Buying and Selling a Hotel

March 7, 2013

How to Buy a Hotel Handbook -- Hotel Lawyers Announce New Book Release

by the JMBM Global Hospitality Group®

By Jim Butler and the Global Hospitality Group®
Hotel Lawyers | Authors of www.HotelLawBlog.com
8 March 2013

JMBM's Global Hospitality Group® announces publication of the How to Buy a Hotel Handbook.

The Global Hospitality Group® of Jeffer Mangels Butler & Mitchell LLP (JMBM) today announced the release of the How to Buy a Hotel Handbook, third in the "We Wrote the Book™" series of handbooks published by the Group's hotel lawyers.

Jim Butler is the Chairman of JMBM's Global Hospitality Group®. The How to Buy a Hotel Handbook is based on the experience Jim's team has gained from more than $60 billion of hotel transactions involving more than 1,300 hotels all over the world. The Handbook provides a detailed overview of the hotel acquisition process, a thorough due diligence checklist, and informative articles that address some of the most important questions that arise when buying or selling a hotel.

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February 21, 2013

Hotel industry outlook for the next several years bodes well for hotel investment now

by the JMBM Global Hospitality Group®

By Jim Butler and the Global Hospitality Group®
Hotel Lawyers | Authors of www.HotelLawBlog.com
21 February 2013

Hotel Lawyers with Lodging Industry assessment: Demand is strong, supply is weak. RevPAR is healthy. What's not to like?

We continue to receive calls from hotel owners, developers, investors, lenders, and members of the media asking, "What is the hospitality investment outlook for 2013 and beyond?"

There is a growing optimism among industry veterans and many of them are revitalizing acquisition (and a few development) projects. The level of activity has kicked up a notch or two.

One thing that everyone likes: barring unforeseen events, the stage is set for continuing improvement in hotel industry fundamentals and hotel valuations for at least 5 years - through 2017.

This presents a very attractive backdrop for investors, and experienced investors are already putting their plans in motion.

1. Fundamentals: What the numbers say

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February 20, 2013

A Detailed Overview of the Hotel Acquisition Process (30-page booklet)

by the JMBM Global Hospitality Group®

By Jim Butler and the Global Hospitality Group®
Hotel Lawyers | Authors of www.HotelLawBlog.com
20 February 2014

Hotel Lawyer with some great information for our friends who want to know more about how to buy a hotel.

Bruce Baltin and I are very excited to announce the release of a publication that has been in the works for many years (see below). As most of you know, Bruce Baltin is Senior Vice President of PKF Consulting. He has been a long-time friend, and great resource for help on anything involving the hotel industry.

The name of our just-released publication is:

How to Buy a Hotel:
A Detailed Overview of the Hotel Acquisition Process

As the title suggests, this publication is an "overview." However, at almost 30 pages, it is quite a detailed overview of the entire hotel acquisition process.

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February 17, 2013

So you think you want to buy a hotel? Well, NOW is probably the time to do it!

by the JMBM Global Hospitality Group®

By Jim Butler and the Global Hospitality Group®
Hotel Lawyers | Authors of www.HotelLawBlog.com
17 February 2014

Hotel Lawyer on buying hotels

Our hotel lawyers spend a big part of their time helping clients identify and vet attractive hotel acquisition targets, and then get them under contract, run a thorough (but fast) due diligence, arrange financing and execute on the purchase. Often there is a lot of follow up work in repositioning the property or cleaning up some old problems.

But one of the perennial questions we hear from people is, "Is this a good time to buy a hotel?"

A little more than 2 years ago, my partner Guy Maisnik wrote an article on this very subject. It was called "So you think you want to buy a hotel?" That article has been one of our best-read pieces on Hotel Law Blog, and similar questions keep bouncing around. So we persuaded Guy to write an update, which continuing improvements in the hotel industry forced him to rename: "NOW is a great time to buy a hotel (and not a bad time to sell)".

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February 8, 2013

HOW TO BUY A HOTEL: Hotel Acquisition Checklist

by the JMBM Global Hospitality Group®

By Jim Butler and the Global Hospitality Group®
Hotel Lawyers | Authors of www.HotelLawBlog.com
8 February 2013

Buying a hotel? Why use a checklist?

Checklists are a great way to keep track of things when a lot of work needs to be coordinated among a lot of people.

