Aztec Group CEO: Hospitality industry is changing, thanks to pandemic
Measures to contain the spread of the coronavirus continue to shift — and so do responses by investors, developers, builders, banks and buyers. To track the impact, RE|source Miami is asking area real estate professionals in various sectors for on-the-ground reports.
Today we hear from
Ezra Katz, CEO and founder of the
Coconut Grovebased investment firm Aztec. Katz, the son of Holocaust survivors, moved from Ohio to Miami in 1979 and opened his firm in 1981. The firm has provided funding for developers and projects for new construction including Newgard Development Group’s Gale Boutique Hotel Residences in Fort Lauderdale and Fortis Development Group’s 250 Wynwood. The investor-turned-developer built his first hotel in 2000. In 1994, Katz established Mayan Properties, a real estate investment merchant bank and asset management team that invests in existing projects nationwide, including Berkowitz Development Group’s Aventura Commons Shopping Center and TPG’s Marriott Fort Lauderdale North. Mayan has invested in over 60 hotels and continues to hold ownership in over 30 hotels, including the Hyatt Centric Brickell Miami and AC Hotel by Marriott Miami Midtown.
COVID-19 devastated the hospitality industry quickly and in many ways, including causing suspension of most hotel operations; those resulted in the furlough of over 95% of the workforce. The related businesses and services, such as food purveyors and restaurants as well as suppliers to cruise ships and airlines also ceased their operations. In addition, the virtual elimination of traveland-leisure visitors caused a significant impairment in hotel and business loans of over $20 billion that failed to meet their interest payments; this put severe stress on local and regional financial institutions. Our dependence upon tourism and the related industries that disappeared overnight also accentuated our lack of diverse economic drivers.
Developers are shelving projects that have not commenced construction as financial institutions are cutting their loan allocations to new projects generally and to hospitality projects specifically. Investors are focused on recapitalizing distressed assets. Owners are preserving their cash positions to fund the capital required to maintain ownership of hotels, which are losing significant money every day. Many hotels will fail to meet their financial obligations to their lenders and suppliers resulting in foreclosures and bankruptcies.I dare not predict the depth of the problems that all in the hospitality space face. No one can provide us with a sense of certainty as to when a vaccine or antidote for COVID-19 might be developed. Regardless of these issues, the road to recovery will surely depend upon the availability of financing and investment funds via financial institutions and the capital markets.
The actions of every hotel owner fluctuated; some closed completely and others retained minimal staffing. Minimizing expenses was the first step. Thus, senior staff undertook multiple responsibilities and performed all duties, including checking in and out guests, cleaning rooms and covering multiple shifts. Hotels are offering reduced housekeeping services and thorough cleaning at checkout.
Each hotel owner had to ask his lender for a deferral on interest payments while eliminating all capital expenditures. Several hotels were able to access business via government-related lodging while continuing to attract the limited local