Articles Posted in Hotel Development

Published on:

16 June 2015

Don Li, head of Asia Investment for Interstate Hotels, speaks in the video below about what drives Chinese investment in U.S. assets, why an understanding of language and cultural issues is important, and what types of hotels foreign investors are looking for.

Don sat down with David Sudeck, a senior partner in the JMBM Global Hospitality Group®, as part of our video interview series on hotel finance and investment opportunities in 2015.

A transcript follows the video.

Don Li discusses Chinese investment in U.S. hotels - Meet the Money®


David Sudeck: I’m David Sudeck. I’m a partner with JMBM’s Global Hospitality Group®. We’re here at the 2015 Meet the Money® Conference which is the 25th Annual Meet the Money® Conference. Thank you for joining us. I’m here with Don Li, the head of Asia Investment for Interstate Hotels.

Don Li: Yes. Thank you. CONTINUE READING →

Published on:

15 June 2015

Bill Blackham, President and CEO of Supertel Hospitality, speaks in the video below about new supply and assets coming to the marketplace for sale, changing guest expectations across different segments, and financing for new development.

Bill spoke with Bob Braun, a senior partner in the JMBM Global Hospitality Group®, as part of our video interview series on hotel finance and investment opportunities in 2015.

A transcript follows the video.

Bill Blackham discusses new hotel supply and assets for sale - Meet the Money®


Bob Braun: I’m Bob Braun, I am a partner at Jeffer, Mangels Butler and Mitchell. I’m part of the Global Hospitality Group®. I’m here at Meet the Money® 2015 for our 25th Anniversary, and I’m talking with Bill Blackham, who is the President and CEO of Supertel Hospitality. Bill, it’s good to have you here.

Bill Blackham: Thank you Bob, it’s nice to see you again. CONTINUE READING →

Published on:

12 June 2015

Elizabeth Braman, Chief Production Officer at Realty Mogul, discusses crowdfunding for hospitality real estate projects and the benefits to investors in the following video.

Elizabeth spoke with David Sudeck, a senior partner in the JMBM Global Hospitality Group®, as part of our video interview series on hotel finance and investment opportunities in 2015.

A transcript is below the video.

Elizabeth Braman discusses financing hospitality deals through crowd funding - Meet the Money®


David Sudeck: I’m David Sudeck. I’m with Jeffer Mangels Global Hospitality Group®. We’re here at the 25th Annual Meet the Money® Conference. I’m here with Elizabeth Braman, Chief Production Officer at Realty Mogul. Welcome.

Elizabeth Braman: Thank you. CONTINUE READING →

Published on:

Editor’s update: As of June 30, 2016, JMBM’s team has closed more than $1 billion of EB-5 financing for our clients!

updates to blog originally 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 7 – 8% per annum, all-in cost to the developer
  Loan size $10 million – $200+ million
  Term 5 – 6 years
  Portion of the capital stack 25 – 35% 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.

JMBM has closed more than $1 billion (sourcing more than $700 million) of EB-5 financing for development projects.

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:

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:

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 →

Published on:

4 October 2014

After so many years of being off everyone’s screen, Los Angeles has suddenly become one of the hottest markets for real estate investment. Roger Vincent’s article of October 4, 2014, in the Los Angeles Times provides some of the latest and most exciting detail about how the “smart money” in New York now sees Los Angeles is a great place to buy real estate. See “Downtown L.A. real estate is drawing N.Y. investors’ interest.”

The transformation of Los Angeles to a “real city” where people live, work, and play has taken decades. The city has lagged behind many other gateway cities and its real property values have languished relative to other major markets. But the renaissance of DTLA is real. See “Hotel Lawyer in Los Angeles: Why does it seem like everyone wants to build or buy a hotel in downtown LA? It’s the “Renaissance of DTLA,” silly!

And the new dynamics have changed international preferences for real estate investment.

Big changes in the past few years

Noting that downtown Los Angeles (DTLA) was “disdained” by Wall Street for real estate investment until lately, the Times article cites a 23% increase in the dollar volume of real estate purchased by New York-based investors in 2014 compared to 2013. CONTINUE READING →

Published on:

7 September 2014

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

 

EB-5 Visas and China “Retrogression” – What’s it all about?

by

Jim Butler and Jonathan Bloch
Partners, Jeffer Mangels Butler & Mitchell LLP

In the past, when China exceeded its 7% allocation of US Immigrant Investor Visas (EB-5 visas), Chinese applicants were permitted to take advantage of unused EB-5 visas allotted to other countries. But as of the last week of August 2014, the US State Department decided that the issuance of new EB-5 visas to Chinese applicants will be frozen or “retrogress” (move backward) until October 1, 2014, when the new fiscal year starts.

