Miami Nice: Brett Mufson Talks Fontainebleau’s South Florida Empire

SEE ALSO: CMBS Issuance Hits 2021 Highs, Even If Office Health Remains Precarious

“He didn’t own it for very long,” Mufson said.

At the time, Eden Roc was the best, baddest hotel in town. “So, Ben Novack got approvals to build a tower that they called a ‘spite wall,’ because it cast a shadow on the Eden Roc’s pool. So, he kind of put my grandpa out of business, and, actually, to this day, the spite wall is still there,” Mufson said. “There’s one window on the wall side of it, and it existed just so Ben Novack could flip my grandfather off.” Larry David would be impressed.

Fast forward to the present, and Mufson is now leading acquisitions and development for Jeffrey Soffer, chairman and CEO of Fontainebleau Development. The two had known each other for 20 years prior to Mufson joining the Miami-headquartered firm, just before the pandemic hit, and now the Mufson name is once again an integral part of Fontainebleau history.

In addition to the famed Fontainebleau Miami Beach and its other hospitality assets, the company’s diverse portfolio includes residential and commercial properties, gaming, dining and entertainment, health and wellness, and even aviation holdings.

Most recently, the firm came full circle in closing its acquisition of The Drew Las Vegas — formerly the Fontainebleau Las Vegas — via a deed-in-lieu sale. Mufson couldn’t comment on the purchase due to confidentiality restrictions, other than to say the deal is “a huge platform-builder, and we’re very excited about it.”

Commercial Observer: Where did you grow up?

Brett Mufson: I was born in Miami, and I guess you could say I was born into a development family. My father was a home developer, and my grandfather was a hotelier. While I was born in Miami, I actually grew up in Aspen, Colorado. I moved there when I was 10 years old, and met my wife there — also when I was 10. I went to University of Pennsylvania in Philly, my wife went to Syracuse, and then we moved to New York City after that.

What are some of your earliest memories of growing up in a development-focused family?

On the weekends, my dad used to take me to his construction sites. I remember this like it was yesterday. He was building communities down in South Florida. He passed away when I was 18, but he used to take me to all these construction sites and we’d drive his truck at the time literally onto the property. I was young, and so I thought it was the coolest thing ever.

So, I grew up around that and did a lot of that type of work during the summers when I was young. I always knew that I wanted to be in the development space. When I went to college, it was to get the finance background and the economic background, that fundamental skill set you need before you do the creative development stuff that you always wanted to do. My dad set that precedent from a very young age. The name of his company was Harris Brett, which is my older brother’s name and my name, then it eventually became Paramount Building because the company got bigger.

Did you move to New York for a job?

I moved to New York to work for Bear Stearns. I was actually there the night that we were acquired by J.P. Morgan, and I was there for the transition. I was at Bear for about two years before we got bought, and then about a year and a half after. That was an experience for sure.

Honestly, I feel like that was my true MBA, and I’m really grateful for that experience. Like most people of that generation — who left college and then the recession hit — it’s always made me  focus on protecting the downside. The amount of money that was lost, and the amount of jobs that were lost … I mean, every day I’d come in, and people were leaving. It was a very intense environment, but it became my barometer for not making mistakes.

The development business, as you know, is an aggressive business. You’re trying to envision something that doesn’t exist today, and you’re reaching for the next, greatest thing; the nicest condo building, the next generation of a hotel concept.

So, that requires being aggressive in nature, but if you have that sensibility to the downside, it just helps in making the right choices. [Bear Stearns] was a hard way to learn that, but once you go through something like that, you never forget it. In hindsight, it was a good thing. Although, had I graduated two years earlier, I would have made a lot more money [laughs].

From J.P. Morgan, I went to LoanCore Capital, which was great. I was actually one of the first employees there. I think we had a couple of billion dollars under management at the time and I learned a lot. I wanted to get into deal flow and we were buying [commercial mortgage-backed securities], originating loans throughout the country, and buying distressed debt.

There was a two-year run there, where we just bought everything and originated everything in sight, and made a lot of money. But LoanCore was really more of a placeholder for me, as I wanted to get into the development space, and so I went to work with Steve Witkoff.

Tell me about your early days with Steve Witkoff.

When Steve and I met, it was only him and maybe two others that were driving the business. So I came on, kind of as his number three, at a pretty young age, and I was working on everything from cradle to grave. I did everything from sourcing deals, to buying deals, to building properties, to working with contractors. It was very hands-on and I really got the opportunity to build a business, because we went from three people to 60 pretty quickly.

