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Miami Herald Business Monday MAY 3, 2015 Q&A with Ezra Katz on smart deals, real estate cycles and philanthropy Ezra Katz on April 28, 2015. | WALTER MICHOT MIAMI HERALD STAFF By Nicholas Nehamas [email protected] • The son of Holocaust survivors, Ezra Katz was born in Slovakia, graduated from Ohio State University with an engineering degree in 1971, and moved to Miami eight years later after working in residential construction management. In 1981, Katz launched Aztec Group, a real estate investment banking firm that specializes in arranging real estate deals. His first high-profile transaction was the sale of 13 high-rise apartment buildings, which he said was the largest commercial real estate deal in Miami at the time. “I put this deal together ‘the old-fashioned way,’ without computers,” Katz said. “We re-created all the rent rolls as well as financial projections through hard work.” In the 1990s, Katz launched Mayan Properties as a way to invest in projects as a principal with co-investors and diversify his business by geography and property type. Mayan now holds investments in more than 30 hotels and eight million square feet of office buildings, shopping centers, apartments and lands, Katz said, with most of the properties located east of Texas across the U.S. and Canada, as well as in South Florida. He now spends most of his time on Mayan’s investments but keeps a close eye on the brokerage business at Aztec. “I still love the art of the deal,” Katz said. Katz shared some of his experiences and views in an emailed conversation with the Miami Herald. Q: How did the financial crisis affect your business and how did you weather the storm? Were you surprised by how quickly Miami recovered? A: We have been opportunistic investors from day one, focusing on our exit strategy the day we close on each deal. Therefore, our asset base was primed for resale in 2005 and we made the decision to start liquidating in 2006. Mayan Properties sold a number of hotels and office buildings in the mid-2000s, pre-crash. Our exit from the market was consistent with our strategy of maximizing an asset’s value and having the discipline to exit according to plan. We were mostly quiet from 2009 to 2011 because we were uncomfortable with the direction of the economy. Aztec remained active in securing financing for investors who saw opportunity in the market, but I didn’t feel it was appropriate to take undue risk with my partners’ money at a time of so much uncertainty. We are not in the speculation business. Today there is a better sense of certainty in the market for the first time in years. This is renewed confidence among investors and that is creating demand for capital. The capital markets have responded aggressively to the demand for a variety of conventional and structured financing. All of these factors are spurring one of the strongest commercial real estate markets I’ve witnessed in many years. Q: What do you consider to be your biggest mistake as a businessman, and what did you learn from the experience? A: The most difficult decision has been identifying worthy operating partners. During the past 20 years, I’ve been blessed to call many people my partners, but I’ve encountered two who were both incompetent and dishonest. Either of those qualities is unacceptable; having both is a disaster. I’ve learned to avoid bad partners. Q: How does Mayan plan to invest its capital in 2015? A: Mayan will deploy over $200 million in equity investments in 2015 as we seek to deliver current cash flow within a diversified portfolio of hotels, office buildings, apartments and shopping centers. Our client base comprises high net worth individuals and family offices, which tend to be conservative when it comes to allocating their capital. They are typically geared to direct investments in assets that offer long-term cash flow. Q: How close are we to the end of the current real estate cycle? And what will happen when the music stops? A: The Miami market is working on 12 cylinders at every corner and within every sector of real state. I believe there are enough condo projects rising or planned to supply the market for several years — and that’s under the premise that no additional projects are launched. If condo buyers continue to put up substantial cash deposits, then lenders will continue to offer construction loans. Developers entering the market with new projects should take caution in evaluating future buyer demand. The key for developers, bankers and buyers is exercising a sense of “discipline” that accounts for realistic demand vs. supply. New condo developments launching now in hopes of selling a large volume of units at above-market prices are going to be hard-pressed to find buyers, especially since foreign currencies have lost so much value. Smaller-scale projects in neighborhoods with high barriers to entry are in the best position to succeed. Q: Miami leaders have a lot on their plate now, including traffic, sea-level rise, affordable housing, education and more. What do you feel should be their top priority? A: Finding solutions to traffic and infrastructure challenges should be at the top of our agenda because they have such a significant impact on our economy and quality of life. Our community’s population, particularly that of urban Miami, has grown exponentially and our infrastructure hasn’t kept up. This is an issue that impacts residents, businesses and visitors. We need to make incremental progress in the short term, while creating a long-term plan that looks at transit, mobility and regional connectivity holistically. Miami has to also tackle these issues with Broward and Palm Beach. We need to begin thinking of ourselves as a region, rather than a stand-alone city. Q: Your office has been in the Grove for 30 years, and you recently purchased a home there. How is the area changing and what is your view of the revival underway? A: The Grove has played a central role in my life during the past 30 years. I’ve lived here, had my office here and got married here. I remember the area’s heyday and watched its gradual decline as South Beach, Aventura and Doral emerged from obscurity. Smart developers are investing in the area because of its superior location, its pedestrian-friendly streets and high barriers to entry. Fortunately, the projects underway have been designed with great sensitivity to the neighborhood’s scale. Terra’s Grove at Grand Bay condominium is a good example. That project was zoned for over 400 units, but Terra Group only built 98 units. My wife and I purchased one of those condos because of the unique design and perceived quality of construction. I can see our unit from my office. We are so excited to move back to the Grove! Q: You have devoted your time and money to several charitable organizations, including the U.S. Holocaust Memorial Museum in Washington, D.C., the Greater Miami Jewish Federation and the Holocaust Memorial in Miami Beach. What does this philanthropic work mean to you and how do you feel about the state of Judaism in the U.S., Israel and the world today? A: I have been focused on Jewish philanthropy due to my history of having lost most of our family in the Holocaust and being the son of Holocaust survivors. I made a decision that allocating money alone is not acceptable. I consider myself to be a Jewish activist and have made a concerted effort to teach my children about our family’s history in order to share this difficult responsibility with them. I’m very concerned about the worldwide rise of anti-Semitism as well as the lack of activism among young Jews. Therefore, my philanthropic agenda will continue to focus on Jews and Israel. Our family’s philanthropic agenda has also included a variety of other organizations, including United Way, Teach for America, University of Miami and several other non-Jewish not-for-profits worthy of our contributions. EZRA KATZ Current position: Chairman, Aztec Group. Time in current post: 34 years. Born: Humenné, Slovakia, in 1948. Education: Bachelor of science in industrial engineering from Ohio State University, 1971. Wife and children: Tati, wife; Jessica, daughter; Jason, Joey, sons.