Buying a hotel is usually a complex process with a lot of moving parts. Just keeping track of all the key people involved can be challenging in a fast-moving deal. And because a hotel involves both special purpose real estate and an operating business, there are many details requiring attention to successfully evaluate and transfer the hotel.

That's why the hotel lawyers in JMBM's Global Hospitality Group® usually start every hotel acquisition or hotel investment transaction by customizing a generic form of checklist to fit the specific transaction at hand. By clicking the link below you view or download one of the generic forms of hotel acquisition checklist that we often use as a starting point in preparing a customized checklist for each unique transaction.

The customized checklist helps us manage the acquisition or investment process, keep all the participants coordinated, and press forward to meet urgent milestones and deadlines.

[Read on to see how you can get your own free copy of our checklist . . .]

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January 10, 2013

Can I use the EB-5 Visa Program for financing hotel acquisition and renovation?

by the JMBM Global Hospitality Group®

By Jim Butler and the Global Hospitality Group®
Hotel Lawyers | Authors of www.HotelLawBlog.com
10 January 2013

Hotel Lawyer with answers to your questions about using EB-5 financing to buy a hotel or renovate it.

EB-5 has been very popular in the last few years for hotel development because there is still very little traditional financing available, and the EB-5 financing market has provided a much needed source of new financing to hotel developers around the country. As one of the most experienced firms in the country on matters involving both hotels and the use of EB-5 financing, we receive frequent inquiries from hotel purchasers asking if they can use EB-5 financing for the acquisition of existing hotels, in addition to the construction of new hotels or new facilities at existing hotels (e.g. a new hotel tower, a spa, or a restaurant).

So I asked my partner Catherine Holmes to put together, in a Q & A format, the most frequently asked questions on this topic. And here it is.


Can I use the EB-5 Visa Program for financing
hotel acquisition and renovation?

by
Catherine DeBono Holmes | Hotel Lawyer


QUESTION: Can I use EB-5 financing to buy an existing, operating hotel?

ANSWER: Generally, NO. An EB-5 investment must create a minimum of 10 NEW jobs for each investor. Jobs that already exit at a hotel that is open and operating when a buyer purchases the hotel are not considered new jobs. Therefore, for most purchases of an existing and operating hotel, EB-5 financing is not available as a source of funds for the purchase. There are, however, a few exceptions to that general rule, which we will discuss below.


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January 9, 2013

Due diligence tips for your next hotel acquisition

by the JMBM Global Hospitality Group®

By Jim Butler and the Global Hospitality Group®
Hotel Lawyers | Authors of www.HotelLawBlog.com
9 January 2013

Hotel Lawyer with the due diligence wakeup call.

As an introduction to today's article on due diligence, I would like to reprint a portion of my blog from December 31, 2008:

Bernard L. Madoff -- Maybe the Madoff debacle provides the quintessential anecdote. In what is clearly the largest Ponzi scheme in history -- probably involving $50 billion -- one man seduced the elite of the elite in the financial world. Who would think that Henry Kaufman, former Chief Economist of Salomon Bros. would be hoodwinked by a Ponzi scheme for several million?

And how did respected institutions like BNP Paribas, Royal Bank of Scotland and Nomura Holdings get tagged for around $500 million each? Or HSBC and other professional investment firms for more than $1 billion each?

The answer to these questions is pretty simple: It was a fundamental failure to perform due diligence.

I think one commentator at dealbreaker.com recently summed up the syndrome best that became an international epidemic. It was his answer to the question of how someone could trust their entire fortune to Madoff. The answer?

Goldman did due diligence in 2001
["no we didn't", "yes you did"]
and gave them a pass.

That kind of sums it all up. No one wanted to say that the emperor had no clothes. No one wanted to do all the due diligence when it seemed like someone else must be doing it. Everyone just "assumed" that it must be OK. Who needs due diligence anyway?

You do (on every hotel acquisition)! Here are some tips.


Due diligence tips for
your next hotel acquisition

by
Catherine DeBono Holmes | Hotel Lawyer

What is due diligence?

Particularly in the context of a hotel acquisition, "due diligence" generally refers to the investigation conducted by a potential buyer of the hotel that is the target of the acquisition. The investigation covers both the physical asset (i.e. the hotel structures, parking, systems, equipment, inventories) as well as the operating business conducted at the hotel facility, and the relevant markets and environment.

