As summer approaches, South Florida’s business climate is still feeling the chill from government restrictions — a vital but painful measure, according to state authorities.
Hotels and restaurants across Miami-Dade, Broward and Palm Beach counties are laying off thousands of employees, and some companies are even declaring bankruptcy, as the service economy struggles under state shut-down orders.
After Gov. Ron DeSantis announced a unified “safer-at-home” policy for South Florida on March 30, clubs, bars and public dining rooms in the area closed and restaurants were only allowed to do delivery and takeout.
Thousands of hotels and brick-and-mortar retailers, with the exception of grocery stores, pharmacies and other essential businesses, have also shut their doors until further notice.
Now Florida — which has seen nearly 42,000 infections and more than 1,700 deaths from Covid-19 — has entered its first phase of reopening. But some of its most densely populated cities remain at the back of the line.
“This is not like flipping a switch. It is not just going to go on overnight,” Gov. DeSantis said during a press conference in West Palm Beach last week.
The pain for South Florida’s tourism-fueled economy was magnified by air travel dwindling at Miami and Fort Lauderdale-Hollywood’s international airports, in addition to cruise lines with ships docked at Port Miami and Port Everglades forced to halt business in the area.
South Florida’s hotels, in particular, have had to make significant cuts due to declining occupancy and steep revenue losses. In April, layoffs occurred at a number of prominent hotels, including the SLS South Beach, JW Marriotts and Soho Beach House in Miami Beach.
Among the properties that are still open for business, hotel occupancy in Florida was just below 25 percent in the last week of April, a 77 percent drop from the first week in March, according to data provider STR.
The Eden Roc in Miami Beach has had to lay off more than 450 employees, while the Hard Rock Cafés in Miami, Hollywood and Key West have furloughed more than 350 employees.
Some of the Trump Organization’s properties, including the president’s “Southern White House” in Mar-a-Lago, have also been forced to make job cuts. The Trump Organization’s Mar-a-Lago resort furloughed 153 people, Trump National Doral Miami furloughed 560 people and Trump National Jupiter Golf Club furloughed 92 employees, due to impacts from the coronavirus, according to a WARN Notices filed with the state.
Hotels have been shut down with the exception of hotels hosting “essential lodgers” such as healthcare workers, airline crew members and displaced travelers
Dana Young, president and CEO of the marketing association Visit Florida, said on a recent conference call with members of the state’s re-opening task force that statewide hotel revenue between March 1 and April 11 was down more than $1.6 billion compared to the same period last year.
Several popular restaurants have also had to make serious cuts. Daniel Boulud’s French-American restaurant Cafe Boulud in Palm Beach laid off 99 employees, while the Japanese restaurant Zuma in downtown Miami laid off 115 people. The popular Florida deli chain TooJay’s declared for Chapter 11 bankruptcy on May 1.
But some in the hospitality and food service businesses are holding out hope, at least publicly.
“There will be a light on at Joe’s and there is a light on at the end of the tunnel,” Joe’s Stone Crab owner Stephen Sawitz, said during a press conference in March.
One of the biggest financial issues for the hospitality industry is its exposure to commercial mortgage-backed securities, which are harder to restructure than conventional real estate loans.
South Florida’s hotel industry will have to deal with $4 billion-plus in CMBS debt payments, including a $975 million securitized loan on Jeffrey Soffer’s Fontainebleau Miami Beach. South Florida’s retail industry, meanwhile, is facing more than $6 billion in debt payments on CMBS loans.
Some borrowers may have trouble getting their loans reworked, sources say, due to contracts with their bondholders. In order to get a CMBS loan modified, the borrower has to enter special servicing — a process that can last months, if not years. During this process, borrowers are unable to refinance or take on additional debt in the meantime.
“It’s low-rate money when you get it, and as long as you can pay it off it’s a great deal. But if you experience any turbulence these are very tough agreements,” said Thomas R. Lehman, founding partner of Miami-based Levine Kellogg Lehman Schneider & Grossman, who focuses on bankruptcy law.
Looking ahead, however, some local businesses may be able to breathe a sigh of relief, as Gov. DeSantis recently announced that restrictions on stores and restaurants across Florida will ease as part of the state’s plan to reopen.
His order originally excluded Palm Beach, Miami-Dade, and Broward counties, but Palm Beach County has now been allowed to reopen after its county commissioners sent a letter to the governor. Miami-Dade County is seeking to possibly reopen parts of the economy by May 18.
“If people can fight over toilet paper in Costco, then I’ve got to think there’s a way to run a restaurant safely,” said DeSantis during a call with industry leaders in April.