Articles Posted in Hotel Development

Published on:

 

12 August 2025
See how JMBM’s Global Hospitality Group® can help you.

Unlocking Value in Hospitality: The New Era of Hotel Mixed-Use Development in Qualified Opportunity Zones

By Guy Maisnik, Vice Chair of The Global Hospitality Group, Jeffer Mangels Butler & Mitchell, LLP

The One Big Beautiful Bill Act (OBBB) has fundamentally changed the landscape for real estate investment in America—permanently enshrining the Qualified Opportunity Zone (QOZ) framework and expanding the horizon for hotel mixed-use development. For developers, investors, lenders, and deal sponsors, the new OBBB regime offers unmatched certainty, flexibility, and opportunity—but it also demands rigorous compliance and strategic planning. Here’s a deep-dive narrative for industry professionals charting the future of hospitality-led community reinvestment.

I. The OBBB Revolution: OZ Permanency, Enhanced Incentives, and Hospitality 

With the OBBB’s passage, Opportunity Zones became a long-term pillar of U.S. tax policy. Gone is the uncertainty that once limited major capital flows. Instead, asset allocators—ranging from pension funds to private equity—can now underwrite horizon investments knowing key incentives like tax-deferral and gain exclusion are locked in.

Key Features for Hotel Projects 

  • Permanent OZ Program: No sunset. Sponsors can plan and phase large urban or resort projects without fear of the window closing.
  • Rolling Redesignation: New OZs will be proposed every decade, creating dynamic markets for future hospitality developments.
  • Rural OZ Boost: Rural hotels receive a 30% basis step-up after five years, and only need to improve 50% of their basis—a major win for resort and adventure destination sponsors.
  • Enhanced Transparency: With new annual reporting requirements, deal clarity is sharpened for institutional lenders, community stakeholders, and public-sector partners.

II. Structuring Hotel Mixed-Use Development for Maximum Opportunity

  1. Building for Compliance

Hotel projects are best structured as Qualified Opportunity Funds (QOFs) that invest in a Qualified Opportunity Zone Business (QOZB). This two-entity approach, favored by both tax counsel and institutional LPs, enables both property and active business income to qualify for OZ benefits.

  • Eligible Property: OZ programs allow owned and leasehold property, including real estate and movable FF&E, provided the “original use” or “substantial improvement” tests are satisfied.
  • Active Trade or Business: Hospitality operations must generate at least 50% of gross income from the property in the zone. Passive triple-net leases or heavily outsourced arrangements risk compliance.
  1. Navigating Substantial Improvement, Phasing, and Mixed-Use Complexities
  • Substantial Improvement: Most historic conversions (urban hotels, adaptive reuse) require doubling the basis of the building portion—except in rural OZs, where only a 50% increase is mandated.
  • Original Use Projects: New ground-up hotels are straightforward—they qualify from day one under “original use.”
  • Mixed-Use Allocation: Sponsors must allocate cost basis between hotel, retail, residential, conference, and parking assets—ensuring each meets applicable OZ standards.
  • Phased Construction: Treasury regulations recognize the reality of multi-phase developments; QOZBs may deploy capital under a 31-month working capital safe harbor, extendable for government delays.

III. Financing Hotel Projects: Capital Stacks, Lender Comfort, and Bonus Depreciation

  1. Typical Capital Stacks

Hotel OZ projects feature hybrid capital structures:

  • QOF Equity: Often the anchor, composed of rolled capital gains from investors seeking both tax deferral and upside.
  • Conventional Debt: Banks, CMBS lenders, and sometimes HUD offer construction and takeout financing, provided strict OZ compliance is maintained.
  • Preferred Equity/Mezzanine: Used to round out the stack, sometimes from EB-5 investors or public sources such as TIFs.
  • State and Local Incentives: Frequently paired with OZ investments for historic or catalytic hospitality projects.
  1. Lender Friction and Solutions

Lenders scrutinize OZ hotel projects for:

  • Debt Service Coverage: Underwriting must account for development timelines and ramp-up periods—a point of differentiation with hospitality.
  • Legal Opinions: Lenders often require tax counsel opinions attesting to OZ structure integrity and risk mitigation (notably around substantial improvement and safe harbor planning).
  • Transparency: Annual asset, impact, and compliance reporting (post-OBBB) is now critical for both institutional investors and lenders evaluating credit risk.
  1. Bonus Depreciation

Sponsors enjoy 100% first-year bonus depreciation for eligible tangible property acquired and placed in service after January 19, 2025—a benefit magnified for hotels, which have significant FF&E components. Property acquired before this date is subject to lower, phased-down deduction rates. Smart structuring and cost segregation studies allow rapid recovery of investment and stronger early-stage distributions.

