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Meet the Money® 2014

ADA defense and compliance

EB-5 financing

Workouts, bankruptcies & receiverships

Hotel Management Agreements

Hotel Franchise & License Agreements

Hotel industry trends

This is Jim Butler, author of www.HotelLawBlog.com and hotel lawyer. Please contact me at Jim Butler at jbutler@jmbm.com or 310.201.3526.

Published on:

16 August 2016

Is there a serious risk that EB-5 will expire September 30, 2016?

Anything is possible when Congress is in session, but none of the experts we talk to believe that the EB-5 program will be allowed to lapse.

As discussed below, certain key provisions of the EB-5 program dealing with regional centers will “sunset” or expire on September 30, 2016. And, as part of the effort to extend the regional center program or make it permanent, there are some proposals to modify potentially significant aspects of the EB-5 program.

No one should be complacent about Congressional “renewal”, but the industry fully expects the EB-5 program will be reauthorized on terms that maintain the viability of program. Some proposals are more or less attractive to certain affected parties, but we expect the final resolution to be satisfactory.

With Congress likely to act soon, should any developers start EB-5 financing now? YES!

Amidst the uncertainty of when and how the EB-5 renewal legislation will be finally resolved, some developers have decided to do nothing with the EB-5 financing opportunity until all the dust settles. Such timing is not certain.

Developers who want to take advantage of EB-5 funding should get started now

Many hope that Congress will act before September 30, 2016. Others think that with election-year turmoil, as it did last year in the budget stalemate, Congress may “kick the can down the road” with one or more interim extensions of the EB-5 program.

We believe the “wait and see” approach is a mistake for many developers — particularly those who are ready to start construction now. Here is why: CONTINUE READING →

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Tye Turman, Senior VP of Lodging Development at Marriott, speaks with David Sudeck, senior member of JMBM’s Global Hospitality Group® at JMBM’s 2016 Meet the Money® – the national hotel finance and investment conference. They discuss what’s in Marriott’s pipeline, PIPs, adaptive reuse, and Marriott’s brands, including Moxy and AC.

A transcript follows the video. See other videos in this series on the Jeffer Mangels YouTube channel.

David Sudeck: I’m at the 26th annual Meet the Money® Conference. I’m here with Tye Turman, Senior VP at Marriott, and I wanted to talk to you about your experience here at the conference so far. First of all, I wanted to see if you’ve ever attended before.

Tye Turman: Actually, this is my first time, David. I’ve really been looking forward to this, I’ve heard about Meet the Money® for many years. I’ve always had schedule conflicts and unfortunately couldn’t make it, so it’s a real honor to be here.

David Sudeck: We love the fact that it’s a small, intimate conference; we hope you are able to get some real activity from the conference, make some good connections. So, wanted to talk about 2016, where you think we are in the cycle. Obviously, Marriott has been in the news in a very big way and I’m sure a lot of what’s in the press you can’t speak to at all, so I’ll avoid those questions. But in terms of the market cycle, what sort of initiatives are you undertaking in 2016 versus 2015, and where do you think we are in the market cycle?

Tye Turman: It’s a question everyone’s asking right now, David. I get phone calls daily from franchisees and various owners asking me, “What’s next? Where are we?” Everyone’s crystal ball is a little bit different. They see the future just a little bit differently. From everything that we’re hearing right now and what we’re witnessing first hand – and my role is that I run the development group for the Western United States for Marriott select service and extended stay brands – we have noticed that the volume of deals that we’re doing is actually surpassing the pace of last year. Which is really good, because there has certainly been some hesitation in the market.

The things that we’re hearing most frequently from our owners is that financing is tightening down again, construction costs are through the roof – which not necessarily prohibits, but certainly limits, the ability to develop. And then thirdly, the cost of acquiring land is a concern because many owners are competing with multi-family developers in acquiring land. So I think that’s going to have a long-term slowing effect on things, but it has certainly not affected the volume of deals. What we’re seeing within existing hotels, right now Marriott’s pipeline – we just released our first quarter earnings report – we’ve got 275,000 rooms in our pipeline, 30,000 of which were just within the last quarter. RevPAR projections were not as strong as we had hoped for but, we finished globally at like 2.4% RevPAR growth. Internationally it was a little bit stronger – and when I say little bit, like by 2.6%.

David Sudeck: Internationally? Is that heavily focused on Asia, Europe? CONTINUE READING →

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Alice Gao, Senior VP of ICBC USA, speaks with Bob Braun, senior member of JMBM’s Global Hospitality Group® at JMBM’s 2016 Meet the Money® – the national hotel finance and investment conference. Alice explains the structure of ICBC USA, discusses interest rates, and Chinese immigrant investment in U.S. gateway cities.

