Hotel Law Blog

By Jim Butler and the Global Hospitality Group®
Hotel Lawyers | Authors of www.HotelLawBlog.com
31 August 2011

Hotel Lenders: Do you know how due diligence for hotel lending differs from due diligence for other commercial real estate lending? More expertise, more time, more resources.

We have seen far too many hotel lenders "who don't know what they don't know" when underwriting a hotel loan, but then get a very expensive education post foreclosure. The due diligence required in hotel lending is far more intensive than for any other kind of real estate lending and requires far more expertise. The article below by my partner Guy Maisnik gives a few examples.

If you would like a refresher as to why hotel lending is different from other kinds of real estate lending, you may want to refer to (see, Why hotel lending is different and 8 pitfalls of hotel lending and how to avoid them).

Please see the links at the end of this article for other articles in the "What every hotel lender needs to know" series.

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Posted In: Hotel Finance − Hotel Debt & Hotel Equity

By Jim Butler and the Global Hospitality Group®
Hotel Lawyers | Authors of www.HotelLawBlog.com
28 August 2011

Hotel Lawyer update on Hotel owners terminating hotel operators. This weekend has been a busy one for owners tired of dealing with their branded managers. The Turnberry Group dropped Fairmont on Sunday. See Hotel lawyers on terminating hotel operators: Turnberry Resort drops Fairmont flag.

And on the same day, the owners of the M Edition Waikiki seized control of their hotel from Marriott and installed Aqua Hotels as the new operator. See Marriott Loses Trendy Waikiki Hotel as Owner Changes Locks Overnight as reported by Alexandra Berzon and Kris Hudson of the Wall Street Journal.

Over the years we have spent a lot of time on the subject of getting a great hotel operator and terminating bad ones. Owner discontent seems to erupt when operators continue to deliver disappointing results and ignore owner's requests to drive the top line and manage costs. Then the operators wonder why owners are upset. See for example "Terminating hotel management agreements when things don't work" and "How to terminate a hotel management agreement when an operator really deserves it!"

Marriott loses control over half of its trendy Edition Chain in the pre dawn hours of Sunday morning.

The dispute between the owners of the M Edition Waikiki and Marriott has been a contentious and high profile piece of litigation. For the background of this dispute, an outline of what went wrong, and the contentions of the parties, see "M Waikiki Edition lawsuit against Marriott - What Marriott's General Counsel says".

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Posted In: How to Terminate Hotel Management Agreements

By Jim Butler and the Global Hospitality Group®
Hotel Lawyers | Authors of www.HotelLawBlog.com
28 August 2011

Hotel Lawyer update on Hotel owners terminating hotel operators. Over the years we have spent a lot of time on the subject of getting a great hotel operator and terminating bad ones. Owner discontent seems to erupt when operators continue to deliver disappointing results and ignore owner's requests to drive the top line and manage costs. Then the operators wonder why owners are upset. See for example "Terminating hotel management agreements when things don't work" and "How to terminate a hotel management agreement when an operator really deserves it!".

Turnberry Isle Resort back under founding family's management and control.

Over the weekend, the owners of the Turnberry Isle Hotel & Resort in Aventura, Florida took control of their hotel and terminated their relationship with Fairmont Hotels.

The resort was created by the Soffer family's Turnberry Associates in the 1970s, and reacquired in 2006. Turnberry recently completed a $150 million renovation. The hotel had been operated by the Fairmont chain until Sunday, August 28, 2011.

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Posted In: How to Terminate Hotel Management Agreements

By Jim Butler and the Global Hospitality Group®
Hotel Lawyers | Authors of www.HotelLawBlog.com
24 August 2011

Hotel Lenders: Will you control the revenues of your hotel after foreclosure? Are you sure? What could go wrong? A lot can go wrong with lender expectations in a hotel loan unless the hotel loan documents are prepared by knowledgeable hotel lending lawyers.

In today's blog post, Guy Maisnik highlights the importance of the hotel lender keeping control over revenues post foreclosure, and explains why it doesn't always happen.

If you would like a refresher as to why hotel lending is different from other kinds of real estate lending, you may want to refer to (see, Why hotel lending is different and 8 pitfalls of hotel lending and how to avoid them).

Please see the links at the end of this article for other articles in the "What every hotel lender needs to know" series.

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Posted In: Hotel Finance − Hotel Debt & Hotel Equity

By Jim Butler and the Global Hospitality Group®
Hotel Lawyers | Authors of www.HotelLawBlog.com
21 August 2011

One of the most read articles in the history of Hotel Law Blog is entitled: "
M Waikiki's Edition lawsuit against Marriott and Ian Schrager - an owner's HMA dispute with Marriott."

I have gotten a lot of compliments on the article from people saying that it helped them understand what was going on there. But a recent letter from Ed Ryan, Executive Vice President and General Counsel of Marriott International took quite a different tone.

Although I disagree with many of Ed's points, the letter is thoughtful and well written. Ed encouraged me to publish it so people could see the "other side" of this issue. And in the interest of airing another view, I have done just that.

