Hotel Finance − Hotel Debt & Hotel Equity

June 18, 2013

EB-5 Financing: Use of stabilized hotel revenues for determining job creation from new hotel development.

by the JMBM Global Hospitality Group®

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


Hotel Lawyers on EB-5 issues.One of the most critical elements in structuring an EB-5 offering to finance a hotel development is making sure the project will generate enough direct and indirect jobs. Because more than 90% of the EB-5 visas are at the $500,000 investment level, that means a developer needs 10 jobs for every $500,000 of EB-5 investment. And most EB-5 investors would like to see a safety margin in case the project does not perform quite as well as hoped, so maybe you need 12 jobs for every $500,000. At that rate you need 240 jobs to support a $10 million EB-5 investment. [If this is not familiar territory for you, see the list of articles below.]

In calculating the number of jobs created, one important question is: When do you measure the hotel's economic performance levels for job creation? The USCIS has approved economic models for calculating indirect job creation that use the revenues of hotel operation as one of the indicators of indirect job creation. And it makes a big difference if you run your calculations as the hotel is just beginning to ramp up operations or whether you can use the stabilized operating results.

That's the issue Catherine Holmes and Victor Shum take on today. Catherine and Victor are two of our EB-5 experts who:

  • Advise foreign investors on how to make sound investments in the US
  • Help developers structure their projects and investment opportunities to fit EB-5 and foreign investment profiles
  • Advise investors on how to form EB-5 regional centers and structure deals with developers and compliance matters

EB-5 financing for hotel development:

Use of stabilized hotel revenues for determining
job creation from new hotel development

by
Catherine DeBono Holmes and Victor T. Shum


USCIS has challenged EB-5 financing for hotel projects that rely on stabilized revenues as the basis for determining job creation.

Since 2012, the U.S. Citizenship and Immigration Services (USCIS) has issued multiple Requests for Evidence (RFE) challenging the validity and reasonableness of economic job creation models for hotel projects that rely on the revenues anticipated to be generated after the second or third year of hotel operation, instead of the revenues generated in the first or second years of hotel operation. In the hotel industry, a new hotel's future value is based on its anticipated "stabilized revenues," meaning revenues anticipated after the first two or three years of hotel operation.

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May 13, 2013

JMBM's Meet the Money® in the Wall Street Journal. Conference panelists discuss financing new hotel construction.

by the JMBM Global Hospitality Group®

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

Meet the Money® made the news again this year, with an article on the Wall Street Journal "Developments" blog. Written by Kris Hudson, the article discusses the return of hotel construction, what types of financing are available, and which markets will be able to support new hotels.

Meet the Money® speakers Marty Collins of Gatehouse Capital, Anne Hampton of Wells Fargo Bank Hospitality Finance, Alison Cumberland and Abid Gilani of Marriott International, Kevin Mahoney of Stonebridge Companies and Paul Novak at Whitman Peterson Capital Partners were quoted in the story.

Conference speakers highlighted the CMBS market, gateway city locations, and upper-midscale hotels developments as factors that might help push construction financing in 2013, although some noted that lending standards are still strict and that many markets may not have a demand for more rooms.

If you haven't read the article yet, you can find it here: Lenders Checking In? Hoteliers Say Construction Lending Is Reviving.

You can more great information from Meet the Money® 2013 at www.HotelLawyer.com on our RESOURCE CENTER, under "Hotel Industry Presentations."

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May 11, 2013

Meet the Money® 2013 -- Mood of the hotel industry and Conference Presentations

by the JMBM Global Hospitality Group®

www.MeetTheMoney.comBy Jim Butler and the Global Hospitality Group®
Hotel Lawyers | Authors of www.HotelLawBlog.com
11 May 2013

Meet the Money® is one of the best places in the country for meeting the Who's Who of the hotel world, getting financing and transactions done and catching up on the latest strategies and approaches. This year's conference was held at the Sheraton LAX, May 6-8, 2013 and was attended by approximately 350 hotel industry leaders. Here's a quick take on the mood of the conference and some information about

Mood of the hotel industry: optimism and sustainability of recovery

JMBM wrapped up its 23rd annual hotel conference this week amidst the strongest optimism for the hotel industry that hotel experts have seen for six years. The consensus was there is a lot of blue sky ahead. Some think the good times will only last for a couple of years, but many see a good run for at least 5 years!

Everyone at Meet the Money® seemed to be fairly comfortable that the recovery has significant sustainability, because the debt and equity markets have not gotten too frothy, and new supply has been very restrained.

Mark Woodworth of PKF summarized it well after presenting industry fundamentals by saying: "It is a great time to be in the hotel business!"

And Vail Brown gave the STR forecast that the outlook of continuing improvements is "Steady as she goes."

Greg Hartmann of JLL sounded a slightly more cautious note. He agrees that everything looks pretty good for the next couple of years, but questions how long it can last, and suggests that investors might consider selling in the next year and a half to two years.

