Articles Posted in Hotel Finance − Hotel Debt & Hotel Equity

Published on:

20 July 2017

EB-5 generates billions of dollars of affordable construction financing for developments located in the United States that create new jobs for US citizens. JMBM’s EB-5 financing group has closed more than $1.5 billion of EB-5 financing for our clients’ development projects, and we sourced more than half of that amount.

Although there are many exciting success stories, we see developers frequently blundering into a small number of easily avoided mistakes, which can be very costly. So here is our short list of the mistakes and tips to avoid them.

 

Tips to avoid the 6 most common
mistakes developers make with EB-5
by
Jim Butler, Hotel Lawyer

There are a number of mistakes developers often make with EB-5 financing. Here are a few tips to avoid 6 of the most common mistakes: CONTINUE READING →

Published on:

08 May 2017

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

As of January 31, 2017, JMBM’s team has closed more than $1.5 billion of EB-5 financing and sourced more than half of that for our clients!

EB-5 is a proven means of financing development projects.

EB-5 financing is an important and viable source of construction financing for hotels, hotel enhanced mixed-use, and other development projects. Seven or eight years ago, when JMBM started helping hotel developers with EB-5 financing, many worried about whether this is a legitimate and reliable financing source.

Now, after billions of dollars of development have been funded with EB-5, this type of financing is regarded as mainstream, and it is used by many institutional players including government entities such as port authorities, major hotel brands like Marriott and Hilton, and some of America’s most successful and well-respected companies, such as Great Wolf Resorts, the Related Companies and Silverstein Properties.

As an active source of EB-5 funding for select developers, JMBM’s Global Hospitality Group® team has been busy too. We caught up with Jim Butler and David Sudeck for an update on recent developments in this area as summarized in the Q and A below.

Q: How much EB-5 financing has JMBM provided to its clients?As of January 31, 2017, our team has closed more than $1.5 billion in EB-5 financing for our clients’ development projects, and we sourced more than half of that amount. CONTINUE READING →

Published on:

05 May 2017

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

EB-5 extended through September 30

Just after noon on Friday, May 5, 2017, President Donald Trump signed the Consolidated Appropriations Act, 2017. The new law approves $1.1 trillion in Federal appropriations through September 30, 2017.

One of the provisions of the bill extends the EB-5 Regional Center program without change through the same date.

Although the Consolidated Appropriations Act did not change any provisions of the EB-5 program, we expect further Congressional and regulatory efforts in the very near future.

As we said yesterday,

Industry leaders view this extension of the program as the necessary threshold to achieve a long-term legislative solution to the issues that have been raised about the EB-5 program before any regulatory changes are implemented and before the next sunset date of September 30, 2017.

We expect all stakeholders in the EB-5 business to be pushing very hard toward this end.

CONTINUE READING →

Published on:

04 May 2017

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

We are getting a lot of calls from our developer clients and friends asking about the status of the EB-5 Regional Center authorization that was about to sunset on May 5, 2017, along with appropriations for the Federal Government.

A “clean extension” for EB-5

Early on Monday morning, May 1, 2017, the House Appropriations Committee approved a $1.1 trillion budget to fund the government through September 30, 2017. That proposed bill includes a “clean extension “(i.e. no amendments) to the EB-5 Regional Center program through the same period.

On May 3, the House passed the spending bill, and on May 4, the Senate gave its approval. The bill now goes to President Trump who is expected to sign the new budget into law.

If expectations are met, the government shut down will be avoided and the EB-5 Regional Center Program will continue without interruption. CONTINUE READING →

Published on:

 

LOS ANGELES—The Meet the Money® 2017 conference will bring hospitality industry leaders together from May 8-10 in Los Angeles at the Hyatt Regency Hotel LAX. This marks the conference’s 27th year, where hotel owners, operators, developers, consultants, investors, brands, lenders and other capital providers will gather to get deals done and discuss and catch up on the latest issues and opportunities involving the hotel industry.

“This year’s conference is particularly important,” said Jim Butler, Chairman of JMBM’s Global Hospitality Group®. “The hospitality industry is at an interesting point in mid-2017. Intriguing opportunities will be available for the diligent and well-connected, but greater perils will also challenge investors. This conference will present many experts’ perspectives on what properties in which markets will thrive or perish. It is a great time to be an entrepreneur in the hotel industry.”

The theme this year is “Opportunity or Peril? Finding the right key to the right door.” Industry experts from top brands across the country will focus on the state of the industry and strategies that will aid in discovering opportunities and avoiding risks. Panelists will join discussions on successful development strategies, current capital markets, creative solutions for existing properties, foreign investment, and a range of other topics. The full conference program is now available online.

