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1. The ADA Compliance and Defense Guide — free download

2. Hotel Lawyer on HMAs: “The shrinking terms of hotel management agreements”

3. Hotel Financing 2015: JMBM’s “preferred” EB-5 construction financing program for top developers and projects

4. The “new breed” of condominium hotels — Key to financing new hotel development? Selling condo hotels as “securities” under new SEC Rule 506(c) . .

5. Los Angeles is the new magnet for real estate investment

6. FAQs on “service animal” requirements of the ADA. What every hotelier needs to know. Why Uber was sued over service animals.

7. Why this may be the time to buy or sell a hotel management company

8. Hotel development & EB-5 financing: Why you don’t want to form your own regional center

9. Hotel Liability for Guest Information — What you need to know and how to avoid liability.

10. Hotel Franchise Lawyer: 8 things to negotiate in your next franchise agreement

11. Hotel Lawyer: The 5 questions every owner should ask before selecting a hotel brand

12. Hotel Franchise Lawyer: Hotel Franchise Agreements and the 5 biggest mistakes a hotel owner can make

13. Hotel Lawyer with insights on "How to get a great hotel operator"

14. The importance of Comfort Letters in financing franchised hotels

15. Hotel Lawyer: Something everyone buying or building a golf course should know . . .

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Meet the Money® 2014

ADA defense and compliance

EB-5 financing

Workouts, bankruptcies & receiverships

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Hotel Franchise & License Agreements

Hotel industry trends

This is Jim Butler, author of www.HotelLawBlog.com and hotel lawyer. Please contact me at Jim Butler at jbutler@jmbm.com or 310.201.3526.

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21 May 2019

JMBM’s ADA Compliance and Defense team, led by my partner Marty Orlick, continues to help hotels and other businesses achieve compliance under the Americans With Disabilities Act (ADA), and has defended more than 750 ADA lawsuits and DOJ investigations or actions brought against owners and operators of “public accommodations.” Such properties include hotels, resorts, restaurants, timeshares, bed and breakfasts, spas, sports facilities, wineries, theaters and other commercial real estate, such as apartment communities, shopping centers, retail stores and banks.

Today, Marty shares some good news from Riverside, California, where the Riverside County District Attorney’s Office is seeking to stop abusive ADA lawsuits filed by serial litigants.

 

Riverside County DA drops the hammer on ADA litigant and counsel
to stop abusive litigation
by
Martin H. Orlick, Hotel Lawyer  & Chair,
JMBM’s ADA Compliance & Defense Group

In an extraordinary case charging ADA litigation abuse, the Riverside County District Attorney’s Office filed an action on behalf of the People of California seeking to permanently prevent serial ADA plaintiff James Rutherford and two law firms that regularly represent him (Manning Law and the Law Offices of Babak Hashemi, and individual members of the firms) from filing abusive lawsuits. The Complaint alleges that the defendants violated various Business & Professions Code sections designed to protect the public against “unlawful, unfair or fraudulent acts or practices” and seeks civil penalties not to exceed $2,500 for each violation and other equitable relief. Civil penalties in this case could exceed $800,000 if the allegations prove true.

The Complaint alleges that “Defendants filed 323 lawsuits based on alleged violations of the Americans with Disabilities Act” in federal and state courts. Many of these lawsuits were filed against hotels and retailers. According to court papers, the pleadings filed by the defendants follow a pattern of near-identical “allegations, except for the identity of the named defendants and the date of the alleged harm.”

This lawsuit is eerily similar to a lawsuit filed by the Arizona Attorney General against Peter Strojnik, Sr., who filed nearly 2,000 identical ADA lawsuits against Phoenix/Scottsdale businesses. Suspended from practicing law, Mr. Strojnik surrendered his license to avoid disbarment. Another lawyer in New Mexico also surrendered her license in lieu of disbarment over ADA litigation abuse. CONTINUE READING →

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10 May 2019

LOS ANGELES—Jim Butler, Chairman of JMBM’s Global Hospitality Group®, along with Jack Westergom of Manhattan Hospitality Advisors, will speak at the 4th Annual West Institutional Real Estate Investor Forum on June 5, 2019 in San Francisco on the topic of hotel investment. They will also conduct a roundtable discussion for investors who may be new to the hotel investment.