What inning are we in? Almost every panel gave its views, with the biggest consensus being that we are in the 4th or 5th inning -- still early in the ballgame. John Alderson of Westfield thinks that the shopping center owners now getting active in adding hotels to their malls are way behind the rest of the industry (2nd inning?) and are likely to have their games continue as they implement strategic plans.

Hotel Industry Presentations from Meet the Money® 2013

Meet the Money® 2013 was buzzing with action and great information. We have decided to release some of the presentations for free download. Select presentations from Meet the Money® 2013 (described below) and are now available at www.HotelLawyer.com. Click on "RESOURCE CENTER" and then "Hotel Industry Presentations."

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May 9, 2013

EB-5 Alert: California moves to make EB-5 financing more competitive in the state -- changes rules on TEA designation

by the JMBM Global Hospitality Group®

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

Hotel Lawyers on EB-5 issues.The California governor's office has just taken action that will make California much more competitive with New York and other states in seeking foreign investment capital to create jobs and facilitate construction financing for hotels and other projects.

Here is the latest from Catherine Holmes and Victor Shum, two of our EB-5 experts who:

  • Advise foreign investors on how to make sound investments in the US
  • Help developers structure their projects and investment opportunities to fit EB-5 and foreign investment profiles
  • Advise investors on how to form EB-5 regional centers and structure deals with developers and compliance matters

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May 1, 2013

Meet the Money® 2013 online registration ends Friday. Don't miss this year's exciting edition of the hotel industry's finance conference.

by the JMBM Global Hospitality Group®

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

Meet the Money® 2013 is next week! Online registration ends this Friday, May 3, 2013 at 5 pm.

It is hard to believe but our 23rd annual Meet the Money® conference is less than a week away -- May 6 to 8, 2013 at the Sheraton LAX.

We have an exciting program with the top providers and consumers of debt, equity and other pieces of the capital stack. We also have top industry leaders speaking and attending, plenty of opportunities for networking and deal making, and the best conference food and snacks in the industry.

Hot topics include all the latest on WHO is providing hotel financing and HOW the deals are being done -- from small deals to big deals. Presenters are all active in providing capital or finding the best sources of it.

In addition to all the latest on hotel debt and equity, there will be some great panels on:

  • State of the Hotel Industry -- industry fundamentals, capital markets,
    financing and market values, cap rates, transaction data and trends,
    state of the economy
    STR
    PKF Consulting
    HVS
    Jones Lang LaSalle
    Atlas Hospitality
    Richard Green, USC Lusk Center
  • Development: What's Hot -- What's Not
    Where's the money going for development?
  • EB-5 Update: Financing for New Construction
    Why do the EB-5 apps double each year?
  • Why the ADA matters to you.
    Comply now or pay later
  • CEO Panel: New Strategies for a New Economy
    Are you at the table or on it?
  • Hotel Retail-Mixed-use
    Why are people adding hotels to shopping centers?
  • State of the CMBS Markets
  • Workouts/Receiverships/Takeovers
    Strategies for distressed hotels
  • Maximizing Return & Value
    Branded vs. Independent Operators

And much more!

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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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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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May 22, 2012

Successful joint ventures for hotel development, acquisition and financing

by the JMBM Global Hospitality Group®

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

At JMBM's recent hotel finance conference in Los Angeles, a panel of experts talked about how well joint ventures are working to provide financing for hotel development and acquisitions.

The hotel joint venture experts

The Joint Venture Panel from Meet the Money® 2012 featured 5 veteran hotel investors and operating partners, and was moderated by Guy Maisnik, hotel lawyer and Vice Chair of JMBM's Global Hospitality Group®. The panelists were:

Picture of Guy Maisnik Guy Maisnik, Vice Chair, JMBM's Global Hospitality Group® works extensively on hotel joint ventures and financings, as well as acquisitions.

  • Mark Burden, CEO, Rim Hospitality
  • Lamont Meek, SVP and COO, Circa Capital
  • Rick Frank, SVP Hospitality, Behringer Harvard
  • Jonathan Martin, VP, AEW Capital Management
  • Kam Babaoff, Managing Director, Ensemble Hotel Partners

Each of these participants has a long history of investing in and operating hotels, and they represent the spectrum of views currently prevailing in the industry. While each has been successful, each has taken a different road to achieve success. The individual strategies and approaches of each stands out, as does the talent and vision necessary to navigate some of the toughest years in the hotel industry.

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March 13, 2012

5 Things to remember when buying hotel notes

by the JMBM Global Hospitality Group®

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

Hotel investment through buying hotel notes As the economy and hotel fundamentals continue to improve, hotel note purchase opportunities will be one of the most attractive hotel investments for savvy investors.

My partner and Vice Chair of our Global Hospitality Group®, Guy Maisnik, has been working a lot on note purchases lately, and I asked him to share some insights with us, which he graciously consented to do with his article today.

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