Read Ed's letter below. Then read the blog again, and take a look at the complaint. Then you be the judge.

I look forward to hearing your thoughts.

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Posted In: Hotel Management Agreements , How to Terminate Hotel Management Agreements

By Jim Butler and the Global Hospitality Group®
Hotel Lawyers | Authors of www.HotelLawBlog.com
19 August 2011

Hotel Lawyer with more information on how to take advantage of EB-5 investment capital

Our recent blog on why Asian investors are targeting U.S. hotels for investment has generated a lot of interest -- and a flurry of questions -- from the hotel development community.

The EB-5 Immigrant Investment Visa program offers an alternative means of raising capital for hotel development projects in the U.S., and JMBM's Chinese Investment Group™ is available to help hotel developers access this source of financing.

As explained in an earlier article on how to use the EB-5 Immigrant Investor Visa Program for hotel financing, the EB-5 program is an immigrant investor visa category created in 1990 for foreign nationals who invest in a new commercial enterprise that will benefit the U.S. economy and create at least 10 full-time jobs.

In another article on the topic, Cathy Holmes detailed why hotel developers need to seek EB-5 financing through "regional centers", how to find a regional center for a hotel project, how to negotiate with a regional center, and whether a developer can establish its own regional center for a hotel development.

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Posted In: Buying and Selling a Hotel , Chinese Investment , EB-5 Financing , Hotel Development , Hotel Finance − Hotel Debt & Hotel Equity

By Jim Butler and the Global Hospitality Group®
Hotel Lawyers | Authors of www.HotelLawBlog.com
18 August 2011

Hotel Lenders: What should every hotel lender consider in the SNDA before making a hotel loan? Here's what to look for.

In today's blog, my partner Guy Maisnik discusses the importance of something most lenders do not seem to adequately understand (until it is too late) and which often ensnares the lender when the loan gets in trouble - the Subordination, Non-Disturbance and Attornment Agreement or "SNDA".

If you would like a refresher as to why hotel lending is different from other kinds of real estate lending, you may want to refer to (see, Why hotel lending is different and 8 pitfalls of hotel lending and how to avoid them).

Please see the links at the end of this article for other articles in the "What every hotel lender needs to know" series.

CONTINUE READING

Posted In: Hotel Finance − Hotel Debt & Hotel Equity

By Jim Butler and the Global Hospitality Group®
Hotel Lawyers | Authors of www.HotelLawBlog.com
17 August 2011

Tips from the Hotel Lending Lawyer: Hotel loan problems and hotel loan document issues are best dealt with at the loan origination. Do you know these fundamentals about your hotel loan documents dealing with hotel management agreements (HMAs) and hotel franchise agreements? There is a long list of things every hotel lender should take into account before making a loan so that it will be protected when a default occurs -- much less a foreclosure. But few considerations are as important as dealing with issues raised by HMAs and hotel franchises.

Over the years, we have counseled hotel developers, owners and lenders as they try to fix bad hotel deals and repair bad hotels loans. Often, their problems could have been avoided if experienced hotel advisors had reviewed the necessary documents with a practiced eye, connecting the dots and filling in the blanks before the loan was underwritten.

Hotel lending experience is the key

Lenders need hotel-specific experience -- not just real estate experience -- because, as my partner Guy Maisnik writes in his article below, "You don't know what you don't know." And what you don't know can cost you a bundle.

Because a hotel's operating business is inextricably intertwined with single-purpose real estate, the borrower's financial obligations are exceedingly complex. We have written other blogs about why hotel lending is different from other kinds of real estate lending, that you may want to read (see, Why hotel lending is different and 8 pitfalls of hotel lending and how to avoid them).

Guy has more than three decades experience in hotel and commercial real estate finance and has recently assisted 3 major lenders in revising and structuring their hotel lending programs and documentation, including their hotel construction lending. In this eye-opening series of articles, Guy discusses how hotel lenders often find unpleasant surprises with hotel loans when they don't get experienced hotel counsel to prepare their loan documents. And real estate lending experience is not hotel lending experience!

Please see the links at the end of this article for other articles in the "What every hotel lender needs to know" series.

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Posted In: Hotel Finance − Hotel Debt & Hotel Equity

By Jim Butler and the Global Hospitality Group®
Hotel Lawyers | Authors of www.HotelLawBlog.com
16 August 2011

Hotel Lawyer with what it all means: Family Suites Resorts v. Viacom International d/b/a MTV Networks -- a suit over branding

I was recently interviewed by Jason Freed of HotelNewsNow (a division of Smith Travel Research) about three high profile lawsuits in the hospitality industry.

In the third and final lawsuit we discussed, Family Suites Resorts v. Viacom International d/b/a MTV Networks, we discussed the Family Suites lawsuit. Family suites operates a Nickelodeon-themed hotel, and claims its licensing rights were breached when Viacom entered into an agreement with Marriott to franchise the Nickelodeon brand.

