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Hospitality Lawyer Insights from MTM: #15 Challenges and Opportunities

03 June 2009

Hospitality Lawyer Insights from Meet the Money® 2009: The hospitality lawyers of JMBM’s Global Hospitality Group® have presented an annual hotel conference for 19 years. On May 5-7, 2009 in Los Angeles, California, nearly 400 industry leaders gathered at the Sheraton LAX for Meet the Money® 2009.


Presentations from Hotel Industry thought leaders by JMBM’s hospitality lawyers

The PowerPoint presentations from a number of industry leaders at Meet the Money® 2009 are listed with hyperlinks at JEWELS from Meet the Money® 2009 — the “best ever” hotel conference.

Commentary and observations from the hospitality lawyers of JMBM and other industry experts on some of the critical industry issues are available at Hospitality Lawyer Insights.

Here is the latest in the Hospitality Lawyer Insights series on some of the most critical issues of our day.

#15 Challenges and Opportunities

CHALLENGES

Mike Cahill:

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Michael Cahill, CRE, MAI, FRICS, CHA
CEO and Founder
HREC – Hospitality Real Estate Counselors
303-267-0057
mcahill@hrec.com



“Consistently, responders to the LIIC survey indicated that the mortgage capital crisis dominates all their challenges: lack of availability first, followed by cost, amount, and need for recourse by sponsors.”

Kevin Mahoney:

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Kevin Mahoney
CEO
Stonebridge Companies
303-785-3100
kmahoney@stonebridgecompanies.com



“If we don’t beat the pending Employee Free Choice Act, our industry will lose lots of value.”

David Loeb:

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David Loeb
Managing Director
RW Baird & Co
414-765-7063
dloeb@rwbaird.com



“Las Vegas will be slow to recover – we could be looking at 10 years of oversupply in that market.”

Jonathan Falik:

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Jonathan Falik
Chief Executive Officer
JF Capital Advisors
212-681-7040
jonathan@ifcap.com



“Over the next 5 years, people in complicated capital stacks will lose money and will litigate. It’s a new challenge and there will be an entirely ne body of law that evolves.”

Paul Novak:

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Paul Novak
President
Bedrock Partners
305-365-7880
pnovak@bedrockpartners.com



“The big challenge now is RevPAR. With 39 years’ experience in hotel industry, I would never have guessed that RevPAR could decline so much!”
Ambrose Fisher:

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Ambrose Fisher
Managing Director
Oaktree Capital
213-830-6319
afisher@oaktreecapital.com



“Mez lending is not dead, but will go back to much lower leverage of 40-50%. It will go up when people are comfortable with more risk. Investors want more safety.”

Jeff Scruggs:

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Jeff Scruggs
Managing Director
Goldman Sachs & Co
212-902-6517
jeffrey.scruggs@gs.com



“The new Stimulus Bill has opened up a wide range of opportunities for tax exempt and tax credit bonds. But so far, the Build America Bonds are available only for AA rated debt, and those have to be issued before December 31st, 2010. For our Goldman Sachs Public Sector Financing Group, the key is whether we can find investors willing to buy the bonds we are selling for our municipal clients.”

OPPORTUNITIES

Michael Depatie:

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Michael Depatie
President and CEO
Kimpton Hotel & Restaurant Group, LLC
415-955-5426
michael.depatie@kimptongroup.com



“This is the best buying opportunity in 20 years, if you have capital. We operate in the boutique space where demand is 3 times that of the average demand. We have capital and we are actively looking.”

Steve Stoycos:

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Steve Stoycos
Consultant, Mezzanine Fund & Principal Investments
Choice Hotels
301-592-5179
steve_stoycos@choicehotels.com



“We are looking at opportunistic land purchases at a substantial discount. We will build the product later.”

Larry Broughton:

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Larry Broughton
President and CEO
Broughton Hospitality Group
714-848-2224
lb@broughtonhospitality.com



“Our business model is not going to change. We always look for distressed opportunities. I think some amazing opportunities will come forward. If you can get a new construction project done, there are some class A projects that will get built. We have debt and equity interested. Given the cost of construction and land values, when the economy turns around we will do well.”