At that time, a new visa quota of 10,000 EB-5 visas (for all countries) will become available for the next fiscal year through September 30, 2015. China will again be allotted only 7% of these visas but most experts expect that Chinese investors will be permitted to access visas unused by other countries in accordance with practice over the past 3 years. This means that the 10,000 visa cut-off date likely will be reached much earlier in the fiscal year ending September 30, 2015, and this may significantly affect fundraising in 2014 and 2015.

EB-5 Visas and China “Retrogression” – What it means to you

If you have a new hotel development in the pipeline and you are on the fence about EB-5 financing, now is the time to act!

Why should this latest development in EB-5 financing concern you — a mere 5 week “freeze” on the issuance of EB-5 investment visas for China? If you want to use EB-5 financing as part of your capital stack for a project in 2015, it should concern you plenty for the following reasons:

  • China has been the dominant source of EB-5 capital for the last 3 years — more than a staggering 70% of EB-5 visa applications.
  • The freeze will only affect immigrants filing I-526 applications who are born in Mainland China. Of course, over time, other countries may fill any shortfall of investors from Mainland China but that may take 2-3 years or longer to develop the EB-5 infrastructure that makes foreigners aware of the program, motivates them to immigrate to the US and provides  EB-5 “capital delivery” system (marketing agents, immigration attorneys and the like) that can match China.
  • Anything that delays, retrogresses, or threatens the certainty of EB-5 financing from China creates uncertainty that is bad for all participants in the EB-5 financing world — the Chinese investors, US developers, and the communities that benefit from the realization of new projects, new jobs for US citizens, and economic stimulus.
  • If the EB-5 issues are not fixed quickly, an irreplaceable source of financing could be lost for US developers, communities may lose the benefit of major new projects (from hotels to conference centers and port facilities), Americans will forfeit hundreds of thousands of new jobs each year, and we will lose a critical source of highly-educated, wealthy immigrant talent as America faces a critical labor shortage of skilled workers in the near future.

Based on our experience of assisting developers with EB-5 financing for more than 60 projects, we are confident that there are both short term and longer term solutions to these problems which are discussed at the end of this article. But first, we need to recap the background and setting for the EB-5 program. CONTINUE READING →

Published on:

4 August 2014

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

 

Frequently Asked Questions about EB-5 project financing
for new hotel development

by

Jim Butler and Jonathan Bloch
Partners, Jeffer Mangels Butler & Mitchell LLP

 

Why is there so much buzz about EB-5 financing?

In the last five years, EB-5 financing has become extremely popular in development circles and is being widely used by mainstream, institutional players including government entities such as port authorities, major hotel brands like Marriott and Hilton, and some of the largest owners of hotels and restaurants. EB-5 financing has provided low-cost, non-recourse, five to six year term financing for construction and development of new projects and offers a number of advantages to developers.

What is EB-5?

EB-5 is a provision in the United States immigration laws. It is the fifth “Employment Based” immigration provision providing expedited visa processing (hence “EB-5”). The program is a win-win-win arrangement giving wealthy immigrants the opportunity to earn a “fast-track” for a US green card if they make an investment of $500,000 or $1 million, and create a minimum of at least 10 permanent US jobs. In return, communities get the benefit of economic stimulation created by this investment and the new jobs. And developers get a valuable source of financing for new projects that is otherwise more difficult to obtain.

Is EB-5 funding available for new development and new construction?

Because foreign investor money must create NEW US jobs, construction and development projects are the normal target of EB-5 financing investment. Although the law does not restrict the nature of the investment to real estate, foreign investors have demonstrated a clear preference for real estate-related projects, particularly hotels, restaurants and resorts. EB-5 financing can also be used to add new facilities to existing ones, such as a new tower of hotel rooms, a spa, a restaurant or nightclub. And, in limited circumstances, EB-5 financing can be used to rescue a bankrupt or failing business, but this exception is difficult to use. CONTINUE READING →