Since its inception in 1990, Meet the Money® has connected thousands of senior hotel financing experts, developers and hospitality insiders. Keynote speaker Richard K. Green, Ph.D., director of the University of Southern California Lusk Center for Real Estate, along with over 130 influential heavyweights in the industry have been assembled to provide insight on navigating the current market. Additional presentations will include a spotlight interview with Trump Hotel CEO Eric Danziger, and a CEO panel with top executives from Condor Hospitality Trust, Monday Properties, Interval International, CMB Regional Centers, and Aimbridge Hospitality. A full list of all conferences speakers can be found on the conference website.

About Meet the Money
For 27 years, Meet the Money® has provided a unique environment for forging relationships and gaining up-to-the-minute information about the world of hotel investment and finance. The conference is big enough to attract heavy hitters, but small enough to network with them. At Meet the Money®, there is time, atmosphere and availability to have meaningful meetings with deal-making potential. Register now at MeetTheMoney.com.

About Global Hospitality Group® of JMBM
The hospitality attorneys in the Global Hospitality Group® of Jeffer Mangels Butler & Mitchell LLP comprise the premier hospitality practice in a full-service law firm, and the most experienced legal and advisory team in the industry. Our team of hotel lawyers and business advisors has more than $71 billion in hotel transaction experience, involving more than 3,800 properties located around the globe, and providing one of the most extensive virtual data bases of market terms for deals and financings.

Published on:

12 December 2016

EB-5 financing for developers extended. Obama signs “Continuing Resolution”

On December 9, 2016, President Obama signed the “Continuing Resolution” passed by Congress to extend funding of the federal government until April 28, 2017, by which time it is expected that Congress will have approved a budget for the full fiscal year.

EB-5 Regional Center program also extended to April 28, 2017

As with several prior budget extensions, the Continuing Resolution included an extension of the EB-5 program’s Regional Center provisions, validating expectations of industry experts.

This means that developers who followed our advice to “get in line” with their projects last fall (when some concerns over EB-5 renewal were raised) have either raised their EB-5 capital by now or should have plenty of time to do so before the current extension signed by President Obama runs out next April.

Why NOW may be the best time for developers to start EB-5 financing

Developers who followed our advice last fall have been well served. On August 16, 2016, we published a blog article entitled “Why NOW may be the best time for developers to start EB-5 financing.” We feel the same way today.

In our earlier article, we warned that there is always some uncertainty in predicting what Congress will do. However, all people that we know who are knowledgeable about the EB-5 program and the political environment believe that EB-5 will be renewed and continued in a viable form. Some developers are uncomfortable with the uncertainty created by short-term legislative sunsets on the extensions, and on accepting predictions that Congress will continue the program we have maintained since 1992 — almost 25 years. These developers want to wait until everything has settled down and has more certainty.

We believe the “wait and see” approach is a mistake for many developers — particularly those who are ready to start construction now. Here is why: CONTINUE READING →

Published on:

08 August 2016

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

A primer on EB-5 and key issues in its renewal

 

What is the EB-5 Immigrant Investor Visa Program?

The EB-5 immigrant investment visa program provides a “fast track” to obtain permanent U.S. residency (a “green card”) to qualified foreign investors who satisfy specified requirements, including investing at least $500,000 in a U.S. enterprise or project that creates at least 10 new permanent jobs for U.S. citizens, and otherwise comply with the immigration visa process.

The regional center pilot program

In addition to the basic permanent EB-5 legislation, a “pilot program” regarding Regional Centers (or RCs) was adopted in 1992. Although it has never lapsed, the Regional Center provisions have typically been renewed for relatively short periods (e.g. 1 to 5 years). The current authorizing legislation for this Regional Center aspect of the program is set to expire or “sunset” September 30, 2016.

Before the Regional Center pilot program expired last year in September, a bi-partisan effort in both houses of Congress worked with industry leaders to propose legislation with a broad consensus of stakeholders that would have addressed a full range of issues concerning the EB-5 program. But at the proverbial 11th hour, Congress dropped the comprehensive reform and decided to renew the existing law (without change) for 12 months (expiring September 30, 2016).

Now that the sunset date is approaching again, many stakeholders in the EB-5 process are working with Congress for a better and longer-lasting resolution of the EB-5 issues.

none of the experts we talk to believe that the EB-5 program will be allowed to lapse

Some of the proposals to revise EB-5

Although a review of last year’s drafts of legislation may be helpful in understanding the “big picture issues,” the political environment is different this year, particularly with election-year dynamics. It is too early to predict what approaches and proposals will succeed, but there is almost universal belief that a workable resolution will be achieved for all legitimate stakeholders. Some of the major proposals are listed below.

JMBM’s EB-5 Financing team follows these developments closely, and you should talk with us to get the latest update.

