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Hotel Lawyers -- featured subjects and articles
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:

15 May 2017

Meet the Money®2017 wrapped up last week at the Hyatt Regency LAX, and looks to be one of our most successful years yet! More than 350 hotel industry leaders gathered to hear from 130+ speakers who gave their expert perspectives on the current hospitality market, the national and global economy, and where trends might take us as we move towards 2018.

The conference will return May 7-9, 2018–Watch www.MeetTheMoney.com for program and registration information.

In the meantime, you can download all the presentations the conference completed last week from the RESOURCE CENTER at www.Hotel.Lawyer.com, or individual presentations as listed below:

 2017 LIIC Top Ten. Mike Cahill, CEO and Founder of Hospitality Real Estate Counselors (HREC) rounds up LIIC’s annual member survey results. What markets should you avoid? Where are we in the hotel real estate cycle? Challenges and trends are identified in the LIIC Top Ten for the current year.

Hotels Values & Cap Rates. Suzanne Mellen, Senior Managing Director of HVS, provides valuable data on historical hotel sales from 2006-2017 (total dollar volume and price per key), hotel transaction volume (year-over-year and by quarter), most active markets for the past 3 years, hottest urban markets, most notable sales, and what is happening to hotel cap rates. CONTINUE READING →

Published on:

10 May 2017

Hotel Real Estate: Forecasting Clear Skies with Some Clouds and Slightly Cooling Temperatures

For well over a decade, the members of the hotel industry’s preeminent think tank, “LIIC – The Lodging Industry Investment Council,” are annually surveyed to develop a list of the major hotel investment opportunities and challenges for the coming year.  This exhaustive survey results in the LIIC Top Ten; a highly regarded profile of investment sentiment and attitudes for the lodging industry for the forthcoming 12 months. Altogether, the members of LIIC represent direct acquisition and disposition control of well over $40 billion of lodging real estate.

Members are highly active and have the pulse of the market, with 45% of LIIC hotel investors having successfully purchased a hotel in the last 12 months and an additional 16% having made offers but not been the winner.  Moreover, 76% plan to sell a hotel over the next 24 months.

The hospitality industry’s most influential investors, lenders, corporate real estate executives, REIT’s, public hotel companies, brokers and significant lodging equity sources are represented on the Council.  LIIC serves as the leading industry think tank for the lodging business (www.liic.org).

Mike Cahill, LIIC co-chairman, produced this year’s survey (www.mikecahill.com).  Mr. Cahill is CEO and Founder of HREC – Hospitality Real Estate Counselors, a leading international hotel and casino brokerage and advisory firm (16 offices nationwide) specializing in lodging property sales, debt financing, consulting, appraisals and litigation support (www.hrec.com).  Nate Shartar and Alexander Cammarata, Associates in HREC’s Denver office, assisted throughout the process.

