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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:

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 →

Published on:

11 November 2014

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

As the Chinese economy continues to become more important globally, we are seeing a shift in Asian investment in the United States, particularly in California. Chinese investors will become even more active and influential over the next 10 years, and will continue adapting to Western business practices while retaining a critical sensitivity to their Chinese roots and the demographics of the Chinese population in the United States.

The ineluctable demographics

China’s demographics are inescapable. It has the largest land mass in Asia and third largest in the world. It’s the most populous nation, with more than 1.3 billion people. And by some measures, China is on track to replace the U.S. as the largest economy in the world by December 2014.

As the Chinese economy has exploded, so has the number of individual Chinese millionaires, billionaires and state- and privately-owned companies with huge cash reserves to invest outside China. Additionally, a large rising middle class now finds itself with money to travel internationally. Over the past five years, Chinese tourism in the U.S. has tripled–and is expected to increase significantly in the next 10 years.

During this same period, Chinese foreign investment has expanded dramatically, with the U.S. as a favored target. We’ve written extensively about the popularity and success about the EB-5 program in China, but it represents only a drop in the bucket, both in terms of immigration–the EB-5 program provides less than 1% of total immigrant visas each year–and in investment. Chinese foreign direct investment in the U.S. since 2000 now totals approximately $40 billion, and it has grown from a mere $58 million in 2000 to about $14 billion in 2013.

The Chinese investors of today are much shrewder than only a year or two ago. Increasingly, they are the largest banks, construction companies, insurance companies and pension funds in the world, who have virtually unlimited resources–and who find U.S. real estate and technologies to be “cheap.” These investors have learned that the most experienced advisors are essential to avoid the mistakes some of their predecessors made.

This situation creates great opportunities for mutually beneficial relationships and profit opportunities, particularly in the hospitality industry. What are some of those opportunities? CONTINUE READING →

Published on:

07 November 2014

Click here for the latest articles on ADA


ADA Lawyer: FedEx sued for failure to provide
effective auxiliary aids and services for hearing and speech impaired
employees and job applicants

by

Marty Orlick | ADA Compliance & Defense Lawyer

Effective communication with blind, low vision, deaf, hard-of-hearing, speech impaired and cognitively challenged employees, potential employees, customers and guests is one of the fundamental tenets of the Americans with Disabilities Act of 1990 (“ADA”). For nearly 25 years, the ADA has been the most sweeping civil rights legislation designed to provide persons with disabilities full and equal access to public accommodations, employment and potential employment.

The DOJ . . . and private litigants have expanded litigation against companies who fail to provide a wide variety of auxiliary aids and services to effectively communicate with guests, customers, employees and job applicants. FedEx is the latest highest profile lawsuit.

In its latest effort to enforce the ADA’s effective communication requirements, the Equal Employment Opportunity Commission (“EEOC”) filed a lawsuit in a Baltimore federal court against FedEx, charging the overnight delivery giant with failing to provide basic auxiliary aids and services to effectively communicate with its deaf, hard-of-hearing and speech impaired employees and job applicants.

The suit accuses FedEx of not providing Qualified American Sign Language interpreters, Communications Access Realtime Translation (“CART”) services or closed captioned training videos during new hire orientation or staff and safety meetings to its employees and job applicants in violation of the ADA’s requirement that businesses provide such auxiliary aids and services. CONTINUE READING →

Published on:

05 November 2014
Click here for the latest articles on Condo Hotels

High end hotel development in 2015

Almost every developer of a high end or luxury hotel in 2015 will at least consider using the condo hotel approach as a financing technique for new development, conversion or adaptive reuse projects.

Anyone evaluating a condo hotel structure needs to know, that with recent changes in the law, there are now two different approaches available:

(1) Non-Security Approach — This is the traditional approach used for almost every condo hotel offering for the last 50 years. It requires that the offering avoid characterization as involving a “security. ” The article below (Using condo hotels for financing new hotel development: The traditional condo hotel structures as “non-securities”) describes this approach. It explains the original formula for condo hotels and, although published in 2005, it continues to provide accurate guidance as to what developers will have to do if they want to avoid treating the condo hotel units as securities.

(2) Security Approach (as a private placement) — The new approach, resulting from the recent change in SEC Rule 506(c), now makes if feasible for most developers to offer condo hotels in private placements to accredited investors with mandatory rental programs and other features that render them “securities.” (see Condo hotel revolution and resurgence: Why developers are using “new breed” of condo hotels for financing.)

We think that most developers will now take advantage of the second approach under the SEC’s new Rule 506(c). They will treat their offerings as private placements of investment contract securities, and avoid all the challenges they otherwise face in avoiding securities status under the traditional condo hotel approach. But look at both approaches and you be the judge!

CONTINUE READING →

Published on:

04 November 2014

Click here for the latest articles on Meet the Money® and here for Hotel Finance

 

Hotel finance experts and industry leaders
coming to your screen on “Meet the Money® TV”

The hotel finance lawyers in JMBM’s Global Hospitality Group® are pleased to announce the launch of Meet the Money® TV, featuring some of the hospitality industry leaders who attended Meet the Money®,  the national hotel finance and investment conference that takes place every May in Los Angeles.

On the Meet the Money® TV, you can:

  • See what our experts had to say about the current hospitality market.
  • Hear what they predict as future trends in the hospitality market.
  • Meet some of the people of Meet the Money®, including:

Donald Trump Jr. (The Trump Organization)
Robert Palleschi (Hilton Worldwide)
Stephen Rushmore (HVS)
Rob Stiles ( RobertDouglas)
Sam Winterbottom (Newmark Grubb Knight Frank)
Suzanne Mellen (HVS)
Geoff Davis ( HREC Investment Advisors)
Greg Hartmann (JJL)
Leah Murphy (HVS) CONTINUE READING →

Published on:

01 November 2014

Click here for the latest articles on Condo Hotels

What is a Condominium Hotel (or Condo Hotel)?

Definition of a real estate legacy

by

Jim Butler, Bob Braun and Guy Maisnik
Condo Hotel Lawyers

A rebirth of the condo hotel phenomenon

Condominium hotels (or “condo hotels” as they are commonly called) are back in the news again. It seems like every high-end or luxury hotel development is at least considering using the condo hotel approach. The renewed interest is fueled by recovery of residential real estate markets, high construction costs for high end hotel rooms, and the recent change in SEC Rule 506(c) that has completely changed the “securities” dynamics on condo hotels. (On this latter issue, see “The “new breed” of condo hotels — Key to financing new hotel development? Selling condo hotels as “securities” under new SEC Rule 506(c) . . .“)

There are many important issues to discuss about condo hotels – whether they make sense, whether to structure them as real estate or securities, what regime structure best ensures a sound hotel operation, who owns what and who pays for what, and much more. But the first question many people ask, is “What is a condo hotel?”

What is a condo hotel?

Condo hotels enjoyed their first wave of popularity in the United States in the 1970s and 1980s. And the term “condo hotel” is often applied (or misapplied) to a wide variety of real estate structures.

The Condo Hotel Lawyers in JMBM’s Global Hospitality Group® think of condo hotels in the following terms, and condo hotel veterans generally agree:

What is a condo hotel?

Definition: A condo hotel is a hotel where some or all the rooms have been legally transformed into condominium units which are sold to purchasers, and where it is intended that the condominium units will be part of the hotel’s rooms inventory to be rented to the public and operated by the hotel management.

CONTINUE READING →