“Many institutional investors, family offices and other sophisticated real estate investors are looking to hotels to increase investment returns. While hotel investments can offer significantly higher cap rates and greater long-term profits, many investors realize they need experienced advisors to avoid pitfalls that might otherwise confront them,” said Butler. “This program will provide an introduction and guide to hotel investments for those looking into how this asset class fits into an investor’s portfolio.”

The morning presentation is entitled, “Time for a second look at Hotels: The hidden gem of asset classes.” It will cover the following:

  • Fundamentals of hotel investment
  • 3 reasons investors buy or build hotels
  • What makes hotels different
  • How much of a hotel’s value is due to the operating business
  • Which hotel agreements have the most impact on value. How much impact?
  • Who are the critical members of your hotel team
  • Case studies for hotel investment – greater upside if done well, greater downside if done badly
  • Why you should let experience be your guide CONTINUE READING →
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07 May 2019

Greetings from Los Angeles and the beautiful Hyatt Regency LAX!

Today, we kicked off Meet the Money® 2019 – the National Hotel Finance & Investment Conference hosted by JMBM’s Global Hospitality Group® – with the LIIC Top Ten. Presented by my friend, Mike Cahill, CEO and Founder of HREC and one of LIIC’s co-chairmen, the LIIC Top Ten reflects the perspectives of the industry’s most active members in the hospitality market.

— Jim

About the LIIC Top Ten

For the past 15 years, the members of the hotel industry’s preeminent think tank, “LIIC – The Lodging Industry Investment Council,” are annually surveyed to develop a list of the major hotel investment opportunities and challenges for the coming year. This exhaustive survey results in the LIIC Top Ten, a highly regarded profile of investment sentiment and attitudes for the lodging industry for the forthcoming 12 months. Altogether, the members of LIIC represent direct acquisition and disposition control of well over $60 billion of lodging real estate.

Members are currently extremely active and have the pulse of the market, with 64% of LIIC hotel investors having successfully sold a hotel in the last 12 months and 50% purchased a lodging asset. In defiance of any late cycle concerns, 93% are looking to buy more hotels over the next 24 months.

The hospitality industry’s most influential investors, lenders, corporate real estate executives, REIT’s, public hotel companies, brokers and significant lodging equity sources are represented on the Council. LIIC serves as the leading industry think tank for the lodging real estate business (www.liic.org).

2019 LIIC Top Ten Survey Results: CONTINUE READING →

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24 April 2019

LOS ANGELES—JMBM’s Global Hospitality Group® will host Meet the Money® national hotel finance and investment conference May 6-8 at the Hyatt Regency LAX in Los Angeles.  Now in its 29th year, this annual event will bring together hotel owners, operators, developers, consultants, investors, brands, lenders and other capital providers to discuss current developments in the industry as well as strategies for the future.

“Our line-up of more than 70 speakers include top hospitality leaders who will share their expertise and deliver essential information for maximizing potential opportunities,” said Jim Butler, Chairman of JMBM’s Global Hospitality Group®. “Attendees will also have the opportunity to meet some of the most active capital providers in the market for both existing and new hotel construction,” he said.

Free to all who register is a special pre-conference session on Monday afternoon May 6th – Meet The Equity: Investment Bootcamp – Preparing and Executing the Capital Raise. This interactive workshop will be led by Jonathan Falik of JF Capital Advisors, Guy Maisnik, Vice Chair of JMBM’s Global Hospitality Group®, and private equity experts who will explain how they evaluate requests for capital, what makes certain deals attractive to them, and why they reject projects.

Some of this year’s panel discussions and special presentations, include:

  • Views from the Executive Suite: What’s Important Now?
  • Creative Financing: Mezz and Beyond
  • Is Select Service Still Everyone’s Favorite? Where Does it Go from Here?
  • Developing, Redeveloping and Repositioning to Optimize Value
  • Winning Strategies for Buying and Selling Hotels
  • Construction Financing Today

“Our speakers are passionate about the hospitality industry and we look forward to the enthusiastic exchange of ideas that happens every year at Meet the Money,” said Butler. “We look forward to seeing our long-time industry friends and making new ones.”