2017 Top Ten LIIC Survey Results

  1. Hotel Real Estate: Forecasting Clear Skies with Some Clouds and Slightly Cooling Temperatures: Overall, the 2017 LIIC Survey is more positive than 2016 and starkly different than the peak year survey in 2015.  Responses reveal a calmness, compared with wide spread nervousness in April 2016.  Chinese investment is expected (36%) to slow slightly and Brexit’s impact on US hotels is considered slight.  Private Equity followed by Listed REITs are predicted to dominate the purchase of Upscale to Luxury hotels; while, Regional Owner/Operators are projected to dominate the purchase of Economy to Upper Midscale hotels.
  2. Movement in the Hotel Real Estate Cycle?: Most investors (68%) believe we are still in the extra innings of the current cycle which began in 2009; however, an astute, highly intelligent minority (32%) believe we have begun a new cycle.  Projections for the US economy are positive, with 60% forecasting GDP growth averaging greater than 2% over the next 24 months.
  3. Asset Pricing Bid/Ask Settles, Values Flat to Maybe Increasing: Over the next 12 months, 54% project that lodging real estate values will be flat in comparison to 2016.  However, a sizable group (36%) forecast a slight increase in values (up to 5%).  Favorite investment target, Upper Upscale lodging properties.
  4. 2017’s Greatest Threats to Hotel Investment?: The top three threats on the horizon:
    • New Lodging Supply: 90% of LIIC members cited new hotel supply as the current and dominant top investment concern.  Hypocritically, 81% are building new lodging assets.
    • Increasing Interest Rates: With interest rates increasing gradually up to 100bps over the next 24 months, sellers need to understand the impact on asset pricing for hotels they are looking to sell.
    • Government Mandated Minimum Wage Increases: Investors (28%; down from last year) are threatened by government mandated minimum wage increases and the corresponding impact on hotel operating costs (74% anticipate a gradual negative impact over the next five years).
  5. Hotel Transaction Market Continues Slight Cooling: 52% of responders forecast the total dollar volume of U.S. hotel transactions in calendar 2017 will be down relative to year-end 2016 and 22% believe volume will be flat.  Similarly, 46% believe the number of assets sold to be down; while, 32% anticipate the number of assets sold to be flat.
  6. Hotel Debt Available, Yet Less Favorable: Hotel investors are “debt leery” causing 56% to seek refinancing of existing debt over the coming year even though 52% believe the optimum refinance window closed in the last six months.  Owners have more concern with interest rate increases on senior debt than lender’s available leverage percentages.
  7. Lodging Development Marches Along: Investor attitude stays positive on the concept of building new lodging properties.  As to developing hotels, 66% of LIIC responds “yes, if you are selective about product and markets”.  Respondents are putting their money behind their votes, with 81% of relevant LIIC members having new hotels actively under development.
  8. Want to Buy a Hotel?  Quantity and Quality:  Quantity:  42% of investors believe that a “below average quantity” of hotels are available for purchase closely followed by 44% at “average quantity.”  Quality (desirability to purchase):  52% believe the quality is average and 28% suggest negatively “slightly worse than 2016”.
  9. Markets NOT to Invest in?:  LIIC members were asked which of the top 25 markets they “would not consider buying a hotel” in: Houston, TX (64%), Nashville, TN (32%), Detroit, MI (28%), New York, NY (28%), St. Louis, MO-IL (28%)Sleeper – where to buy?  New Orleans! Not one vote against recorded.
  10. Marriott and Starwood Merger?  If you own a Starwood branded hotel, 36% surprisingly believe the value of Starwood lodging investments have increased specifically due to the merger.  On the other hand, the primary concern (22%) stressing hotel owners is decreasing negotiating leverage with Mega Marriott going forward.

CONTINUE READING →

Published on:

08 May 2017

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

As of January 31, 2017, JMBM’s team has closed more than $1.5 billion of EB-5 financing and sourced more than half of that for our clients!

EB-5 is a proven means of financing development projects.

EB-5 financing is an important and viable source of construction financing for hotels, hotel enhanced mixed-use, and other development projects. Seven or eight 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 it is used by many institutional players including government entities such as port authorities, major hotel brands like Marriott and Hilton, and some of America’s most successful and well-respected companies, such as Great Wolf Resorts, 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 David Sudeck 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 provided to its clients?As of January 31, 2017, our team has closed more than $1.5 billion in EB-5 financing for our clients’ development projects, and we sourced more than half of that amount. CONTINUE READING →

Published on:

05 May 2017

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

EB-5 extended through September 30

Just after noon on Friday, May 5, 2017, President Donald Trump signed the Consolidated Appropriations Act, 2017. The new law approves $1.1 trillion in Federal appropriations through September 30, 2017.

One of the provisions of the bill extends the EB-5 Regional Center program without change through the same date.

Although the Consolidated Appropriations Act did not change any provisions of the EB-5 program, we expect further Congressional and regulatory efforts in the very near future.

As we said yesterday,

Industry leaders view this extension of the program as the necessary threshold to achieve a long-term legislative solution to the issues that have been raised about the EB-5 program before any regulatory changes are implemented and before the next sunset date of September 30, 2017.

We expect all stakeholders in the EB-5 business to be pushing very hard toward this end.

CONTINUE READING →

Published on:

04 May 2017

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

We are getting a lot of calls from our developer clients and friends asking about the status of the EB-5 Regional Center authorization that was about to sunset on May 5, 2017, along with appropriations for the Federal Government.

A “clean extension” for EB-5

Early on Monday morning, May 1, 2017, the House Appropriations Committee approved a $1.1 trillion budget to fund the government through September 30, 2017. That proposed bill includes a “clean extension “(i.e. no amendments) to the EB-5 Regional Center program through the same period.

On May 3, the House passed the spending bill, and on May 4, the Senate gave its approval. The bill now goes to President Trump who is expected to sign the new budget into law.

If expectations are met, the government shut down will be avoided and the EB-5 Regional Center Program will continue without interruption. CONTINUE READING →

Published on:

 

LOS ANGELES—The Meet the Money® 2017 conference will bring hospitality industry leaders together from May 8-10 in Los Angeles at the Hyatt Regency Hotel LAX. This marks the conference’s 27th year, where hotel owners, operators, developers, consultants, investors, brands, lenders and other capital providers will gather to get deals done and discuss and catch up on the latest issues and opportunities involving the hotel industry.