Smart structuring and cost segregation studies allow rapid recovery of investment and stronger early-stage distributions.

IV. Investor Dynamics: Returns, Waterfalls, and Pitching Post-OBBB 

  • Return Profiles: Hospitality deals differ from multifamily or office—exhibiting more “J-curve” effects (delayed stabilization, upside via brand/repositioning, diverse cash flow streams).
  • Investor Benefits: Hotel OZ opportunities as:
    • Inflation-hedged, with dynamic income potential (room rates, F&B, events)
    • Community anchors driving local employment and revitalization
    • Vehicles for permanent tax benefit—especially appealing post-OBBB
  • Preferred Returns & Waterfalls: Proper structuring preserves upside for sponsors but ensures “tax attributes” (deferral, step-ups, exclusions) flow to eligible LPs.

V. A Real-World Hotel QOZ Case Study

Imagine a southwest city’s historic main street. The Project is a classic bank-to-luxury-hotel conversion (with integrated co-working, food hall, and community event space):

  • Site & Entitlement: Navigated brownfield remediation and landmark approvals (Year 1).
  • Capital Stack: $15M QOF equity, $20M construction loan, $4M preferred equity from an EB-5 syndicate, $3M TIF grant.
  • Structure: Two-entity (QOF + QOZB) structure; phased rollout leveraging 31-month safe harbor and bonus depreciation.
  • Operation: Multi-brand soft-flag arrangement with independent F&B vendors, maintaining “active business” status for QOZB.
  • Exit Scenarios: (a) Bulk sale to PE after 10 years; (b) REIT roll-up; (c) refinance and hold for continuous cash flow with tax-free treatment for investors.
  • Impact: 300+ construction and operations jobs, tourism revenue, triple-digit occupancy premium in Year 3.

VI. Sponsor’s Compliance Checklist: Hotel QOZ Project

Compliance Area Key Standard/Requirement Best Practice
Reinvest Gains 180-day deadline from realization Calendar/procedure tracking
QOF Formation US entity; Form 8996 self-certify Central file/annual checklist
QOZB Operations 70% tangible property, 50% income Site mapping, business plans
Substantial Improvement Double (or 50%) basis in 30 months Construction timeline
Working Capital 31-month plan, extendable for delays Written plan, track milestones
Reporting Annual impact, compliance reporting Data systems, CPA engagement
Depreciation 100% bonus for eligible property Cost segregation study
Exit/Waterfall Exit model, tax analysis for LPs PPM, scenario planning


VII. Key Legal and Regulatory Sources

  • Internal Revenue Code §§ 1400Z-1, 1400Z-2.
  • Treasury Regulations §1.1400Z2(a)-1, §1.1400Z2(d)-1 and final Treasury “QOZ” regulations (2019, 2020).
  • IRS Notices (e.g., 2021-10; working capital safe harbor).
  • OBBB legislative text and summaries (as finalized).
  • Industry guides on FF&E treatment, depreciation, and compliance architecture.

Conclusion: Seizing the Next Decade of OZ Hospitality

With permanency, expanded incentives, and heightened transparency, OBBB has set the stage for a decade of hospitality-led Opportunity Zone development. Sponsors prepared to rigorously document, diligently monitor, and creatively structure their hotel mixed-use projects will unlock attractive returns—for investors, lenders, local communities, and their own firms.

Industry leaders: Now is the moment to stake your claim in the next generation of transformational real estate, powered by federal support but dependent on vision, discipline, and innovative execution.

 


Tphoto__2883799_jim-butler-web-1-300x300his is Jim Butler, author of www.HotelLawBlog.com and founding partner of JMBM and JMBM’s Global Hospitality Group®. We provide business and legal advice to hotel owners, developers, independent operators and investors. This advice covers critical hotel issues such as hotel purchase, sale, development, financing, franchise, management, ADA, and IP matters. We also have compelling experience in hotel litigation, union avoidance and union negotiations, and cybersecurity & data privacy.

JMBM’s Global Hospitality Group® has been involved in more than $125 billion of hotel transactions and more than 4,700 hotel properties located around the globe. Contact me at +1-310-201-3526 or jbutler@jmbm.com to discuss how we can help.


How can we help? Brochure Credentials Photo Gallery

Published on:

 

Jim Butler and Guy Maisnik will be speaking at the 2025 Boutique Hotel Investment Conference on June 4, 2025.

Jim will be on a panel titled Redefining Invest in Boutique and Luxury Hotels from 10:40 am – 11:10 am.
This panel will bring together leading investors and developers who are rethinking how capital is deployed across independent, boutique, and luxury hospitality projects. From creative deal structures and adaptive reuse to aligning brand authenticity with investor returns, this session will explore the new metrics of success in a space where character and capital must coexist. Learn how today’s leaders are approaching growth, risk, and value creation in a rapidly transforming landscape.