Registration can be made through the Meet the Money® website. CONTINUE READING →

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19 April 2019

The Spring 2019 Trigild Lender Conference in Dallas, TX wrapped up on Thursday, April 18—an informative day-and-a-half conference delving into what the industry is saying about lending and debt for commercial real estate.

The Trigild Conference

Keynote speakers Peter Muoio, Ph.D. and Ten-X executive vice president Donald D. Sheets shared their perspective on commercial real estate, construction project risks, ethics questions, hospitality trends, economic forecasts, and whether a downturn is imminent.

Other programs at this exciting conference discussed the impact of natural disasters on the commercial real estate industry, block-chain and other emerging trends, and strategies to help lenders, investors and developers mitigate risk. Trigild brings together lenders, special servicers, legal counsel, investors, real estate fund leaders, asset managers, and loan buyers to network and learn from one another. Specializing in property management, receivership, bankruptcy, and advisory services, Trigild has hosted the Lender Conference for 7 years.

Lenders seeing distressed hotel loans?

Speakers at the conference noted a few troubled spots in lending, but they seem to be isolated to the oil patch or situations that are specialized and limited. Overall it seems that some experts project a continuation of modestly good times through 2020 or 2021, while a few doomsayers claim we are ready to fall off a cliff any minute. CONTINUE READING →

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21 February 2019

Voters in Long Beach, California passed an initiative in November 2018 that affects all hotels in Long Beach with more than 50 hotel rooms. The Hotel Workplace Requirements and Restrictions Initiative Ordinance, known as the “Panic Button Initiative” places new requirements and restrictions on hotel owners and puts non-union hotels at a disadvantage.

Marta Fernandez, Hotel Lawyer and a partner in JMBM’s Labor & Employment department, discusses “Panic Buttons” and the new ordinance below and describes what Long Beach hotels should do to prepare for compliance and potential union organizing.

What hotel owners need to know about unions and
the “Panic Button” ordinance in Long Beach, CA
by
Marta M. Fernandez, Hotel Lawyer and Labor & Employment Partner

Passed by voters last November, the “Panic Button Initiative” – which was placed on the local ballot after the hotel workers union submitted 46,000 signatures to the City Clerk in Long Beach, California – has become a new chapter in the City of Long Beach Municipal Code, titled “Hotel Working Conditions.”

The new code mandates that all hotels with 50+ rooms in Long Beach, California must

  • Provide panic buttons for workers to protect them against sexual assault
  • Require notices regarding the use of panic buttons to be posted in guest rooms
  • Give workers who are assaulted the right to reassignment and paid time off for reporting and consultation

Unrelated to potential assaults on hotel housekeepers, the ordinance also requires hotels to

  • Place limits on overtime and make overtime voluntary
  • Limit the amount of space that housekeepers can clean per shift
  • Keep certain records relating to the above

Why the hotel union spent resources on an initiative that does not apply to union hotels

The Panic Button Initiative (also known as Measure WW) tellingly included a significant carve-out for unionized hotels – all provisions of the new ordinance may be waived for union hotels through the collective bargaining process.

Under the guise of protecting workers, the ordinance gives an unfair advantage to union hotels in Long Beach. CONTINUE READING →

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15 February 2019

$87 billion in hotel transactions involving more than 3,900 properties

LOS ANGELES—The hotel lawyers of JMBM’s Global Hospitality Group® are pleased to present their updated Hospitality Credentials, which include clients and projects that represent more than $87 billion in hotel transaction experience involving more than 3,900 properties worldwide – more than any other law firm.

“If you are a hotel owner, developer, or capital provider, our hospitality lawyers can provide expertise and experience you just won’t find elsewhere,” said Jim Butler, Chairman of JMBM’s Global Hospitality Group. “Whether you are buying or selling a hotel, developing a new one, need a privacy and cybersecurity plan, or defend an ADA lawsuit – we have lawyers who know the ropes, and can guide you every step of the way.”

