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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:

30 March 2015

Meet the Money® National Hotel Finance & Investment Conference
May 4-6, 2015 in Los Angeles


The window of opportunity is open – choosing the right deals

LOS ANGELES–Meet the Money® 2015 will mark the 25th year that hotel owners, operators, developers, consultants, investors, brands, lenders and other capital providers convene in Los Angeles to explore opportunities for hotel development and deals.

“Industry fundamentals are strong, interest rates are low, debt and equity are flowing, and overseas investors are lining up to invest in hotels,” said Jim Butler, Chairman of JMBM’s Global Hospitality Group®. “The window of opportunity is wide open. The challenge now is to choose the right deals for you and your company.”

Meet the Money® 2015 will include presentations on how developers are using new financing sources, such as crowd funding and EB-5 financing, as part of the capital stack for new projects. Industry experts will share up-to-the minute information on valuation, buying, selling, repositioning, and financing hotels.

This year, Meet the Money® will offer a new Monday afternoon session—the Resort Development Workshop: Mixed Use and Shared Ownership. Hosted by Platinum Sponsor Interval International and the Global Hospitality Group®, the Resort Development Workshop will explore mixed-use and shared ownership with industry experts across a diverse mix of disciplines, focusing on the business models and opportunities for hoteliers, developers and investors. CONTINUE READING →

Published on:

18 March 2015

Click here for the latest articles on EB-5 Financing. 

 

The buzz continues on EB-5 financing for development projects.

EB-5 financing is an important and viable source of construction financing for hotels, hotel enhanced mixed-use, and other development projects. Five years ago, when JMBM started helping hotel developers with EB-5 financing, many worried about whether this is a legitimate and reliable financing source.

Now, after billions of dollars of development have been funded with EB-5, this type of financing is regarded as mainstream, and is used by many institutional players including government entities such as port authorities, major hotel brands like Marriott and Hilton, and some of the largest owners of hotels such as the Related Companies and Silverstein Properties.

As an active source of EB-5 funding for select developers, JMBM’s Global Hospitality Group® team has been busy too. We caught up with Jim Butler and Jonathan Bloch for an update on recent developments in this area as summarized in the Q and A below.

Q: How much EB-5 financing has JMBM sourced for its clients?

Our team has sourced more than $700 million of EB-5 funding for our developer clients.

  • In 2014, our team sourced and closed more than $200 million in EB-5 mezzanine loans for our clients.
  • To date in 2015, our team has sourced more than $475 million in EB-5 mezzanine loans for our clients which are signed deals expected to fund before the end of the year.
  • And there is about another $100 million in the pipeline that does not yet have a signed commitment.

Over the last 5 years we have worked on more than 60 EB-5 projects, primarily representing developers in getting EB-5 financing — projects all over the country, including high profile locations in California, New York, and Texas, but also in more bread-and-butter locations including Nebraska and Maryland.

Q: That is more than $700 million sourced by JMBM. What do you mean by “sourced”?

The “sourcing” is a process. What we do depends on the client. Typically, we help the client position and structure itself and the project for optimal EB-5 financing — presenting the best profile to get the fastest and most certain funding of the largest amount feasible. It includes identifying and introducing our client to one or more appropriate funding sources, negotiating a term sheet, and taking the deal through funding closing. CONTINUE READING →

Published on:

12 February 2015

Succession planning for the family-owned hospitality business: protecting your family and your business

The hospitality industry has been kind to families over the centuries, providing a good living for many, and significant wealth for others.

Whether your family owns a hotel management company or hotels — involved with one or two small properties or a large chain of hotels — the responsibilities of your family-owned business are as profound as the advantages.

Ensuring that the business continues to operate and provide for the family and others whose livelihood depends on it after one’s retirement or death is important. It is one of the critical responsibilities of the founders and senior management of the family-owned hotel business. Will family members want to keep running the business, and be prepared to do so? Will they want to sell the business? Keep the business and hire outside management?

Providing for continuity and certainty

Business detests uncertainty. It has a bad effect on all concerned, including business partners, employees, customers, vendors and other stakeholders. Succession planning helps eliminate unnecessary disruptions and uncertainties.

Recently, I was interviewed  by Brendan Manley, a contributor to STR’s Hotel News Now, about this issue.  In his article, Brendan made the point that “The timeline for a change in succession also is critical, because hotels are a 24/7 concern that require constant care and attention. Operators might hope for a quick, clean change in ownership in the event of an owner’s death, while grieving family members might desire a gradual change. Striking a balance between those two attitudes is yet another delicate tightrope one must walk.”

Addressing these kinds of difficult issues in advance, in a succession plan, is difficult to do. But many closely-held business owners embrace the responsibility and get help from experts who can walk them through various scenarios and outcomes.