According to the complaint, Family Suites Resorts spent $168 million on its Nickelodeon-themed property -- money it would not have spent if guests could get the Nickelodeon hotel experience elsewhere. So what happened?

An industry built on intellectual property.

As Jason quotes me as saying in the article: "This is an industry that relies on intellectual property--that's what brands are." See, The 5 questions every owner should ask before selecting a hotel brand.

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Posted In: Hotel Franchise & License Agreements , Hotel Management Agreements

By Jim Butler and the Global Hospitality Group®
Hotel Lawyers | Authors of www.HotelLawBlog.com
15 August 2011

Hotel Lawyer on brokers, agents fiduciary duty and charges of trust betrayed as laid out in the high-profile lawsuit of Host Hotels & Resorts against Robert T. Koger (personally) and his brokerage firm Molinaro Koger, Inc.

I was recently interviewed by Jason Freed of HotelNewsNow (a division of Smith Travel Research) about three high profile lawsuits in the hospitality industry. One of these cases was Host Hotels & Resorts v. Robert T. Koger. In this litigation, Host Hotels & Resorts sued a number of defendants, including Rob Koger and his firm, Molinaro Koger, for breach of fiduciary duties, breach of contract, fraud and other serious claims.

Lawsuits between sellers and brokers are not particularly common in the hospitality industry. And lawsuits alleging fraud are even less common.

One of the reasons I enjoy working in the hospitality industry is the optimism, openness and collegiality that exists throughout the hospitality community. Developers, owners, operators, lenders, brokers, lawyers, consultants, advisors, trade media -- we all depend upon each other. Although I am a rigorous advocate for my client's position in negotiations, there is an understanding, including with those on the "other side", that we are working together for the success of making the deal or completing the project.

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Posted In: Outlook and Trends

By Jim Butler and the Global Hospitality Group®
Hotel Lawyers | Authors of www.HotelLawBlog.com
07 August 2011

Hotel Lawyer with what it all means: The M Waikiki's lawsuit seeking to terminate Marriott as its hotel operator for the Edition Waikiki, in Honolulu.

I was recently interviewed by Jason Freed of HotelNewsNow (a division of Smith Travel Research) about three high profile lawsuits in the hospitality industry.

The first case we discussed was the recent lawsuit filed by the owner of the 353-room Edition Waikiki against Marriott and Ian Schrager. As the hotel's owner, M Waikiki LLC asked the New York Supreme Court to terminate its 50-year, no-cut hotel management agreement (HMA) with Marriott on its $250 million Honolulu hotel and to award damages for misrepresentation and breach of contract.

This lawsuit raises issues we have covered extensively in the HMA Handbook and in many articles under the Topic of Hotel Management Agreements on www.HotelLawBlog.com, See, for example, "Hotel management agreement terminations -- Is there a better way?."

This is an interesting lawsuit, so first let's look at the background facts and then let's see what the claims and the implications are.

For a response from Marriott, please see "Hotel Lawyer with more on M Waikiki Edition lawsuit against Marriott - What Marriott's General Counsel says."

Click here to download a copy of the complaint.

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Posted In: Hotel Management Agreements , How to Terminate Hotel Management Agreements

By Jim Butler and the Global Hospitality Group®
Hotel Lawyers | Authors of www.HotelLawBlog.com
4 August 2011

Hotel Investment: Why Asian investors are targeting U.S. hotels for purchase and investment, and what could it mean for you?

This week I was interviewed by several media sources to talk about the explosion of Asian investment - and particularly Chinese investment - in U.S. hotels and real estate. Nadja Brandt at Bloomberg News was kind enough to quote me in one of her articles on the subject, and Gigi Stone, Bloomberg TV anchor, had me in the Bloomberg TV studios for a brief interview and even briefer video clip! (Yes, Mom, it's long enough that you can tell it's me and she does say nice things about our Global Hospitality Group®). Bloomberg TV also made a point of highlighting JMBM's Chinese Investment Group™ which was recently announced.

The Chinese Investment Group™ . . . provides a gateway for Chinese investment in the United States.

Nadja Brandt's article (Asian Buyers Target U.S. Hotels as Affluence Increases Travel), discusses the just-completed iconic purchase by Hong Kong billionaire Cheng Yu-tung of 5 luxury hotel properties, including the Carlyle Hotel in Manhattan, and Rosewood properties including The Mansion on Turtle Creek and The Crescent in Dallas, The Inn of the Anasazi in Santa Fe, and Little Dix Bay in the British Virgin Islands.

The Cheng family also owns the Beverly Wilshire in Beverly Hills and once owned a stake in the Four Seasons Hotel in New York.

Bloomberg TV also made a point of highlighting JMBM's Chinese Investment Group™

Bloomberg's coverage of Chinese (and broader Asian) investment in the U.S. has really been top drawer, so if you are interested in this subject you will want to follow it. And if you want to go beyond the Bloomberg article, read on about why Asian investment is focused on US hotels.

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Posted In: Chinese Investment , EB-5 Financing