JMBM’s Global Hospitality Group provides a full range of services to the hospitality industry including:

  • ADA compliance & defense
  • Cannabis
  • Celebrity chef agreements
  • Construction
  • Corporate governance
  • Cybersecurity
  • Data privacy
  • Development
  • Equity & joint ventures
  • Expert witness
  • Fiduciary duty
  • Financing
  • Foreign investment
  • Franchise & licensing
  • Hotel-specific contracts
  • Labor & employment
  • Land use & environmental
  • Leasing
  • Litigation
  • Management agreements
  • Mergers & Acquisitions
  • Opportunity Zone
  • Proposition 65
  • Purchase & sale
  • Shareholder disputes
  • Tax
  • Trademark & copyright
  • Trusts and estates
  • Union negotiations
  • Union prevention
  • Vacation ownership
  • Workouts, bankruptcies & receiverships
“Exceeding $87 billion in hotel transactions involving 3,900 properties is a new milestone, and one I am proud to announce,” said Butler. “I am grateful to all of our wonderful hospitality clients who have shown us their trust and confidence over the years and continue to provide us with challenging and meaningful work.”

About JMBM’s Global Hospitality Group
JMBM’s Global Hospitality Group is the premier hospitality practice in a full-service law firm and the most experienced legal and advisory team in the industry. The Group publishes the Hotel Law Blog and hosts the annual Meet the Money® National Hotel Finance & Investment Conference (May 6-9, 2019 in Los Angeles). For more information visit www.HotelLawyer.com.

Contact:

Jim Butler
jbutler@jmbm.com
+1 310-201-3526

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12 February 2019

Recently, my partner, Guy Maisnik, and I spoke about hotel retail mixed-use development with Kelsi Maree Borland of GlobeSt.com. Her article, Why Retail Owners Are Partnering With Hotels ran with the subtitle, With retail evolving to be more experience-driven, retail owners are finding the benefits of adding boutique hotels to shopping centers.

Retailers adding hotels to the mix is nothing new – but they may be more motivated than ever. The Hotel Law Blog has been covering hotel mixed-use projects — where the hotel provides the catalyst for social activity at shopping centers, office complexes, and residential buildings — since 2009. At that time, retail sales were suffering due to the Great Recession.

From GlobeSt.com:

“The Great Recession taught retailers that the old mantra was dead”, says Maisnik. “’If you build it, they will come’ may work in the movies but not for increasing retail sales. There were just too many stores and they were boring, outmoded and couldn’t attract shoppers. The drivers for adding hotels to retail projects have not changed in the last 10 years but the force of the drivers and their impact has increased tremendously. Failure to adopt and grow to meet consumers’ desires can be the death knell for retailers.”

Add to this the spectacular growth of online sales, which accounted for 19.1% of total retail sales in 2018, and it is no wonder that brick-and-mortar retailers are hurting. Some, like Sears and JC Penney are scrambling for survival.

From GlobeSt.com:

“To survive the challenges from online retailing, brick and mortar retail will need to create exciting environments for consumers, where art, music, events, convenience and lifestyle provide a magnet for consumers. Properly done, hotels can be an important part of creating this magic, but hotels provide new levels of complexity in mixed-use projects with their own unique norms, customs, and players.” Jim Butler

What retail properties are good candidates for a hotel, and what should owners interested in including a hotel look for?

To create a great mixed-use project, each component of the project must be strong and must be tested against the fundamentals for that type of real estate use. Just as retail developers go through their checklists to determine what will make a great retail center, if there is to be a hotel, office, entertainment, or residential component, each piece of the puzzle must be tested against its own unique criteria for success. This is particularly true for hotels which need demand, and require a rigorous feasibility analysis. CONTINUE READING →

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23 January 2019

Hotel Lawyers share tax news for those owning interests in foreign entities.

The tax lawyers at JMBM have significant experience in advising clients with international business interests, and keep them informed of developments that affect their businesses. Recently, JMBM issued a Tax Alert regarding the obligations of those owning an interest in a foreign entities to determine whether a repatriation tax payment must be made under the Tax Cuts and Jobs Act. Yes, the IRS imposes a penalty for failure to report, so compliance is critical. I am pleased to share this information with you, which is provided by my partner, Scott Harshman, Chairman of JMBM’s International Tax Group.