Bruce G. Wiles:

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Bruce G. Wiles
Managing Director & Principal
Thayer Lodging Group
(301) 581-5910
bruce.wiles@meristar.com



“This is a period of great investment opportunity — we are getting lots of calls. We are attracting more capital, including offshore institutional investors that are recognizing an opportunity.”

Jack vanHartesvelt

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Jack vanHartesvelt
Executive Vice President – Partner
Kennedy Associates Real Estate
206-623-4739
jackv@kennedyusa.com



“Yes, what is attractive now are foreign investors. These are primarily individuals that are willing to go into funds that include a “club” of other investors they know and trust. These investors are hedging on the value of the dollar.”

Steve Stoycos:

With regard to smaller transactions, there is still government money available. SBA lenders are providing debt up to 80 percent for existing properties.

Valerie Red-Horse:

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Valerie Red-Horse
President
Red-Horse Financial Group, Inc
714-846-3810
valerie@wisedirect.com



“Under the Stimulus Bill, hotels are specifically authorized projects that can be financed with the new Build America Bonds and Tribal Bonds. We are looking for private developers who want to participate in building hotels on Indian lands, where we can bring tax-exempt financing in as part of the total cost of the development, and the private developers and other investors can partner with the tribes to bring the rest of the financing.”

David Schachter:

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David Schachter
Managing Director
Reedland Capital Partners/Financial West Group
310-275-8675
dschachter@reedland.com



“We work with large private equity funds that are working with hotels that will be in default in the near future, or are already in default. We negotiate a discount on the sale of the note from the original borrower to the PE firm. We look for a 30% discount because lender has probably already written down 20% of it. The PE source works out a plan for debt service and provides capital to keep the hotel running. In exchange, the PE takes about 30-40 equity piece.”

Russ Urban:

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Russ Urban
Senior Vice President, Development
HEI Hotels & Resorts LLC
203-849-2279
rurban@heihotels.com



“You will do well if you can jump in now, before new capital swarms around the good deals. This is different than the recession of the 1990s when there was little capital.”

David Berins:

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David Berins
Managing Partner
Berins & Co. LLC
214-351-1030
dberins@berinsco.com



“We have been through down cycles before. As always, during this one we will find out who is smart, bold, and tough — and most importantly who we want to do business with in the future.”

Jim Butler :

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Jim Butler
Chairman, Global Hospitality Group
Jeffer Mangels Butler & Marmaro, LLP
310-201-3526
jbutler@jmbm.com



“This Great Recession will change the hospitality industry, and the Global Hospitality Group® at JMBM will continue to monitor and analyze those changes for readers of the Hotel Law Blog. Whether it is seizing an opportunity or responding to a challenge, our hotel lawyers are committed to providing aggressive advocacy and experienced counsel to our owner, lender and developer clients.”

This is Jim Butler, author of www.HotelLawBlog.com and hotel lawyer, signing off. We’ve done more than $60 billion of hotel transactions and have developed innovative solutions to unlock value from troubled hotel transactions. Who’s your hotel lawyer?

________________________
Our Perspective. We represent hotel lenders, owners and investors. We have helped our clients find business and legal solutions for more than $60 billion of hotel transactions, involving more than 1,000 properties all over the world. For more information, please contact Jim Butler at jbutler@jmbm.com or 310.201.3526.

Jim Butler is a founding partner of JMBM and Chairman of its Global Hospitality Group®. Jim is one of the top hospitality attorneys in the world. GOOGLE “hotel lawyer” and you will see why.

JMBM’s troubled asset team has handled more than 1,000 receiverships and many complex insolvency issues. But Jim and his team are more than “just” great hotel lawyers. They are also hospitality consultants and business advisors. For example, they have developed some unique proprietary approaches to unlock value in underwater hotels that can benefit lenders, borrowers and investors. (GOOGLE “JMBM SAVE program”.)