“This year’s conference is particularly important,” said Jim Butler, Chairman of JMBM’s Global Hospitality Group®. “The hospitality industry is at an interesting point in mid-2017. Intriguing opportunities will be available for the diligent and well-connected, but greater perils will also challenge investors. This conference will present many experts’ perspectives on what properties in which markets will thrive or perish. It is a great time to be an entrepreneur in the hotel industry.”

The theme this year is “Opportunity or Peril? Finding the right key to the right door.” Industry experts from top brands across the country will focus on the state of the industry and strategies that will aid in discovering opportunities and avoiding risks. Panelists will join discussions on successful development strategies, current capital markets, creative solutions for existing properties, foreign investment, and a range of other topics. The full conference program is now available online.

Since its inception in 1990, Meet the Money® has connected thousands of senior hotel financing experts, developers and hospitality insiders. Keynote speaker Richard K. Green, Ph.D., director of the University of Southern California Lusk Center for Real Estate, along with over 130 influential heavyweights in the industry have been assembled to provide insight on navigating the current market. Additional presentations will include a spotlight interview with Trump Hotel CEO Eric Danziger, and a CEO panel with top executives from Condor Hospitality Trust, Monday Properties, Interval International, CMB Regional Centers, and Aimbridge Hospitality. A full list of all conferences speakers can be found on the conference website.

About Meet the Money
For 27 years, Meet the Money® has provided a unique environment for forging relationships and gaining up-to-the-minute information about the world of hotel investment and finance. The conference is big enough to attract heavy hitters, but small enough to network with them. At Meet the Money®, there is time, atmosphere and availability to have meaningful meetings with deal-making potential. Register now at MeetTheMoney.com.

About Global Hospitality Group® of JMBM
The hospitality attorneys in the Global Hospitality Group® of Jeffer Mangels Butler & Mitchell LLP comprise the premier hospitality practice in a full-service law firm, and the most experienced legal and advisory team in the industry. Our team of hotel lawyers and business advisors has more than $71 billion in hotel transaction experience, involving more than 3,800 properties located around the globe, and providing one of the most extensive virtual data bases of market terms for deals and financings.

Published on:

1 April 2017

JMBM’s ADA Compliance and Defense team, led by my partner Marty Orlick, continues to help hotels and other businesses achieve compliance under the Americans With Disabilities Act (ADA), and is actively defending numerous ADA lawsuits brought against our clients.

As we predicted, more and more of these lawsuits allege that a company’s website and reservation system is not accessible to visually impaired customers. In his article below, Marty Orlick reports why a recent U.S. District Court decision may affect the future of ADA website litigation, and urges hoteliers to ensure their websites are accessible.

 

Judge Dismisses ADA Website Lawsuit
by
Martin H. Orlick, Chair, JMBM’s ADA Compliance & Defense Group

In September 2016, we published an alert that a group of plaintiff’s ADA lawyers had threatened a number of businesses – including hotels – with litigation claiming their websites failed to comply with “ADA Guidelines.”  (Read ADA Compliance & Defense Lawyer: ADA Website Accessibility Lawsuits Escalate.) These lawsuits have since been filed with greater frequency.

Since then, a number of threats have turned into lawsuits seeking injunctive relief (website accessibility), a multiple of $4,000 minimum statutory damages under California’s Unruh Civil Rights Act (per visit to the website or from being deterred from visiting the website), attorneys’ fees and litigation costs.

Years ago, the Department of Justice (“DOJ”) adopted rules requiring all federal agency websites to conform to the WCAG 2.0 A and AA Success Criteria as a means of providing accessible websites to persons who are blind, low vision, color blind or who suffer cognitive disabilities. In 2010, the DOJ issued a Notice Of Proposed Rulemaking (NOPR) stating that it intended to adopt formal ADA Guidelines for state and local government agencies to meet when designing websites. The DOJ intended to adopt the WCAG 2.0 A and AA Success Criteria for state and local government websites.  Justice then announced that it intended to adopt these same basic standards for private businesses’ websites.  But the DOJ withdrew its NOPR and has yet to issue final rules regarding web access standards for state and local agencies or private businesses.

