are a “good start.”

He also pointed to the county’s decision to soon relocate its 14 facilities from downtown to a new consolidated campus as an opportunity to use those properties to reimagine downtown Clearwater and help the city grow.

“We couldn’t be more excited,” Rector said. “We’ve got a strategic plan that was put in place by the prior council and we have confidence we’re on the right track. It’s going to take a lot of hard work and it will take a lot of convincing businesses they can be successful in downtown Clearwater. We’ve already been working hard in the first two days to do that.”

The next chapter

Both Ikajevs and Porbeni are looking elsewhere for their next investments. Ikajevs said they are looking at options throughout Tampa Bay but do not believe they will invest anywhere else in Clearwater as the entire city, not just downtown, is “too much of a gamble.”

The Ring Workspaces will remain a tenant in One Clearwater, and Ikajevs said he hopes to expand the coworking space throughout Tampa Bay.

As three new city councilmembers — Rector and councilmembers Mike Mannino and Ryan Cotton — step into their roles, Ikajevs said he hopes they recognize the only way for downtown to become successful is for the city to develop a plan to attract and retain businesses. And what businesses look for is stability.

“I hope the people who get voted in really do take their job seriously and stay four years,” Ikajevs said. “That is important if they want to start fixing these problems. I always saw downtown Clearwater as a white page where you can draw and imagine anything you want. There’s a lot of discussion about the Church of Scientology, but that was never a factor of why I came or why I left.”

Private investors can only do so much without the guidance and partnership of the city leadership, Ikajevs said, and no investor will consider entering a market that has no sense of identity.

The city needs to decide what it wants to become, he said — only then can it begin selling that vision to investors and businesses that might be keen to be a part of the change.

“Whatever is being done thus far, this small thinking, it did not excite the market,” Ikajevs said. “If anything, the market has reacted in the opposite direction. This is the reality: Businesses are leaving. Without fixing these issues we’ve been talking about, the reasons why we are leaving, that reality is not going to change.”