Here in the Keys, it was reported that 80 employees have been let go.
The vice president of operations, Frank Rego, made the layoffs sound like they were more closely tied to their upcoming merger with Keys Hospitality Acquisition Corp. ( a "blank-check" company formed to acquire assets). Rego was quoted as saying: "We are reorganizing to get structured as we need to operate as a public company," he said. "There are certain ways a company has to act as a public entity. We need to get things in a way that will be accepted by shareholders."
But later in the same report, Rego seemed to be pointing to bigger problems in the real estate developer arena. He was quoted as saying, "It is a down market. Several developers across the country are going out of business," Rego said. "We need to make sure we can prosper through a down market so we're one of the companies that stay in business."
No doubt that the real estate market has become treacherous for developers. Widespread reports of overbuilding of condos and condo prices crashing in South Florida have scared and bankrupt some developers. Projects that failed to get pre-construction buyers have been cancelled or abandoned on the mainland. And here in Key West, the change is evident as well. Major condo-conversion projects, like the Atlantic Shores, Hampton Inn, and others have found that they will be better off as hotels - and have, as I have heard, cancelled plans to go "condotel".
Cay Clubs is now among the largest developers in the Florida Keys. The question that we should be asking: "Have they bitten off more than they can chew?. And what effects will it have on the Keys should Cay Clubs and it's new parent company become financially unstable?"
Cay Clubs, only recently formed in the past decade, is betting that people will continue to buy expensive second homes, boat slips, and condominiums. Plus, they recently acquired the Turtle Kraals, Half Shell, and A&B Lobster House restaurants.
Remember, during the go-go-go real estate craze of the past few years, hotels in Key West were being bought up, closed, and turned from transient rentals to condominiums. Now that buyers are nearly non-existent, what will happen to the hundreds of hotel rooms stuck in limbo? What if the whole enchilada goes belly up....will we be left holding the bag?
With most of the Cay Clubs holdings in Florida, aren't they particularly sensitive to market shocks? Since Florida is suffering the biggest declines in real estate, should we worry about one of the largest developers here in our backyard? Think about this: in only the past 2.5 years, Cay Clubs has acquired at least 8 Florida Keys locations.
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