Tax Alert: Foreign Entity Ownership Compliance
Don’t Ignore the Repatriation Tax
by
Scott A. Harshman

 

In 2017, if a client owned an interest in a foreign entity (directly or indirectly through a tiered entity structure), then an evaluation should have been done to determine whether the client owed a repatriation tax under the Tax Cuts and Jobs Act (TCJA).  Many clients, and their tax advisors, are unaware of this obligation and have failed to pay this tax.  The repatriation tax was meant to tax accumulated earnings of a controlled foreign corporation.  For clients that own an interest in multiple foreign entities, the accumulated earnings may offset one another from each entity.  Two tax rates potentially apply, 15.5% and 8%.

The rules are complex, but in simple terms, if a U.S. person owns an interest in a controlled foreign corporation or owns any interest in a foreign corporation through a domestic corporation, they likely should have paid the repatriation tax beginning in 2017.  A special election may be made to pay this tax in 8 installments. Additionally, an election under IRC Section 962 would treat an individual, trust or estate shareholder as a corporation to potentially receive more favorable tax treatment.  This analysis and election must be done each year.  A controlled foreign corporation is a foreign corporation (some entities may be a corporation for U.S. tax purposes even if called something else) where U.S. persons who own more than 10% also collectively own more than 50% of the entity (but note that the repatriation tax applies to any domestic corporation that owns a foreign entity).  Constructive ownership rules apply and generally attribute stock ownership from family, entities, trusts and estates.

Now that we are in 2019, tax professionals are starting to understand the new tax rules for foreign entity reporting and disclosure, including the 2017 repatriation tax under IRC Section 965 (such as those described above).  The IRS continues to provide new guidance in this area to help tax advisors apply these new rules. CONTINUE READING →

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8 December 2018

Hotel Lawyer on Owners’ concerns with hotel brand franchise agreements — Areas of Protection or Non-competition clauses

My partner Bob Braun is a senior member of our Global Hospitality Group® and has experience with many hundreds of hotel management and franchise agreements. Bob is also co-author of the Hotel Management Agreement & Franchise Agreement Handbook (3rd edition), and has first-hand experience with branding and management for every major traditional hotel brand, including a number of multi-branded properties. Today he explores the growing problem for hotel franchisees in gaining meaningful protection from other hotels operating under their franchisor’s brands.

Hotel Franchise Agreements:
What happened to my Area of Protection?
by
Bob Braun, Hotel Lawyer

 

Brand concentration, new brand proliferation and ascendance of the franchise model of branding

Brand concentration has intensified greatly over recent years and many new brands have been created. At last count (and the count changes often), Marriott owns 30 brands, Accor has 33, Wyndham has 18, Hilton has 14, IHG has 13, Choice has 11 and Hyatt has 10. For a hospitality chain, a portfolio of brands used to represent a customer and regional segmentation strategy designed to target buyers across the economic spectrum and resonate with local preferences.

Before the mergers and acquisitions, new brand launches, and the development of soft brands, a hotel chain typically had a few iconic brands in each chain scale that customers could easily recognize and differentiate from the competition. Guests could rely on their knowledge of the brands for a predictable experience commensurate to the brand promise. Moreover, it was common for brands to operate, own, or both operate and own properties, giving brands “skin in the game” and greater ability to create a uniform guest experience. Over the years, however, franchising became the preferred model for growth, shifting more of the costs of development and costs of ownership to hotel owners. Today, you would be hard-pressed to name a hotel that owns a significant number of properties.

While the move to managed and franchised hotels freed up capital to invest in new growth, the brands faced a new dilemma — how to build or convert more hotels in a market where they already had operating branded properties. After all, brands could not rely solely on fee-based revenue from existing properties growing at single-digit RevPAR to meet expectations of Wall Street investors, but they also couldn’t open the same brand next to one that already existed.

As brands pursued franchised growth, they have also tried to retain the right to saturate a market with their affiliated flags. Hotel brands now uniformly reserve the right to operate competing properties in the same location as existing properties — helping them to fulfill their goal of expanding their markets. Hotel owners, of course, have a different view — having the only property of their brand (or of any competing property, whatever the brand) is a benefit, and allows the owner comfort that they will be able to benefit from their investment.

Owners’ challenges in obtaining protection from competition by their brand’s other hotel owners using the same reservation system.

Owners see a number of benefits to limiting competition within the brand: CONTINUE READING →