  • How long should the re-authorization last? After almost 25 years, hasn’t the Pilot Program shown results justifying making it permanent or doing away with it? Why is it permitted to become a political football every year or two? Why does it need to come up for renewal?
  • What is the required investment for an EB-5 visa applicant? Currently the minimum investment is $500,000, and more than 90% of all EB-5 visa immigrants have qualified for this amount. Only 10% have used the $1 million investment level. Should one or both investment levels be raised (e.g. to $800,000 and $1.2 million)? Should there just be one level of investment? Should the difference between the lowest and highest investment requirements be reduced?
  • What does it take to qualify for the lowest investment requirement? Currently, only projects in Targeted Employment Areas or “TEAs” (rural locations or areas with high unemployment equal to 150% or more of national unemployment levels) qualify for the lower investment of $500,000. Should rural areas be more strictly defined? Should national standards be imposed to replace the current state-by-state approach to TEA designation based on unemployment? What should those standards be?
  • How do you calculate job creation? To obtain an EB-5 visa, each investor must invest the required minimum and that investment must create at least 10 new permanent jobs. Certainly it is easy to calculate the number of direct employees — those with W-2s, but what else counts? Construction jobs? Indirect and induced jobs (not direct or W-2 employees but workers servicing the project such as an outside laundry service for a hotel, the window washers for the building, the workers in the restaurants and retailers who reside in the project). Currently, indirect and induced jobs can be included in the job count when calculated by one of the four established USCIS-approved formulas – should this approach be changed? Should the job count requirement be changed?
  • How many visas should the program permit and how do you count them? Is the current 10,000 EB-5 visas per year the right amount or should it be increased? Should any of those visas be set aside or earmarked for certain projects such as projects in rural areas of public infrastructure? Should the permitted number of visas (10,000 or whatever it may be changed to) count only the EB-5 investors, or should it include the investor’s spouse and minor children? Should unused EB-5 visa allocations accumulate from year to year or be spread amongst all employment based immigration programs?
  • Should something be done about the “aging out” problem? Is it appropriate to exclude minor children from the benefits of EB-5 when they exceed the age of minority because of long delays — up to several years — by the U.S. immigration service in processing the visas?
  • Should Regional Centers be charged an annual fee? Should there be an annual fee for a Regional Center to retain its designation? Should that be $25,000, $50,000 or some other number? Do we want to discourage inactive RCs and those who just “bought a charter” for speculation with no intention to use it for the intended purpose? What should these fees, if any, pay for?
  • Should there be more Federal oversight? Proposals in this area have included greater reporting, oversight and involvement by a host of federal government agencies such as the SEC, FBI, NSA, and Homeland Security. Such proposals also generally include civil and criminal penalties for noncompliance. Nobody in the EB-5 industry favors fraud or terrorism, but is there really enough of a problem to warrant this attention? Aren’t current laws adequate? Could this be over-regulation?

These 8 broad areas of inquiry about the EB-5 program are worth discussing and, in fact, have been discussed at length for some time. (See our December 8, 2015 blog for changes that almost went into effect in 2016.)

Time to evaluate the right EB-5 strategy for you?

We have a lot of practical experience in helping our developer clients raise EB-5 funding. If you would like some help to evaluate whether EB-5 could work for you, or what strategy is best for you, then give us a call. There is no cost for an initial discussion.

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

David Sudeck, +1-310-201-3518 or dsudeck@jmbm.com

 

Other articles on EB-5 Financing

To access our rich library of articles on EB-5 financing, go to www.HotelLawyer.com, scroll down the right-hand side under LEARN MORE ABOUT and click on “EB-5 Financing.” For your convenience, here are a few popular EB-5 articles that may be of interest:

EB-5 funding for new development: JMBM has closed more than $1.5 billion of EB-5 financing.

EB-5 extended without change: President Donald Trump signs bill

What’s happening with EB-5 financing for new development projects? Is it still available?

JMBM’s “preferred” EB-5 construction financing program for top developers and projects.

FAQs about EB-5 project financing for new hotel development

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

Financing hotel development today: The 5 questions every hotel developer is asking about EB-5 financing

Picture of Jim Butler
This is Jim Butler, author of
www.HotelLawBlog.com and hotel lawyer. We represent hotel owners, developers and investors. We have helped our clients find business and legal solutions for more than $71 billion of hotel transactions, involving more than 3,800 hotels. As of January 31, 2017, we have closed more than $1.5 billion of EB-5 financing for our clients’ projects, and sourced most of that. I invite you to contact me to explore how our experience and resources might help you accomplish your goals. 310.201-3526 or jbutler@jmbm.com
Published on:

 

Alan Reay, President of Atlas Hospitality Group, speaks with Robert Braun, senior member of JMBM’s Global Hospitality Group® at JMBM’s 2016 Meet the Money® – the national hotel finance and investment conference. They discuss the California hotel market including sales and purchases, pricing, RevPAR, financing, and the impact of the Marriott/Starwood merger and Airbnb.

