7 December 2010
It is always nice to be quoted in the New York Times, especially in a story that includes so many industry heavy hitters, as was the case in the article, After a Rough Night, Hotel Investors Are Waking Up. Reporter Janet Morrissey’s article provides a thought-provoking picture of the current unprecedented hotel investment landscape.
New York Times, December 4, 2010: “I have never in my entire career seen so much equity on the sidelines ready to pounce,” says Jim Butler, chairman of the global hospitality group at the law firm Jeffer, Mangels, Butler & Mitchell.”
I believe the hospitality industry is poised for a rebound in 2011 that is disproportionately greater than the economy’s recovery, springing back from its disproportionate decline in the Great Recession of 2008. It is possible that hotels will be one of the leading sectors in the coming economic recovery. But investors must be realistic about market value, and understand the risks involved.
New York Times, December 4, 2010: “I think opportunistic investors had those visions dancing in their head of assets that you buy at 10 cents on the dollar,” Mr. Butler says. But now many realize they may get distressed assets at only 60 to 80 cents on the dollar, and are afraid they’ll miss the rebound if they don’t jump in soon. “Things will begin drifting up, if not shooting up,” Mr. Butler says.
The deal environment has changed significantly in the past few years. Transactions look different, have different challenges, and come with greater risks. Although there will be more distressed sales that look like conventional transactions, “RESTRUCTURING” will be the mantra for more successful investors.
New York Times, December 4, 2010 (quoting Jim Butler): “There’s still huge amounts of debt coming due in the last half of this year, 2011 and 2012 that will be very difficult to refinance,” he says.
In the new deal environment, restructuring leaves old ownership with some stake in the venture, perhaps to mitigate adverse tax consequences or to provide hope-certificate upside if the recapitalized investment prospers. But the successful restructurings we are seeing give new investors control of the investment without bidding at an auction, and provide attractive returns for risks taken.
Yes, hotel investors are waking up! Whether you are a buyer, seller or capital provider, it is more important than ever to understand the new investment reality and how to unlock the value in a hotel property.
The hotel lawyers at JMBM’s Global Hospitality Group® are excited — and ready — for a very interesting 2011!
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 firstname.lastname@example.org 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”.)
Whether it is a troubled investment or new transaction, JMBM’s Global Hospitality Group® creates legal and business solutions for hotel owners and lenders. They are deal makers. They can help find the right operator or capital provider. They know who to call and how to reach them.