CONTINUE READING →

Published on:

03 February, 2015
Click here for the latest articles on ADA Compliance & Defense.

New Resource: The ADA Compliance and Defense Guide

Download your free copy now!

The Global Hospitality Group® of Jeffer Mangels Butler & Mitchell LLP (JMBM) is pleased to announce the latest publication in our We Wrote the Book™ series : The ADA Compliance and Defense Guide, a practical handbook for owners and operators of hotels, restaurants, golf courses, spas and sports facilities, banks and other financial institutions, retail stores, shopping centers, theaters, sports arenas, and other places of “public accommodation,” as defined by the Americans with Disabilities Act (ADA).

Co-authored by JMBM’s Global Hospitality Group® Chairman, Jim Butler, and JMBM’s ADA Compliance and Defense Group Chairman, Martin H. “Marty” Orlick, the Guide reflects the complexities and ever-expanding requirements of the ADA. For a limited time, it is available for free download at www.HotelLawyer.com as described below.

About The ADA Compliance and Defense Guide, Understanding, preventing and defending claims and enforcement actions under the ADA

It will not surprise U.S. hotel owners and operators to learn that that business owners and operators in the U.S. have been subjected to more than 20,000 ADA civil lawsuits and DOJ enforcement actions since the ADA was enacted in 1991 – and most of those lawsuits were filed in the last 5 years. JMBM’s Global Hospitality Group® provides practical ADA compliance and defense advice for owners and operators. This book is an example and was written specifically to help owners and operators understand the challenges they face, encourage preventative compliance, and to prepare to defend ADA lawsuits.

Written in plain language, the Guide includes information on requirements for accessible websites, service animals, pool lifts, auxiliary aids, and the importance of developing company-wide ADA policies and procedures. Through numerous case studies, the Guide also addresses Department of Justice investigations and private plaintiff litigation. CONTINUE READING →

Published on:

28 January 2015

Click here for the latest articles on EB-5 Financing. 

This article was first published by EB5Investors.com on January 28, 2015.

 

Polis Bill Reform EB-5 Immigrant Investor Program

With the regional center program set to expire in September 2015, the EB-5 industry has been given new life in the form of the American Entrepreneurship and Investment Act of 2015. The Act was introduced today by Congressmen Jared Polis (CO-02) and Mark Amodei (NV-02), and is a follow-up to last year’s bill of the same name. The bill would make the regional center program permanent and allow for continued job creation and a more reliable stream of foreign capital.

“Our nation has always been at its strongest when we attracted the best and brightest minds to help build and invest in our economy,” said Rep. Polis. “The EB-5 visa program is an important tool that brings innovation and investment to the United States, and this bipartisan bill will improve and make permanent the program so that foreign investment and talent will continue to flow into our businesses, and strengthen our economy.”

“This bi-partisan, pro-investment, pro-growth and pro-jobs bill is one piece of the legislative solution to reform legal immigration,” said Rep. Amodei. “As stated in Article I, Section 8, Clause 4 of the Constitution, ‘The Congress shall have power to… establish a uniform rule of naturalization.’ That is a responsibility we owe the country to take seriously.”

The legislation makes several much-needed improvements, most notably making the regional center program permanent. It also creates new designations for Targeted Employment Areas, and leaves those designations up to the state’s discretion. CONTINUE READING →

Published on:

11 January 2015

Click here for the latest articles on EB-5 Financing. 

 

JMBM is a Platinum Sponsor of the EB-5 Investors Conference in Las Vegas on January 17, 2015 and will moderate and talk about EB-5 for hotel development

JMBM’s Global Hospitality Group® is pleased to be a Platinum sponsor of the upcoming EB-5 Investors Conference at the Wynn Encore Resort in Las Vegas on January 17, 2015. This is one of the premier conferences on this subject in the entire United States.

Partner, Jonathan Bloch and I will moderate and participate in a panel on Hotel Development – Jonathan as a speaker, and myself as a moderator. In addition, JMBM’s Global Hospitality Group® Vice Chairman, Guy Maisnik and Partner, David Sudeck will be attending to meet with potential clients and friend to help explore this opportunity.

Our panel on EB-5 for Hotel Development will be from 11:30 am to 12:30 pm on Saturday, January 17, 2015. We hope you will join us for our session and reach out to us if you would like to get together to explore the EB-5 financing opportunity. We are able to help qualified premier developers source low-cost EB-5 financing for their project.

Why EB-5 and this Conference?

EB-5 financing is being used widely by some of the largest owners of hotels and restaurants, and we will be discussing how developers are taking advantage of this capital. EB-5 financing has provided developers with low-cost, non-recourse, five to six year financing for construction and development of new projects.