A transcript follows the video. See other videos in this series on the Jeffer Mangels YouTube channel.

Bob Braun: I’m with Alan Reay of Atlas Hospitality. He’s the foremost hotel broker in California, I’d say. At least that’s what I tell my clients, and I’ve always been proved right. Alan, thanks very much for coming and talking to us today. I think you have your pulse on the market, certainly here in California, more than possibly anyone else. What do you see in the hotel market today? What kind of trends do you see?

Alan Reay: During the first quarter we’ve definitely seen a big drop off in sales in California. In the U.S., down 52%; in California, down 35%; that really has nothing to do with the economic fundamentals, because RevPARs are still increasing, profits are up and a lot of the numbers are positive throughout California. It has been a fundamental shift from a buyer’s sentiment in terms of how they’re looking at deals and how they’re pricing them. We had a lot of turmoil in the public markets, as you know, in the first few months of 2016, and a lot of REITs have pulled out of the market, and a lot of lenders have pulled out of the market. So that’s created a disconnect between what buyers and sellers expectations are on pricing, which in turn has created a big drop in hotel sales volume.

Bob Braun: Now do you think this creates an opportunity for people? Or is the lack of lending and the lack of interest something that’s just going to continue through the rest of the year? CONTINUE READING →

Published on:

 

Tom Corcoran, Chairman of the Board of FelCor Lodging Trust, speaks with David Sudeck, senior member of JMBM’s Global Hospitality Group® at JMBM’s 2016 Meet the Money® – the national hotel finance and investment conference. They discuss “rational debt,” redevelopment opportunities, and the evolution of FelCor.

A transcript follows the video. See other videos in this series on the Jeffer Mangels YouTube channel.

David Sudeck: I’m David Sudeck, I’m at the 26th annual Meet the Money® conference with Tom Corcoran, the founder of FelCor Lodging Trust. Thank you for joining us. You just got off your panel and you did a great job, so thank you for that. I wanted to hear about in this uncertain time, 2016, where you see us in the market at this point and how it may differ from 2015.

Tom Corcoran: Actually, I think it’s going to be a lot like ’15. I think ’16 and ’15 are going to be very similar. I think we’re going to continue to have positive RevPAR above the GDP and so I think it makes a lot of sense to me that the industry remains very strong; robust. There’s some clouds out there, people are trying to say there’s a storm coming, and I just don’t happen to believe there is. I think those clouds are artificially made up and aren’t really in the real world.

David Sudeck: My experience is some of our lender clients are pulling back in terms of the provisions, particularly of construction lending.

Tom Corcoran: Yeah, I think that’s probably good, I’m okay with that. When people go through getting nervous before things really are bad, it has the net effect of acting as a governor – which is why I call it a governor – because it kind of stops irrational lending. Most people believe supply is the worst enemy of the hotel industry and I would argue that it’s debt that creates the supply. The source, historically, of all the downturns has been where people have borrowed too much money – even in some of the worst cycles we’ve gone through – people had non-recourse, 100% financing. Then people can build hotels that make no rational, economic sense at all.

David Sudeck: So where do you see opportunities in this market given the lack of liquidity? I think that the number of hotel developers is going to shrink, supply will pull back to some extent. Do you see any specific opportunities in this marketplace? CONTINUE READING →

Published on:

 

Jonathan Falik, CEO of JF Capital Advisors, speaks with David Sudeck, senior member of JMBM’s Global Hospitality Group® at JMBM’s 2016 Meet the Money® – the national hotel finance and investment conference. They discuss the current hotel market, the availability of capital, and what lenders and capital providers are looking for.

A transcript follows the video. See other videos in this series on the Jeffer Mangels YouTube channel.

David Sudeck: We’re at the 26th Annual Meet the Money Conference. I’m here with Jonathan Falik, CEO and Founder of JF Capital Advisors. Welcome.

Jonathan Falik: Thank you for having me.

David Sudeck: You’ve been a mainstay at Meet the Money® – we appreciate that, by the way.

Jonathan Falik: Well, it’s one of my favorite conferences.

David Sudeck: What’s the temperament like in terms of the marketplace?

Jonathan Falik: People are cautious. Most seem optimistic, but are cautious and are in a learning mode. Everyone’s trying to figure out who’s saying what and who’s thinking what – which is interesting because normally people in our industry think they know everything.

David Sudeck: What are you seeing in the marketplace in general? Let’s talk about the cycle. CONTINUE READING →