Driftwood’s ‘to infinity and beyond’ portfolio

Driftwood Capital is taking over Florida’s Space Coast hotel market as it announces the close of the $330 million Driftwood Florida Space Coast Portfolio fund with four hotels expected to represent approximately 11% of all the hotel rooms in the market and 62% of the area’s beachfront hotel inventory. That market dominance is also supposed to generate north of 20% IRR, according to CEO Carlos Rodriguez, Sr.

Since entering the market more than 10 years ago, the Miami-based developer, manager and lender recognized the untapped potential for this region to become a hub that melds business, innovation, and leisure tourism. “We are going to transform this market. We will drive higher rates than what normally comes to Cocoa Beach, and our marketing and conventions will help fill many other hotels in addition to our four hotels,” Driftwood CEO Carlos Rodriguez, Sr. told Hotel Investment Today.

Consisting of four large-scale beachfront assets representing Marriott, Hilton and IHG brands, upon completion of the Westin Cocoa Beach Resort, Spa and Conference Center, the fund’s portfolio is projected to include more than 1,200 guest rooms, 166,000 square feet of meeting space, and 21 food & beverage venues on 36 beachfront acres.

Aerial rendering of the Westin Cocoa Beach

The fund’s portfolio is comprised of the following assets managed by the in-house management company with only the Westin a new development project. The Element in Melbourne opened this past June and the other two have been operating for several years:

• The 502-room Westin Cocoa Beach Resort
• The 295-room Hilton Cocoa Beach
• The 130-room Element by Westin Melbourne
• The 290-room Crowne Plaza Melbourne

Rodriguez added that while the fund’s life is six to nine years, he personally intends to keep these assets for generations to come. “So, we will figure out a way to recapitalize the fund and provide liquidity to investors who want to leave sometime around year six,” he said. “Those who want to stay on with us will roll over and stay for another five to nine years, and those who want out will be provided liquidity. The process will repeat itself several more times. I see us being here for a very long time.”

When asked about challenges in meeting projections, Rodriguez simply answered, “none. We have a great team that will make them run well. The biggest issue was getting all the entitlements to build the Westin.”

Those who want to stay on with us will roll over and stay for another five to nine years, and those who want out will be provided liquidity. The process will repeat itself several more times. I see us being here for a very long time.

Carlos Rodriguez, Sr.

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The Space Coast has a variety of demand generators with increasing activities from the space industry attracting millions of visitors every year as well as proximity to Orlando. The Kennedy Space Center attracts more than 1.5 million visitors per year from around the world, more than 4 million cruise passengers embarked via Port Canaveral in 2022, and millions more visit from the Orlando MSA.

Increased demand is expected in the Space Coast market in the coming years. With 111 launches expected in 2024, last year’s record of 72 launches is expected to be surpassed by the year’s end. Current projections indicate more than 300 rockets are expected to launch in 2028, drawing increased tourism and business travel.

Rodriguez added that not only loves the market’s strength and diverse group of demand generators, but they will also benefit from barriers to entry and the location on a wide white sand beach. “The barriers to entry are big and that’s why development takes a while here,” he said. “But we also took the time to get community buy-in. We listened to people’s observations, and we modified our plans to satisfy as many people as we could to get the community to love and use our project. Community buy in is very important for us.”

Earlier in 2024, Driftwood announced that its hotel development pipeline exceeded $1 billion in projected value. Its development portfolio includes projects valued at approximately $500 million, which are either under construction or scheduled to break ground in 2024.

Since 2015, Driftwood Capital and its principals and affiliates have transacted on more than $5 billion in hospitality assets, including new ground-up hotel development projects, cash-flowing hotels and hotel-backed loans.