Steve had never had a hotel deal and we ended up getting into hotels — we did every asset class. It ended up being an amazing experience, and I owe him a lot. He gave me a lot of rope at a young age to do a lot of things that most people wouldn’t be able to do. It was a big education for sure.

How did it feel getting into the hotel development side, given your family history?

Hotels have always been an attractive thing to me. I think the first hotel that we did when I was with Steve was probably [the PUBLIC Hotel on] Christie Street with Ian Schrager. We bought that land together, concepted it, worked with Ian on a lot of it. We were the developer, so we were heavily involved in that and did the capitalization of it. And it was amazing to work with [architect] Herzog & de Meuron.

From there, we did the Times Square EDITION hotel, and then we bought Park Lane Hotel along the way, and actually did two hotels in Miami Beach — we built one, bought another one and renovated it. Then, we went out to L.A. and did the West Hollywood EDITION.

What was the biggest takeaway from your time at Witkoff?

The biggest thing I learned there was how to be a developer. I was a huge advocate for always being involved in every step along the way. I think that, once you gain that skill set of understanding the intricacies and how much coordination has to go into projects and — how much blood, sweat, and tears — then you can start to get out of the weeds, and start to think a little bit more big picture and understand where you want to be.

We always tried to raise the bar, whether it was the newest and greatest condominium building, where we were going to build amenities that no one’s ever seen before, or a hotel, where we were going to hire Herzog & de Meuron and have a hotel with all these [food and beverage] components to it. We always bought quality, and I think just the experience of being able to buy a deal and live with it for the life of the asset was amazing. And I did it around 15 times, cradle to grave. Leaving Witkoff, I felt that I could kind of do anything.

You joined Fontainebleau Development in December 2019. Talk me through the thought process as to why this was the right move for you?

Jeff [Soffer, CEO of Fontainebleau] and I had been talking for a long time about doing something together, and I was actually pretty close to starting a business on my own. I had raised a bunch of money from family offices, and Jeff was actually going to put up a portion of my general partnership capital to build this growth vehicle.

Ultimately, what happened was he had some changes that were happening on his side. And he called me and said, ‘Listen, we weren’t necessarily talking about you coming here, but I’d like for you to be a partner here and have ownership in my legacy business. And then, we can also have this growth business.’

Sometimes, you jump into these things and you never know how they’ll work out until you do it. But I’m blessed, because he’s been an amazing partner. We have a friendship, as well as a partnership, and we really understand each other. I think we have the perfect age difference, where we have different perspectives and a very yin and yang relationship.

It’s only been about a year and three months, but we’ve done a lot of exciting things. I’m excited to be part of the team and growing a business with him, because we have big, big goals in terms of where this business is headed.

How did you approach the first few months of the pandemic, given your significant hospitality portfolio?

The beginning of COVID was a difficult time. We have office buildings and multifamily, and development sites and all sorts of other stuff. But, we have a large hospitality portfolio and our South Florida portfolio was pretty group- [bookings] driven — which, clearly, was badly hit in the pandemic. In the first three months, we were ready to grow, and then this happened.

So, we spent a lot of time doing some really smart things. We buckled down and made sure we were cutting costs in the right way. I had some really significant capital partners, because I had family offices that were supporting me in my jump from Witkoff. So, we had them come in and help us with some recaps, raising some liquidity and buttressing our balance sheet. 

And, then, we really got into the weeds on operations. Our operational team is just top-notch, and they did an amazing job fighting through a time that was not easy, and we did a great job managing our liquidity and our balance sheet. Now, we can see the forest through the trees.

We’re lucky to be located mostly in South Florida, so our hotels remained open, starting in June. 2021 seems like it’s going to be an amazing year, relatively speaking. I don’t think we’re back to 2019 levels, but we should be surpassing 2019 by 2022. So, it feels really good.

What was Fontainebleau’s edge in terms of being prepared for this crisis?

Jeff has true vertical integration. It’s actually incredible and I’ve never seen anything like it before. We’re our own general contractor, so our construction team builds the building. We have an in-house sales and marketing team when we’re selling condos. We operate all of our food and beverage; every venue, nightclub, restaurant, pool deck; all of our hotels, all of our office buildings and casinos. In our aviation business, it’s all our employees.

The infrastructure was super attractive to me, and it’s been great to be able to take what Jeff has and try to leverage that, to really grow it into something that can be more global.

I guess if you have all of those capabilities in-house, you’re not dependent on anybody else to execute on any decisions, and can move quickly when needed.