A transcript follows the video. See other videos in this series on the Jeffer Mangels YouTube channel.

Bob Braun: I’m here with Alice Gao, who’s a Senior Vice President of ICBC USA. Alice, thank you very much for coming and spending a little time with us today.

Alice Gao: Thank you very much.

Bob Braun: Alice, I’d like to ask a few questions which I think you’re very suited to in your position with ICBC. One question I’d like to ask is, what kind of projects are the bank most interested in lending to these days? Are there things that attract you more than others, or are more interested in than others these days?

Alice Gao: Well, let me just start with a brief introduction of our bank. I’m very excited that as of December 2015, the bank continues to be ranked as the number one largest bank in the world by total assets of $3.6 trillion, and also as number one on tier one capital, about $215 billion. We are also ranked number one by net profit of $44 million. So, with that, in the U.S., we have four financial institutions. So, the four together provide a full array of products and services. The first financial institution is ICBC Financial Services: it’s a broker dealer of security services. And we also have ICBC Standard Bank, which is a financial market and commodity bank based in New York. We also have ICBC New York Branch, which is a wholesale bank of ICBC Group. And lastly we have ICBC USA, a Federal Charter full licensed bank, FDIC insured.

So, ICBC USA has thirteen branches and one service center. We have three branches in New York, ten branches in California, one service center in Seattle. Together with these four financial institutions, physical locations and e-banking platform, we offer not only traditional deposits and loan services, we also offer a variety of products such as cash management, trade finance, treasury and also foreign exchange. Our strongest point to distinguish us from others is we do offer variety of services of onshore and offshore renminbi products.

Bob Braun: So most of the lending that you would do on hotels is through ICBC?

Alice Gao: Most of the lending for hotels is through ICBC New York Branch and ICBC USA.

Bob Braun: And in terms of the type of lending you’re doing, does ICBC have any current priorities or any current trends that it sees? CONTINUE READING →

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Alan Reay, President of Atlas Hospitality Group, speaks with Robert Braun, senior member of JMBM’s Global Hospitality Group® at JMBM’s 2016 Meet the Money® – the national hotel finance and investment conference. They discuss the California hotel market including sales and purchases, pricing, RevPAR, financing, and the impact of the Marriott/Starwood merger and Airbnb.

A transcript follows the video. See other videos in this series on the Jeffer Mangels YouTube channel.

Bob Braun: I’m with Alan Reay of Atlas Hospitality. He’s the foremost hotel broker in California, I’d say. At least that’s what I tell my clients, and I’ve always been proved right. Alan, thanks very much for coming and talking to us today. I think you have your pulse on the market, certainly here in California, more than possibly anyone else. What do you see in the hotel market today? What kind of trends do you see?

Alan Reay: During the first quarter we’ve definitely seen a big drop off in sales in California. In the U.S., down 52%; in California, down 35%; that really has nothing to do with the economic fundamentals, because RevPARs are still increasing, profits are up and a lot of the numbers are positive throughout California. It has been a fundamental shift from a buyer’s sentiment in terms of how they’re looking at deals and how they’re pricing them. We had a lot of turmoil in the public markets, as you know, in the first few months of 2016, and a lot of REITs have pulled out of the market, and a lot of lenders have pulled out of the market. So that’s created a disconnect between what buyers and sellers expectations are on pricing, which in turn has created a big drop in hotel sales volume.

Bob Braun: Now do you think this creates an opportunity for people? Or is the lack of lending and the lack of interest something that’s just going to continue through the rest of the year?

Alan Reay: I think it’s going to create some very good opportunities. For people that have to sell, they’re going to have to reprice their assets in today’s market. And what we’re seeing is an increase in cap rates and, obviously, more money down on the larger transactions. So if you don’t have to sell in today’s market then you’re not going to sell – a bit similar to what we saw in 2009. Last year we saw almost 400 sales; in 2009 it was less than seventy. When we have a disconnect like this, either sellers have to reprice their properties or we’re not going to see transactions.

Bob Braun: You talked about a drop off. Was this something consistent in every segment of the market? Or are there still some parts of the market that are stronger, more significant than others? CONTINUE READING →

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Tom Corcoran, Chairman of the Board of FelCor Lodging Trust, speaks with David Sudeck, senior member of JMBM’s Global Hospitality Group® at JMBM’s 2016 Meet the Money® – the national hotel finance and investment conference. They discuss “rational debt,” redevelopment opportunities, and the evolution of FelCor.

A transcript follows the video. See other videos in this series on the Jeffer Mangels YouTube channel.

David Sudeck: I’m David Sudeck, I’m at the 26th annual Meet the Money® conference with Tom Corcoran, the founder of FelCor Lodging Trust. Thank you for joining us. You just got off your panel and you did a great job, so thank you for that. I wanted to hear about in this uncertain time, 2016, where you see us in the market at this point and how it may differ from 2015.