Guy will be on a panel titled Deal Structuring in a Complex Market from 11:10 am – 11:30 am.
This panel features seasoned advisors who will share expertise on topics such as leverage levels, pricing dynamics, and risk mitigation strategies. Attendees will learn about the complexities of boutique deal-making, including how to navigate challenging market conditions, align with partner expectations, and secure investment without compromising the brand’s boutique integrity. This session will provide actionable strategies for crafting deals that support both growth and independence in a competitive environment.

View the full agenda: 2025 BHIC Agenda

Contact us to discuss how we can help.


Picture of Jim Butler

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

 


Guy Maisnik:photo__2885699_guy-maisnik-web1-300x300
+1-310-201-3588
GMaisnik@jmbm.com

 


View the links below for our services: 

Advising Hotel Operators and Brands – ALLA
How We Help With Hospitality – ALLA

Published on:

18 January 2022

See how JMBM’s Global Hospitality Group® can help you.

“Practice Group of the Year” awarded to
JMBM’s Global Hospitality Group
by Law360

Jeffer Mangels Butler & Mitchell LLP (JMBM) is proud to announce that the Global Hospitality Group® (GHG) has been selected as one of Law360’s Practice Groups of the Year. This award “honors the practices behind the litigation wins and major deals that resonated throughout the legal industry in 2021” and winners are chosen out of hundreds of submissions. The recognition is a result of the unsurpassed experience of the GHG team members who, for the past 30 years, have helped clients with more than 4,500 hospitality properties, valued at more than $112 billion.

Some notable accomplishments by members of the GHG in 2021 include:

  • Workout, recapitalization, and repositioning of a $1 billion mixed-use lifestyle hotel project
  • Sale of an NYSE-traded hotel REIT’s entire portfolio of 15 upscale, select-service hotels for $305 million
  • Closing more than $210 million in Commercial Property Assessed Clean Energy loans (C-PACE)
  • Assisting clients with hotel management and franchise agreements for properties worth more than $1.5 billion
  • Serving as primary counsel for lenders on more than $2.2 billion in the distressed hotel, retail, and office loans during the global pandemic, including over $500 million for a single client

CONTINUE READING →

Published on:

16 November 2021

See how JMBM’s Global Hospitality Group® can help you.

LOS ANGELES—The Global Hospitality Group® (GHG) of Jeffer Mangels Butler & Mitchell LLP (JMBM) has released an updated version of its Hospitality Credentials, detailing unsurpassed experience by providing representative clients and properties the GHG has worked on over the past 30 years. These Credentials show how the GHG has helped clients with more than 4,500 hospitality properties, valued at more than $112 billion.

Some notable accomplishments by members of the GHG over the last 12 months include:

  • Workout, recapitalization and repositioning of a $1 billion mixed-use lifestyle hotel project
  • Sale of a NYSE-traded hotel REIT’s entire portfolio of 15 upscale, select service hotels for $305 million
  • Closing more than $210 million in Commercial Property Assessed Clean Energy loans (C-PACE)
  • Assisting clients with hotel management and franchise agreements for properties worth more than $1.5 billion
  • Serving as primary counsel for lenders on more than $2.2 billion in distressed hotel, retail and office loans during the global pandemic, including over $500 million for a single client

CONTINUE READING →

Published on:

19 March 2021

See how JMBM’s Global Hospitality Group® can help you.
Click here for the latest articles on Hotel Development.

The survey standards for the American Land Title Association® (ALTA®)/ National Society of Professional Surveyors (NSPS) survey were updated in February 2021. Given how important this survey is to most commercial real estate transactions, it is crucial that investors understand its scope in order to avoid unnecessary costs and delays. JMBM associate Trevor Countryman has outlined these recent changes below.

New ALTA/NSPS Land Title
Survey Standards for 2021

by
Trevor Countryman

Every 5 years the survey standards for ALTA surveys are revised. ALTA surveys are the standard for the commercial real estate and hotel industry.

The most recent revisions to the ALTA survey standards took effect on February 23rd, 2021. All new ALTA surveys and any updates to existing ALTA surveys will now need to comply with the revised standards.

Click here for a redline showing the changes for the 2021 ALTA survey standards.

