30 October 2008
Please see “troubled hotel loans – workouts, bankruptcies & receiverships” for the latest articles on troubled hotels.
Advice from Hospitality Lawyer: Options and considerations in troubled hotel mortgage loans for lenders and borrowers.
When a hotel loan gets in trouble, a lender should immediately perform a Comprehensive Situation Analysis. (See Hospitality Lawyer – The “Comprehensive Situation Analysis” for troubled hotel loans and workouts). This is the foundation for making some of the most important decisions that the lender will face on what to do with the borrower and the loan. The borrower should also look at these considerations to formulate its strategy to accomplish its goals. So what are the alternatives for dealing with a troubled hotel loan, and what are the considerations each party has?
Lender and borrower alternatives for a troubled hotel loan
The alternatives for a lender with troubled hotel loan are:
- Do nothing (or sell the loan)
- Workout the loan
- Appoint a receiver
- Start foreclosure
- Bankruptcy proceedings
What are the lender and borrower considerations for each of these alternatives?
The matrix below is a cooperative effort with input from the entire JMBM team. The considerations of lender and borrower are summarized for each alternative listed above. Why would a lender or borrower prefer a particular alternative? When is it indicated? What are the thoughts or concerns that should be taken into account? They are all summarized in this matrix.
NOTE: You can enlarge/shrink or page through this 8-page document with the controls at the top of the frame.
View the matrix in the frame above or download the PDF by clicking here: Lender Alternatives for Troubled Hotel Loans This PDF file has limited privileges. Please email Jim Butler at email@example.com for a free password available for all clients and friends of the Firm.
Distressed hotel loans — Resource Library for hotel workouts, hotel bankruptcies, and hotel deeds in lieu of foreclosure
The hospitality lawyers at JMBM’s Global Hospitality Group have a great library of free resources on dealing with troubled hotel loans. Go to top of the home page at www.HotelLawBlog.com, click on the “HOTEL LAW TOPICS” tab, and then select “Workouts, Bankruptcies & Receiverships.”
Here are a few of the recent articles on troubled hotel loans and assets for your convenience:
How did we get here?
If you are interested in reviewing how the hotel industry can be shocked from boom to bust overnight, you may find these articles interesting:
Hospitality Lawyer: Fortunes will be made . . . or lost . . . in the wake of The Financial Bailout and the Panic of 2008. Hospitality Attorney with pearls from NYU, Part 5: Whither Lodging Demand, GDP and the Cost of Gasoline? What’s the price of gasoline have to do with the future of the lodging industry? Hotel Lawyer: As goes the economy, so goes the hospitality industry — the ineluctable elasticity of demand! “Hotel Attorney on Hotel Cap Rates. What’s happening to hotel cap rates, values and financing?”
To see how little it takes to turn a hotel loan upside down, see the discussions and examples in the Section entitled “Benefits and detriments of leverage, and the vicissitudes of changing cap rates and LTVs” in the “Fortunes will be made . . . or lost . . “ article.
JMBM’s Distressed Assets Expertise
JMBM’s Global Hospitality Group® includes an experienced Distressed Assets Team that mobilizes quickly to address the complex issues surrounding distressed hospitality properties and stalled developments. Whether it is a solution to a lender’s troubled loan or the response to a buyer’s opportunity, we work quickly to preserve value and increase cash flow.
Because hotels are special assets, with operating companies, numerous issues come into play in a workout or bankruptcy scenario. Because we have represented creditors, owners and investors in the hospitality arena for more than two decades, we do not need to “get up to speed” on the special issues.
Regardless of where we are in the market cycle, JMBM’s Distressed Assets Team is involved, day in and day out, in restructuring and working out deals that go sideways. Our experience — together with our knowledge of the current capital markets where distressed assets often include complex deal structures and securitized loans — allows us to bring creative and effective strategies to the table. When aggressive litigation is the best strategy, we are effective, rigorous advocates for our clients’ interests.
For information about how we can help, contact one of the senior members of the team, below.
This is Jim Butler, author of www.HotelLawBlog.com and hotel lawyer, signing off. We’ve done more than $50 billion of hotel transactions and more than 100 hotel mixed-used deals in the last 5 years alone. Who’s your hotel lawyer?
Our Perspective. We represent developers, owners and lenders. We have helped our clients as business and legal advisors on more than $50 billion of hotel transactions, involving more than 1,000 properties all over the world. For more information, please contact Jim Butler at firstname.lastname@example.org or 310.201.3526.
Jim Butler is one of the top hospitality attorneys in the world. GOOGLE “hotel lawyer” or “hotel mixed-use” or “condo hotel lawyer” and you will see why.
Jim devotes 100% of his practice to hospitality, representing hotel owners, developers and lenders. Jim leads JMBM’s Global Hospitality Group® — a team of 50 seasoned professionals with more than $50 billion of hotel transactional experience, involving more than 1,000 properties located around the globe. In the last 5 years alone, Jim and his team have assisted clients with more than 100 hotel mixed-use projects — frequently integrated with energizing lifestyle elements.
Jim and his team are more than “just” great hotel lawyers. They are also hospitality consultants and business advisors. They are deal makers. They can help find the right operator or capital provider. They know who to call and how to reach them.