Tom Corcoran: Actually, I think it’s going to be a lot like ’15. I think ’16 and ’15 are going to be very similar. I think we’re going to continue to have positive RevPAR above the GDP and so I think it makes a lot of sense to me that the industry remains very strong; robust. There’s some clouds out there, people are trying to say there’s a storm coming, and I just don’t happen to believe there is. I think those clouds are artificially made up and aren’t really in the real world.

David Sudeck: My experience is some of our lender clients are pulling back in terms of the provisions, particularly of construction lending.

Tom Corcoran: Yeah, I think that’s probably good, I’m okay with that. When people go through getting nervous before things really are bad, it has the net effect of acting as a governor – which is why I call it a governor – because it kind of stops irrational lending. Most people believe supply is the worst enemy of the hotel industry and I would argue that it’s debt that creates the supply. The source, historically, of all the downturns has been where people have borrowed too much money – even in some of the worst cycles we’ve gone through – people had non-recourse, 100% financing. Then people can build hotels that make no rational, economic sense at all.

David Sudeck: So where do you see opportunities in this market given the lack of liquidity? I think that the number of hotel developers is going to shrink, supply will pull back to some extent. Do you see any specific opportunities in this marketplace? CONTINUE READING →

Published on:

 

Bill Blackham, President and CEO of Condor Hospitality Trust, speaks to Bob Braun, senior member of JMBM’s Global Hospitality Group® at JMBM’s 2016 Meet the Money® – the national hotel finance and investment conference. They discuss Condor’s transition from economy chain scale into select service, extended stay and limited service hotels,  RevPAR, and opportunities in the select service sector.

A transcript follows the video. See other videos in this series on the Jeffer Mangels YouTube channel.

Bob Braun: I’m with Bill Blackham of Condor Hospitality Trust. Bill, thanks very much for taking out the time to talk to us today. What are you currently working on? What’s Condor focused on these days?

Bill Blackham: Condor has been involved over the last year in a lot of different initiatives that involve the transition of the company from once being an economy chain scale-focused entity into a select service, extended stay and limited service hotel company, with a platform that is growing in that new investment strategy at the same time that we are divesting the old investment strategy hotels. Therefore, you have multiple things going on at the same time. Combined with a recent private placement of equity into the company with a new investor, it’s been a very busy time.

Bob Braun: So, what drove this shift from the economy (sector), up the ladder a little bit to the limited and select service?

Bill Blackham: I think that the potential for stock growth was far greater in the space that we’re now pursuing. One of the problems with the sector that the company had previously been in is that the average size hotel was very small. And in order to get to a very meaningful scale to justify being a public company, one would have to own four-, five-, six-hundred of those hotels, which is unwieldy from the standpoint of managing that platform.

I think that the platform that we’re going into also affords us the opportunity to have greater investor interest because it is a sector that continues to have above-industry growth in terms of demand, while at the same time is a space that has much higher margins than we are, as a company, traditionally in. So the higher margins combined with sort of a void in the space, the public company space of people that we’re going specifically after, the geographic markets that we’re pursuing, and the type of products that we’re pursuing really left an opportunity open to get highly accretive acquisitions.

Bob Braun: So this is an open space for you. Do you see yourself moving further? Do you see yourself ever developing into the full service area? CONTINUE READING →

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Jonathan Falik, CEO of JF Capital Advisors, speaks with David Sudeck, senior member of JMBM’s Global Hospitality Group® at JMBM’s 2016 Meet the Money® – the national hotel finance and investment conference. They discuss the current hotel market, the availability of capital, and what lenders and capital providers are looking for.

A transcript follows the video. See other videos in this series on the Jeffer Mangels YouTube channel.

David Sudeck: We’re at the 26th Annual Meet the Money Conference. I’m here with Jonathan Falik, CEO and Founder of JF Capital Advisors. Welcome.

Jonathan Falik: Thank you for having me.

David Sudeck: You’ve been a mainstay at Meet the Money® – we appreciate that, by the way.

Jonathan Falik: Well, it’s one of my favorite conferences.

David Sudeck: What’s the temperament like in terms of the marketplace?

Jonathan Falik: People are cautious. Most seem optimistic, but are cautious and are in a learning mode. Everyone’s trying to figure out who’s saying what and who’s thinking what – which is interesting because normally people in our industry think they know everything.

David Sudeck: What are you seeing in the marketplace in general? Let’s talk about the cycle. CONTINUE READING →

Published on:

 

Patrick Hogan, CEO of CMB Regional Centers, speaks with David Sudeck, senior member of JMBM’s Global Hospitality Group® at JMBM’s 2016 Meet the Money® – the national hotel finance and investment conference. They discuss the evolution of the EB-5 Immigrant Investment Visa Program, indirect jobs, completion guarantees, and taking care of the investor.