Overall, there were not many substantial edits to the ALTA survey standards for 2021, but below is quick summary of some of the most significant changes: CONTINUE READING →

Published on:

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

Published on:

6 December 2018

Hotel Lawyers developing hotels

Los Angeles—The Global Hospitality Group® of Jeffer Mangels Butler & Mitchell LLP is pleased to announce its client Ari Pearl’s development of the Diplomat Golf & Tennis Club in Florida into the SLS Resort Residence & Marina Hallandale Beach. The $220 million mixed-use project will include 240 hotel rooms, a 50-unit condo hotel, 250 branded apartments, a Katsuya restaurant and S Bar, and an 18-hole championship golf course.

JMBM Partner David Sudeck led the Global Hospitality Group team, which included Robert E. Braun and Associate Caleb Gilbert. JMBM attorneys represented Pearl’s company, PPG Development, in connection with residential and hotel-related management and licensing agreements.

“This is an exciting project for PPG Development,” said Sudeck. “We look forward to supporting its future success.”

Hotel Lawyer insights on hotel development transactions
The hotel lawyers of JMBM’s Global Hospitality Group® provide unsurpassed experience and resources to hotel owners, developers and capital providers — developing, buying, selling, financing and branding hotels. Based on the Group’s experience with more than $125 billion of hotel transactions and more than 4,700 hotels, these resources are valuable for veteran dealmakers and first-time hotel buyers and sellers. Look at some of the materials available on HotelLawyer.com and see how this experience can help you:

Published on:

07 September 2017
Click here for the latest articles on EB-5 Financing. 

President Trump’s budget deal with Congress includes extension of EB-5 through December 8, 2017

In a message to members of the Public Policy Committee today, the IIUSA confirmed the extension of the EB-5 regional center program as part of the budget deal struck yesterday by President Trump and Congressional leaders.

IIUSA message on EB-5 extension

The IIUSA is one of the leading EB-5 industry trade groups. Here is the text of the message from the IIUSA we received today:

Dear IIUSA Public Policy Committee,

As we are sure you’ve seen in media outlets, there is important news regarding government spending, and in turn, EB-5 reauthorization.

EB-5 Extension thru 12/8 Part of Congress/White House Spending Deal

Yesterday, Congress reached a deal with the White House that, once passed at some point this September, would extend existing funding levels and other program authorizations (such as EB-5) included on the last “continuing resolution” (“CR”) through 12/8/17.

The EB-5 authorization comes in Section 105 text of the deal released yesterday which:

Continues all authorities, requirements, and limitations from 2017 appropriations Acts through the date in section 106. Allows for valid obligations and expenditures during the period of the Continuing Resolution (CR).

Section 106 verifies the date:

Continues appropriations through December 8, 2017, or the enactment of the pertinent appropriations Act.

CONTINUE READING →

Published on:

 
15 August 2017
Click here for the latest articles on EB-5 Financing. 

JMBM’s Global Hospitality Group® and EB-5 Finance Group™ are pleased to announce the publication of The Developer’s EB-5 Handbook for EB-5 Construction Financing, a “must-read” resource for developers who are considering using EB-5 financing to complete or enhance their capital stack for construction projects . This is the much talked-about and often (inappropriately) maligned EB-5 program, also known as the immigrant investment visa program.

While there are many pending developments that could affect the EB-5 program, this is still a good time to learn how the program works and why so many developers have used EB-5 financing as part of the capital stack for their new projects. The Global Hospitality Group has developed an approach to guide clients through the EB-5 process with a minimal amount of financial risk to find and evaluate the reliable players and execute financing with a high degree of confidence.

The Developer’s EB-5 Handbook is written to help developers assess the potential opportunities for EB-5 financing while avoiding potential traps for the unwary. Written by legal and business advisors to top developers with great projects in the United States, the Handbook includes articles addressing the following topics: CONTINUE READING →

Published on:

 
06 August 2017
Click here for the latest articles on EB-5 Financing.

This article is an updated version of the one that was originally published on HotelLawBlog.com on 15 December 2014.

 
What JMBM does for developers with EB-5 financing
by
Jim Butler, Hotel & EB-5 Finance Lawyer

Focus on helping developers

Client confidentiality precludes us from listing clients and projects we have assisted with this program, but suffice it to say that some of the best known names in the business are tapping into this funding source to fill out their capital stack at a favorable cost. And we have helped some of the biggest and highest profile players.

JMBM has closed more than $1.5 billion of EB-5 financing and has sourced more than half of that for our development clients.

We specialize in representing developers and projects that we believe can qualify for “preferred” status. This concept is discussed in great detail in this article: “Development financing: How to win the race for EB-5 capital.

For developers and projects that qualify for “preferred” status, we provide business and legal advice to guide the developer through the entire capital raising process. This includes validating that the developer can qualify for the favorable financing and actually sourcing the capital.

Here is a more complete list of how we can usually assist: CONTINUE READING →

Contact Information