It’s a silly example but — as you know —we just bought back the Fontainebleau in Las Vegas, and I’m looking at a restaurant space. Before, I would need to have a consultant that I could go talk to and ask, ‘Well, what do you think about this space? And how much kitchen space do I need?’ I don’t have to do that now. We have a head chef internally, and I can say, ‘Come meet me, sit down for an hour and go to the plan.’

The access and the ability to do things in a very efficient way is amazing. And I think most people would say, as a result of the pandemic, there’s no better time to leverage an operational infrastructure. So, I think we’re extremely well positioned and just excited.

What else is keeping you occupied right now?

Gosh, a lot. We’re building new hangars at Fontainebleau Aviation in Opa-locka, and expanding our operations there. We’re also building a very high-end, boutique condominium building in Jupiter, and it’s the first condominium property to be built in Jupiter in over 25 years. It’s been highly successful, and we’re basically fully sold out.

Then, we’re planning a two-tower condominium project in Aventura on a marina and we have a couple of deals under contract to buy. Plus, we’re bidding on some [requests for proposals] for the airport hotel in Miami. Then, we obviously bought the former Fontainebleau in Las Vegas and that’s been a huge focus, obviously. We’re also building 640 units of multifamily in Hialeah [in Miami-Dade County], and we partnered with Related on that. There’s a lot going on, and we’re trying to manage all of it [laughs].

Are you seeing a big uptick in terms of people staying in your hotels again?

We’re in a unique position, because we watch it every day — we see the rate, the occupancy, the food-and-beverage venues, the nightclubs, and have all this information in real time. We also see the groups that are booking hotel rooms for the future, whether it’s in a month from now or three years from now. So, our pulse is unique and, right now, it’s a very positive message.

I know it’s spring break, but we’re about 95 percent occupied with 100 percent leisure customers in the Fontainebleau’s 1,600 rooms, and Turnberry’s 680 rooms are 100 percent occupied. So, our reports are showing that, in Q3 and Q4, we’ve got some decent group rooms already on the books. And, then, I think 2022 is going to be back to normal from a group mix. When the groups come in, it just helps you compress rates and you can really manage the rest of your business.

But what’s really interesting, that’s happening right now, is because of the government funding, because of PPP and the whole package that they put together, it’s actually been very difficult to hire back at the operational level — because the amount of money that these people are getting versus going to work, when you take into consideration gas and travel, it’s not motivating. It’s been very hard. In past years, we’ve been able to ramp up a lot quicker. I think it’s a short-term thing, hopefully. But, it’s been hard managing, being 100 percent occupied with 50 percent of the staff that we need.

How do you get around that?

What’s really been happening — and this just goes to show the loyalty that we have on our operational team and the history they have here with the company — is the most senior executives are rolling their sleeves up. So, they used to manage teams, and now they’re doing a little bit more than just managing; they’re actually implementing and executing. Everyone’s been rolling their sleeves up.

How did you find the interactions with lenders through the crisis? Fontainebleau Miami Beach went through a CMBS restructuring.

Securitizations are always tricky. You have a lot of middlemen that are fiduciaries to a lot of other people. I found that all of our lenders were reasonable. And I think, at the end of the day, if you’re just straightforward, honest, and you show your business model and track record of always doing as you say, lenders will work with you.

We didn’t really get that much out of the restructuring and we paid our debt service the entire time. Deferral of the [furniture, fittings & equipment] reserve is meaningful to us, but it’s not that big of a deal to the bondholders.

Are you seeing any distressed opportunities you can take advantage of?

We took advantage of a bunch of distressed opportunities in April, May, June. We paid a lot of attention to the CMBS market and bought back some debt on our own deals; we try to be entrepreneurial in that sense. We bought some distressed debt on a condo project, One Thousand Museum, with Reuben Brothers. We did a couple of other small loan deals.

But, it’s funny, I think that this time around, it was un-American to [pursue] distress and everyone was working with one another. I also think that distressed deals that were out there were already distressed prior to the pandemic. What’s happening now is because of a fundamental shift, and not everyone is deep-pocketed enough to handle zero cash flow. But, there’s a lot of liquidity on the sidelines and it closed the gap on some distress.

How are you enjoying being back in Miami? 

I moved my whole family down here — my wife and two boys, and then we have a little girl on the way. Miami wasn’t really on the radar, but it’s been nostalgic for me and often people will ask, ‘Oh, are you Harry Mufson’s grandson?