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Ask the Hotel Lawyer: Investor surveys — some results that may surprise you!

22 April 2009

Hotel Lawyer with the latest PKF Consulting and JMBM survey results.

As I was getting ready to publish JMBM’s latest survey, I received an email from our friends at PKF Consulting with their 2009 Hospitality Investment Survey. The results of both surveys are interesting for different reasons. Here they are.

PKF Consulting’s 2009 Hospitality Investment Survey

PKF fingers the lack of liquidity as the force driving declining investor expectations. Not much of a surprise there . . . After all, isn’t that what we have all been looking for since the Lehman bankruptcy and why we have all been hoping that the TARP and TALF will start to clean up the financial crisis? Nonetheless, this survey confirms what is apparent to any one trying to do business today.

But, to me, the most impressive take away from the PKF study was the extreme description of the pain being described. In PKF’s works:

As industry participants now contemplate the worsening economic recession and its impact on lodging revenues and expenses, the 2009 edition of HIS reveals that investors anticipate a significant decline in operating incomes and resultant loss in property values unlike anything we have seen in past recessions.

The six-page 2009 Hospitality Investment Survey presents both investment criteria (cap rates, IRR, equity yield, cash returns) and lending criteria (LTV ratios, interest rates, loan terms, debt coverage ratios), as well as three topical articles. To purchase a copy of the report for $250, please visit

JMBM’s 2009 California Real Estate & Land Use Survey

My partner, land use lawyer Ben Reznik, is one of the most effective weapons in JMBM’s legal arsenal. If a hotel development needs to get entitled or re-entitled in California, Ben is the go-to resource. When Gatehouse Capital needed the way paved for the development of the new W Hotel at Hollywood &Vine in Hollywood, they called on Ben. He knows his way around City Hall as well as the courts. A recent feature story in the Los Angeles Times, stated that “Last year, no one took the city to court more than Benjamin Reznik.” And I can attest that no one was as effective in getting his clients’ deals done.

The survey and respondents

Not only is Ben a very effective advocate, he is an important part of California’s real estate and development community. Earlier this year, he and 25 attorneys in JMBM’s Government, Land Use, Environment and Energy Department, conducted a survey of California’s top real estate developers and investors. Of the executives responding to the survey, 51% identified themselves as developers and 32% as investors. 27% of them were involved in hotel development.

The real estate developers and investors remain unconvinced that the end of the real estate downturn is imminent. 69% of those surveyed indicated they were cautious, while 22% were bearish about the real estate market.

Still, the extensive comments made by survey participants to the question, “Where do you see opportunities in the current downturn?” illustrate that the majority have strategies for surviving the recession and are positioning their companies for future growth. While specific projects vary widely, nearly all respondents are seeking to maximize the performance of their current portfolios and looking for opportunistic acquisitions that fit into their long range plans.

Good time to entitle and re-entitle properties

65% of survey respondents indicated that now is a good time to entitle or re-entitle projects. “The reasons for this include the belief that municipalities need the additional income that development can provide, and that zoning authorities are likely to be more lenient during tough economic times,” according to Ben Reznik.

Good time for smart investments in distressed properties

In response to the question How do distressed assets play a role in your strategy for 2009?, 70% of survey participants indicated they were seeking to acquire distressed assets even while 54% of them believed that the value of these assets could fall further. As one respondent wrote, “Acquisitions made before the recovery should show significant returns.”

Good time to position projects for future financing

Acquiring debt was at the top of the list of challenges currently faced by survey respondents. “The real estate markets will remain under pressure until financing is available,” Reznik said. “But our survey indicates that developers and investors are preparing to take advantage of opportunities as soon as the pipeline reopens.”

To review the complete survey results, click here.

This is Jim Butler, author of and hotel lawyer, signing off. We have helped our clients as business and legal advisors on more than $125 billion of hotel transactions, involving more than 4,700 properties all over the world. Who’s your hotel lawyer?

Jim Butler is one of the top hospitality attorneys in the world. GOOGLE “hotel lawyer” or “hotel mixed-use” or “condo hotel lawyer” and you will see why.

Jim devotes 100% of his practice to hospitality, representing hotel owners, developers and lenders. Jim leads JMBM’s Global Hospitality Group® — a team of 50 seasoned professionals with more than $125 billion of hotel transactional experience on more than 4,700 properties located all over the world.

Matters handled range from hotel workouts, restructurings and bankruptcies to public-private partnerships, mixed-use development and foreign investment.

JMBM’s troubled asset team members have more than 1,000 receiverships under their belts, along with the often related bankruptcies and restructurings. Jim and his team are more than “just” great hotel lawyers. They are also hospitality consultants and business advisors with a virtual database of current “market” business terms. They are deal makers. They know who to call and how to reach them.

Contact Jim Butler at or 310.201.3526. For his views on current industry issues, visit

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