Whether you are new to EB-5 financing or have used it in the past, this one-day conference has something for everyone. CONTINUE READING →

Published on:

01 January 2015

Click here for the latest articles on ADA Compliance & Defense.

ADA Issues on Websites: Department of Justice Poised to Adopt Accessible Website Standards

Since at least 2000, the U.S. Department of Justice (DOJ) has been advocating standardized website development and content to promote access to blind and low vision internet users.  In 2013, the DOJ withdrew its proposed Advanced Notice of Proposed Rule Making (ANPRM) which would have established standardized internet protocols by adopting the Web Content Accessibility Guidelines (WCAG) 2.0.

In 2006, we reported on the landmark case National Federation of the Blind v. Target Corporation, regarding “cyber accessibility” (a term we coined). Target was the first case in which any court ruled that the ADA applied to a retail website. With limited exception, the few courts that had addressed the subject uniformly held that the ADA only applied to brick and mortar architectural barriers, not to internet retail channels (Access Now, Inc. v. Southwest Airlines.)

Target argued that it complied with the ADA because its retail stores were fully compliant and that its website channel was not covered by the ADA standards.  The Court disagreed.  Plaintiffs’ class certification motion was granted.  Target paid a hefty sum and implemented WCAG standards to make its website accessible to blind and low vision customers.  The Target decision was followed with Rendon v. Valleycrest Productions Ltd.  Since Target, the DOJ and other agencies have imposed accessibility requirements for web content and services in Consent Decrees and Settlement Agreements with such industry leaders as Amazon.com, Netflix, H&R Block, Hilton International and others.

Website standards are imminent

The DOJ’s issuance of website standards is not a matter of “if”, but “when.” The regulations will “establish requirements for making goods, services, facilities, privileges, accommodations, or advantages” offered by state and local government agencies and businesses via the Internet, “specifically at sites on the World Wide Web,” accessible to persons with disabilities.

On November 25, 2014, the DOJ Civil Rights Division issued its Advance Notice of Proposed Rule Making entitled “Nondiscrimination on the Basis of Disability: Accessibility of Web Information and Services of State and Local Government Entities and Public Accommodations.”  These revised regulations, when adopted, will implement web site development standards which the DOJ has been working on for nearly a decade. CONTINUE READING →

Published on:

22 December 2014

Click here for the latest articles on Hotel Management Agreements.

A version of this article first appeared in Hotel Business Review in December 2014, and this article is reprinted with permission from www.hotelexecutive.com.

 

The shrinking terms of hotel management agreements

Better bargaining position for hotel owners on HMAs

by

Jim Butler and Mark S. Adams | Hotel Lawyers

The relationship between hotel owners and managers continues to evolve. Hotel management agreements historically were long-term. Fifty to sixty year terms were common. However, in the last few years, hotel owners have successfully negotiated shorter contract durations and other more favorable terms, even from the largest and most sought-after major brands. This trend is likely to continue and expand as brands realize that hotel owners have the power to terminate so-called no cut, long-term hotel management agreements, despite contrary provisions in the contract which courts now routinely ignore as a matter of public policy.

The Separation Of Hotel Ownership From Hotel Operations

Trade, pilgrimage, conquest, and adventure have been the driving forces of travel since ancient times. For more than 5,000 years, accommodations for these travelers were provided by inns or monasteries. These lodging facilities were typically owned and operated by the same persons. That ownership pattern still exists today, particularly among mom-and-pop operations or small chains, but more and more, there is a separation of hotel ownership and hotel management.

This trend first gained traction when Kemmons Wilson started the first hotel franchising of Holiday Inns in the 1950s, and picked up momentum in the next couple of decades when hotel operators decided to move hotel real estate off their balance sheets with sale-leaseback transactions, and when hotel investors bought hotels and elected to lease their hotels to professional hotel operators. The separation of ownership and management continued and became the prevalent structure as hotel management agreements were developed in the 1970s and proliferated in the 1980s, 1990s and 2000s, particularly for larger, higher-end hotel properties.

But in the last ten or 15 years the franchise model has become the dominant one, at least by number of branded rooms, and particularly for the rapidly expanded extended stay and select service segments of the industry. Under this model, ownership is separate from branding, and usually a professional (unbranded) hotel management company is a surrogate for the brand.

Ultimately, the separation of ownership and management brought about by this evolution meant that the traditional hotel companies focused more on finding more owners of hotel real estate that they could brand and manage, and the owners of hotel real estate (lacking hotel brand or management capacity) focused on collecting rents or looking to their brand and operator to optimize profits. In other words, the concept of a hotel being owned by one entity and operated by another became a preferred model, whether under a hotel lease, hotel management agreement or a franchise.