ADA website lawsuit violates due process

Last week, in what is a ground breaking decision of particular importance to the hospitality industry, the U.S. District Court for the Central District of California threw out a serial plaintiff’s lawsuit which alleged that Domino’s Pizza’s website violated the Americans with Disabilities Act (ADA) and related California anti-discrimination laws by not conforming to the WCAG 2.0 A and AA Success Criteria. CONTINUE READING →

Published on:

22 March 2017

Unless Congress acts in time, a critical part of EB-5 financing will lapse on April 28, 2017

The Regional Center program was enacted in 1992 as a “pilot project.” Since then, it has been renewed or extended many times by Congress, with the current extension due to sunset April 28, 2017. Combined with some negative comments by a few foes of the program, some have begun to wonder out loud if the end of EB-5 financing is near. And, if Congress does not act soon, it would have a serious impact on the program.

What will likely happen if Congress lets the EB-5 program sunset on April 28

Most people involved with the EB-5 industry believe there is little chance the program will not be extended or made permanent. This “pilot program” has been renewed for more than 20 years, and in the last five years has provided hundreds of thousands of jobs for US citizens, and billions of dollars of vitally needed capital for both public and private facilities that would not otherwise have been feasible.

The breakthrough on resolution could come next week (the week of March 27)

Since President Trump’s inauguration, the Administration and Congress have been focused on transition matters, appointments and confirmations, and related issues. However, insiders now believe that by the last week of March, EB-5 industry groups will be able to meet with members of Congress and work through some reasonable resolution of all concerns. A new bill is likely to be introduced shortly thereafter. CONTINUE READING →

Published on:

The Lodging Industry Investment Council (LIIC) met in Los Angeles during the American Lodging Investment Summit 2017 and our friends from Hotel News Now (HNN) were on the scene.

Some of us were asked by HNN for our take on where the hospitality industry is headed in 2017 — including my friend and fellow LIIC board member, Mike Cahill, who will present the “LIIC Top Ten” hospitality issues of the year at the national hotel finance and investment conference, Meet the Money®, as he does every year.

To read my comments about why 2017 will be a year of change, as well as comments by my associate, Wei Deng, regarding the impact the possible depreciation of Chinese currency could have on the industry, see HNN’s coverage: LIIC: Hot takes on industry hot button issues.

I was also interviewed in the video accompanying the article, regarding predictions for M&A in 2017 (as were my colleagues Phil Ribolow of Deutsche Bank, Mike Cahill of Hospitality Real Estate Investors, Andrea Foster of Marcus Hotels, and Gary Gray 24/7Hotels). My comments in that video are as follows:

“It must have been about 20 years ago at one of our Meet The Money® conferences, an industry leader predicted that in the next few years there would be two hotel companies. I don’t remember which ones they were – I think it was Hilton and Marriott. Interestingly, the consolidation – the urge to merge – has been extremely strong. And while one can look at the brands and think that the smaller brands – a Hyatt, a Wyndham – might be more prone to being acquired. I’m not so sure that’s true. The scale of capital that is available really makes the entire hospitality industry subject to acquisition. The urge to merge is inevitable.” CONTINUE READING →

Published on:

1 February 2017

Theft of confidential data by hackers is a major threat to businesses worldwide and the hotel industry is no exception. Hoteliers remain vulnerable to hackers seeking confidential information such as guests’ credit card data and employees’ personal information. They are also vulnerable in other ways. In a recent hotel breach, the hackers did not go after confidential data, but rather sought a ransom payment after taking control of the hotel’s technology. My partner Bob Braun, senior member of JMBM’s Global Hospitality Group® and co-chair of JMBM’s Cybersecurity and Privacy Group, describes what happened, and shares what hotels can do in response to such threats.

Hotels and Ransomware — Something Special
by
Robert E. Braun

Last year, at the Global Hospitality Group’s Meet the Money™ Conference, I participated in a panel on Cybersecurity and we discussed how cybersecurity issues affect the hotel industry.  One of the comments was that hotels, more than most private industries, have to take into account the kind of physical harm that might be done by a hacker. We noted that not only are guest information systems targets, but also the life and safety systems – HVAC, elevators, electricity and so on.  We concluded that while financial theft could impact a hotel and its reputation, a hack of the physical structure of a business could put the hotel out of business.

Locked Out

Our discussion turned out to be prescient when, this week, Romantik Seehotel Jaegerwirt, in the Austrian Alps, had their systems frozen by hackers, which resulted in the complete shutdown of hotel computers.

The 111-year-old hotel had already been targeted by hackers twice.  This time, however, the hackers breached the key card system, made it impossible for guests to enter their rooms and prevented the front desk from reprogramming cards.

The hackers demanded €1500 in Bitcoin, promising that control of the key card system and room locks would be returned.  Management of the hotel, fully occupied at the beginning of the winter season, chose to pay the ransom, rather than attempt a solution that could have taken significant time and harmed their 180 guests. CONTINUE READING →