The purpose of the investor's due diligence is to understand and evaluate the potential investment in the hotel. It is the analytic review of the real and personal property, the business operations and potential of the specific hotel. This effort all seeks to validate the investor's reasons for buying the hotel and to avoid surprises after the purchase has closed.

Perhaps the most significant element in the buyer's calculation of a bid or purchase price is the analysis of the potential earnings to be derived from the hotel. To develop the proposed acquisition price, the buyer must make assumptions as to future market conditions and the hotel's performance within that market. These assumptions will be reflected in a discounted cash flow on stabilized operating projections. Thus, a preliminary business plan which reflects assumptions as to physical facilities and condition, management, affiliation and other factors must be developed in order to assess the potential acquisition realistically.

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December 13, 2012

Buying a hotel? Financing a hotel? 10 things every borrower should know. (part 2)

by the JMBM Global Hospitality Group®

By Jim Butler and the Global Hospitality Group®
Hotel Lawyers | Authors of www.HotelLawBlog.com
13 December 2012

Financing or refinancing a hotel. Some issues every borrower should understand. As we said in introducing part 1 of this article, most hotel buyers will want financing. Some of the big REITs or other cash rich players will buy for all cash and then find financing at their leisure. That gives them an advantage in bidding on hot properties. But most buyers will want financing to pay for their acquisition.

Either way, there are some things your mother may not have told you, but as a buyer (and a borrower) in a hotel purchase, you really should know these 10 things that my partner, hotel lawyer Jeffrey Steiner, lays out for us in his article.

Because of the length of this article, it is presented in 2 parts. Here is part 2.


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December 8, 2012

Buying a hotel? Financing a hotel? 10 things every borrower should know. (part 1)

by the JMBM Global Hospitality Group®

By Jim Butler and the Global Hospitality Group®
Hotel Lawyers | Authors of www.HotelLawBlog.com
9 December 2012

Buying hotels is in vogue right now. But financing hotel purchases has some twists every borrower should understand. The industry fundamentals continue to go from good to better, and values are increasingly favorable compared to alternative investments. Many think that this is the time to jump in, before it is too late.

Most hotel buyers will want financing. Some of the big REITs or other cash rich players will buy for all cash and then find financing at their leisure. That gives them an advantage in bidding on hot properties. But most buyers will want financing to pay for their acquisition.

Either way, there are some things your mother may not have told you, but as a buyer (and a borrower) in a hotel purchase, you really should know these 10 things that my partner, hotel lawyer Jeffrey Steiner, lays out for us in his article.

Because of the length of this article, it is presented in 2 parts. Here is part 1.


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November 9, 2012

The hotel purchase and sale agreement -- What is the value of the seller's representations and warranties to a hotel buyer?

by the JMBM Global Hospitality Group®

By Jim Butler and the Global Hospitality Group®
Hotel Lawyers | Authors of www.HotelLawBlog.com
9 November 2012

Representations and warranties in the documentation of a hotel purchase and sale agreement (or agreement for purchase and sale of any type of hospitality property): What is the value of the seller's representations and warranties? When does it matter?.

Hotels, restaurants, resorts, vacation ownership projects, spas, golf courses and other similar hospitality properties are different than most real estate. They involve operating businesses that are integrally intertwined with special purpose real estate.

So the documentation to buy or sell such a property (and business) needs to be different than that used for other commercial real estate. One of the areas that is most apparent is in the seller's representation and warranties.

The article below is by hotel and timeshare lawyer David Sudeck, a senior member of JMBM's Global Hospitality Group®, and someone very experienced in the purchase and sale of hotels, restaurants, resorts, vacation ownership projects, spas, golf courses and other similar hospitality properties. In a recent article, David wrote about representations and warranties in a purchase and sale agreement -- what they are, what areas they cover, and what you want to get in a typical deal.

In this article, he writes about the value of these representations and warranties, hurdles to enforcing them and common terms used today.

This article is one of a series of insights that will be published initially as articles on the Hotel Law Blog at www.HotelLawyer.com and then they will be assembled into the HOW TO BUY A HOTEL handbook for our "We wrote the book™" series, much like the HMA Handbook and the Lenders Handbook for Troubled Hotels (see Resource Center at HotelLawyer.com for free copies).

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