Since the 1990s, when some estimate that 60% of the hotel rooms in the U.S. were unbranded, more owners have elected to brand their hotels to access the professional management, finaceability, marketing power and resources of the brands. Today, unbranded hotel rooms probably comprise less than 20% of the hotel rooms in the U.S. This massive shift to the brands further reinforced the separation of hotel ownership from hotel branding and management.

The separation has been facilitated by the fact that hotel guests do not particularly care who owns the title to the hotel real estate as long as the hotel’s physical facilities and service levels meet their expectations and are predictable, satisfactory, clean and safe. Branding was one way to provide assurances of consistency and meeting minimum brand standards. In this evolving dynamic, brands focused on operations, brand standards, and system expansion.  They were less capital-constrained because owners now provide the bulk of capital to build and maintain hotel real estate and related facilities.

The Hotel Management Agreement (“HMA”)

The HMA is one of the clearest separations of ownership and operation. A branded HMA with one of the traditional hotel management companies is typically a long-term agreement between the owner and operator under which the operator is delegated virtual control over the operations of the hotel. The principal provisions in an HMA are, as follows: CONTINUE READING →

Published on:

06 December 2014

Click here for the latest articles on EB-5 Financing. 

 

JMBM is sourcing low-cost mezzanine capital for new construction through EB-5 financing for its top developer-clients.

To qualify for this program, the borrower must be an experienced developer with a superb track record, a superior reputation and a great project. If you don’t meet those threshold requirements, then don’t read any further, because this program does not apply to you.

If you are still reading, the question is: “Can you benefit from mezzanine financing with an all-in cost to you of approximately 6 – 7% per annum?”

If so, you may want to look into JMBM’s “preferred” EB-5 financing program which is summarized below.

Highlights of JMBM’s Preferred EB-5 Financing Program for new construction & development

  Financing type Mezzanine debt or preferred equity
  Cost 6 – 7% per annum, all-in cost to the developer
  Loan size $20 million – $200+ million
  Term 5 – 6 years
  Portion of the capital stack 30 – 40% of the total project cost (excluding land)

Exactly what can JMBM do to help me with EB-5 financing for my development project?

Client confidentiality precludes us from listing clients and projects we have assisted with this program, but suffice it to say that some of the best known names in the business are tapping into this funding source to fill out their capital stack at a favorable cost. And we have helped some of the biggest and highest profile players.

In 2014, we represented clients in identifying, obtaining and closing more than $200 million of EB-5 funding, and as of December 2014, we have commitments for more than $300 million in the pipeline for 2015.

We specialize in representing developers and projects that we believe can qualify for “preferred” status. This concept is discussed in great detail in this article: “Hotel development financing: How to win the race for EB-5 capital.”

For developers and projects that qualify for “preferred” status, we provide business and legal advice to guide the developer through the entire capital raising process. This includes validating that the developer can qualify for the favorable financing and actually sourcing the capital. Here is a more complete list of how we can usually assist: CONTINUE READING →

Published on:

28 November, 2014
Click here for the latest articles on Condo Hotels

Condo hotels: Don’t forget the secret sauce!

by

Jim Butler, Bob Braun and Guy Maisnik
Condo Hotel Lawyers

Condo hotels are back in vogue as “securities”

Developers particularly like the “new model” where condo hotel investments are offered as a “securities” using the new SEC Rule 506(c) for private placements with public solicitation.

Unfortunately, in their enthusiasm for this new model– which is well deserved – many developers will create dysfunctional structures that will be difficult or impossible to correct once they are put in place. These issues can all be avoided with an experienced team of experts who know and understand condo hotels.

What is right about this “new model”?

Condo hotels make sense in many situations. (See Condominium Hotels are hot! What is a Condo Hotel?) They can be a great financing device for developers, particularly at the luxury and high-end spectrum of hotel development. The “new model” of selling condo hotels as securities will clearly be the way to go in most situations. SEC Rule 506(c) is the key to this approach. (See: The “new breed” of condominium hotels — Key to financing new hotel development? Selling condo hotels as “securities” under new SEC Rule 506(c) . . .)

So what’s the problem?

With the right team of experienced experts, there is no problem. But some people don’t recognize the legal and business complexity of a condo hotel. Every mixed-use project introduces new dimensions of issues for development, design and operation. And a condo hotel adds an entirely new dimension of issues related to hotel operations, condo hotel operations, integration of the project components, design of the rental program and terms of participation by condo owners in that program. Who owns what? Who pays for what? Who gets to use what? How are these terms implemented in CC&Rs, HOA articles and bylaws, rental agreements, maintenance agreements, and the like? CONTINUE READING →