Driftwood Execs Tout Potential of High-Barrier-To-Entry Hotel Projects

MIAMI — At the company’s investor conference, Driftwood Capital executives touted two remarkable hotel projects in high-barrier-to-entry locations across Florida as big drivers of growth.

Driftwood Capital is a real estate investment and development firm based in Coral Gables, Florida, with a portfolio of 80 hotels totaling approximately 15,000 rooms. The company also has 1,200 active investors and more than $3 billion in hospitality assets under management.

In pitching hotel projects to investors, Carlos Rodriguez Sr., Driftwood’s chairman and CEO, said he channels the advice of Berkshire Hathaway Chairman and CEO Warren Buffett.

“The theme for us is ‘Be fearful when others are greedy, but be greedy when others are fearful,'” he said. “Now is that time. It’s an opportunity that we have. If you are well-capitalized, you can pounce. Obviously, sharpen your pencils, and be careful, but when the opportunity arises, that’s when we can take advantage, and I think we’re set up for that.”

Carlos Rodriguez Jr., president and chief operating officer, said that while there are overall recession threats looming on the horizon, the hotel industry has managed to thrive since the depths of the COVID-19 pandemic.

“We’re still at a point where we have runway to go, and we’re projecting that,” he said.

The crown jewel in Driftwood’s pipeline is the 165-room Dream Hotel Miami at the Riverside Wharf. Carlos Rodriguez Sr. said that property — which is a $222.5 million, 200,000-square-foot, mixed-use development on the Miami waterfront — is the result of years of work, and described the project as “as sexy as it could be.”

“I don’t know if you heard, but the Dream brand was just bought by Hyatt, which makes this even better for us today,” he said.

Miami Mayor Francis Suarez, who was on hand at Driftwood’s investor conference, praised the Dream Hotel project, adding it is part of a “transformative time in the city, country and world.”

“Driftwood — and Carlos and Carlos — are doing a magnificent job being at that inflection point,” he said.

The project is partially funded through the EB-5 program, which encourages investment by foreign nationals in the U.S. The hotel — which is in an opportunity zone in downtown Miami — is slated to break ground in 2023.

Driftwood executives are expecting an internal rate of return of 24% on the project with an equity multiple of 4.5 times.

Another property with a yearslong development track that Driftwood executives have high expectations for is the Westin Cocoa Beach. Developers are preparing land after Driftwood secured $30 million in funding from city officials in Cocoa Beach, Florida.

Carlos Rodriguez Sr. said that project has been in the works for almost six years, which is an indicator of just how unique the project and location will be upon completion.

“The barriers to entry for anybody to come compete with us will be very difficult and will take them many, many years to be able to do that,” he said.

Cocoa Beach Mayor Ben Malik said the region is experiencing a huge uptick in tourism as it sits in the heart of the Space Coast, just minutes south of Cape Canaveral shuttle launch sites. He also called the Westin development “the definitive crown jewel” of the region.

“We only have so much land, just 13% of Cocoa Beach is available for redevelopment, and we have 50 million-plus visitors,” he said. “It’s a very unique market.”

Driftwood officials said one of the biggest investment opportunities going forward will be operating as a lender. The work of the company’s established lending platform includes a $44.5 million mezzanine loan for a portfolio of G6 hotels.

Carlos Rodriguez Jr. said there is no shortage of hotel investors looking to alternative lending platforms for help.

“Capital market instability is what we’re seeing today,” he said. “45,000 CMBS loans are maturing in 2023. That may cause extra concern, but what does that mean for hospitality? The reality is in 2013 when these loans were originated we saw less leverage in the system.”

He said the groups holding those loans aren’t eager to sell but want to be in a position to hold and renovate assets.

He noted his company works well as a mezzanine lender because of the various levels of expertise in the hotel industry.

“We layer on top and partner with banks to come in at that second position, but in partnership because they view us as an insurance policy given our operation platform,” he said. “We’re operating over 80 hotels around the country today.”

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