A transcript follows the video. See other videos in this series on the Jeffer Mangels YouTube channel.

David Sudeck: Hi, I’m David Sudeck, I’m here at the 26th annual Meet the Money® Conference with Pat Hogan, CEO of CMB Regional Centers. Welcome Pat. And thanks again for participating this year. You were on stage earlier on the CEO panel and you did a fantastic job.

Patrick Hogan: Well thank you, I’m pretty excited to be here. It’s an interesting group of people.

David Sudeck: EB-5 is hot right now. I was wondering if you could tell us a little bit about the roots of CMB, how things have changed from the 1990s to today, and what you see as your current platform.

Patrick Hogan: We started in 1994, before regional centers were ever involved.

The EB-5 program is actually a permanent program. Most people don’t know that because everybody does business with the regional center. But I started in 1997, getting my first regional center, and we actually got an approval in the year 2000. But as you know, fraud crept into that particular program and I just couldn’t take it anymore. It wasn’t really a business at that point in time. So I just said, “Okay, I quit, and until Congress can put some reforms through, I don’t want to do it anymore.”

David Sudeck: So you were pushing for regulation?

Patrick Hogan: Yes, even back then. So, fast forward to today – and we’ve been rocked with all kinds of scandals and things like that within EB-5 – which you would expect. Because if you go back to 2007 there were eleven regional centers, and maybe five of us doing something. And then to go to today where you have 800 regional centers – there’s bound to be some individuals that don’t have a clue.

David Sudeck: Do you have any sense as to how many of those 800 actually do business of any kind? CONTINUE READING →

Published on:

17 July 2016

New York EB-5 Investment Immigration Convention

More than 700 people are gathering the next two days in New York City for one of the largest EB-5 financing conferences in the country. We are proud to be a platinum sponsor of this program, and I am looking forward to my panel on how to finance hotel construction and development with EB-5.

Hosted by EB-5 Investors Magazine, this event will be held July 17-18, 2016 at the Sheraton Hotel in Times Square. The first day is comprised of three tracks of workshops and Monday is a full day of panels on EB-5 topics of current interest.

Dr. Arthur B. Laffer of Laffer Associates, and Mr. Charles Qi of the Beijing Entry and Exit Immigration Service Association will deliver keynote speeches, and attendees will benefit from timely legislative analysis on the EB-5 Regional Center Program extension. CONTINUE READING →

Published on:

13 June 2016

To maintain the confidentiality of hotel data, STR imposes certain restrictions on the hotels for which it will provide competitive set data. The Marriott-Starwood merger is shaking up the world of competitive sets with the result that many owners will need to revise the competitive sets specified in their hotel management agreements.

As Bob Braun explains in the article below, considering the need to identify appropriate hotels for new competitive sets, and negotiation of amendments to hotel management agreements, it would probably be wise to start now on this process.

 

STR Adopts New Competitive Set Guidelines – Impact on Owners

by
Bob Braun, Hotel Lawyer and Data Security Advisor

The importance of the competitive set

Many hotel management agreements contain performance test standards allowing an owner to terminate a management agreement if the hotel fails to meet specified guidelines, and most of those tests incorporate a “RevPAR Test” – whether the hotel’s revenue per available room is comparable with a set of competitive hotels, its “competitive set.” The RevPAR test typically allows an owner to terminate a management agreement if the hotel’s RevPAR fails to meet a specified percentage, or index, of the competitive set’s RevPAR. Competitive sets can also be used to determine incentive pay or for other measures of performance, as well as projections of potential performance.

The competitive set data is typically provided by a single source: STR, Inc. STR has established itself as a unique provider of supply, demand, and overall performance data for the hotel industry by collecting financial performance and other information from a vast number of hotels in the United States, and using that information to create anonymized measures of performance.

The STR competitive set allows parties to select a known group of comparable hotels and measure performance against that set without seeing their actual financial data. Spurred on by changes in the hotel brands –the Marriott – Starwood merger is the most recent and highest-profile example — STR announced that, effective January 1, 2017, it will impose a new set of guidelines for determining eligibility of competitive sets.

STR’s new guidelines

The new guidelines contain the following key elements:

  • No single property and no single brand can comprise more than 50 percent of the total room count, excluding the subject property and other properties from the same company as the subject.
  • No single company can account for more than 70 percent of the total participating room supply of a competitive set, excluding the rooms of the subject property and other properties from the same company as the subject.
  • Sets must include a total of four properties, excluding the subject, and a minimum of two companies, excluding the subject.

CONTINUE READING →