Articles Posted in Hotel Finance − Hotel Debt & Hotel Equity

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04 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 about 3 years ago on HotelLawBlog.com on 30 July 2014.

 
Why you do NOT want to form your own regional center
by
Jim Butler, Hotel & EB-5 Finance Lawyer
How should developers pursue EB-5 financing?

Although the EB-5 immigrant visa program has been around since 1990, the current trend of using it as a source of financing for hotel and other real estate started 20 years later – around 2010. We worked on one of the first hotel EB-5 financings for the W Hotel & Residences in Hollywood, and we have since worked on more than 100 EB-5 projects all over the country. Now, the use of EB-5 financing for construction has gone mainstream. High profile EB-5 financing closings include $450 million for the Century Plaza Los Angeles, $100 million for the Ritz Carlton & JW Marriott in downtown Los Angeles, $150 million for the Waldorf Astoria in Beverly Hills, and $1 billion for the Silverstein project at the World Trade Center in New York City (with a Four Seasons Hotel).

As a growing number of savvy hotel developers hurry to assess the EB-5 financing opportunity, they frequently receive conflicting advice as to the best way to pursue EB-5 financing. Many immigration lawyers and advisors tout the advantages of the developer forming its own regional center – basically to shave a few points off the all-in cost of EB-5 financing.

This advice may work well for the EB-5 advisors (in that they may get $100,000 or more in fees) and for certain hotel developers. But for most of the hotel developers we know, forming a captive regional center is a bad idea. This article should provide a note of caution for developers considering this course.

Based on our extensive experience with financing hotel development from EB-5 funding sources, we believe that the answer for most hotel developers will be to obtain “preferred” status for themselves and their projects – if they can do so – and to tap into the very best established EB-5 funding sources. For more on this approach, see “Development financing: How to win the race for EB-5 capital.”

Restricted capacity in channels for accessing EB-5 capital

As hotel developers compete in a very crowded field seeking the finite amount of EB-5 funding available each fiscal year (because there are only 10,000 visas available per year), there is something of a “race” to gain access to the limited resources for tapping EB-5 capital. CONTINUE READING →

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4 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 about 3 years ago on HotelLawBlog.com on 25 July 2014.

The 5 questions every developer
is asking about EB-5 financing
by
Jim Butler, Hotel & EB-5 Finance Lawyer
EB-5 financing has gone mainstream for hotel development

The use of EB-5 financing has exploded over the past 8 years as an important funding source for new development – particularly for hotel developments. It is clearly now part of the “mainstream.” 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 respected companies, such as Great Wolf Resorts, the Related Companies, and Silverstein Properties.

As lawyers who have worked on more than 100 EB-5 projects all over the country, we have noticed that everyone who investigates EB-5 financing wants answers to 5 big questions about the EB-5 financing opportunity for their project. It should come as no surprise that most of our EB-5 projects involve financing for new hotel development, because hotels are the most popular type of project for EB-5 investors, and we have one of the most prominent hotel law practices in the world. However, our team has also successfully used EB-5 financing for a number of non-hotel projects, including hospitals, senior living, restaurants, solar farms, and infrastructure projects.

The 5 questions every hotel developer is asking about EB-5 financing

Our developer clients say their top concerns in pursuing EB-5 financing is to quickly and reliably determine the answers to the following 5 questions below before they spend substantial time and money or forego other opportunities. They don’t want to waste their time on a wild goose chase. We think every developer considering EB-5 financing should be asking the same questions.

  1. Will EB-5 work for me on my project?
  2. How much money can I get?
  3. How much will it cost?
  4. How long will it take?
  5. How can I get certainty of execution?

CONTINUE READING →

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01 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 05 December 2014.

 
JMBM’s EB-5 construction financing program terms
for top developers
by
Jim Butler, Hotel & EB-5 Finance Lawyer
EB-5 financing comes in many colors and shapes

JMBM believes that for most developers, EB-5 financing is best structured as mezzanine debt or preferred equity, to optimize the total amount of financing and reduce the cost of the capital stack. Normally, senior construction debt (secured by a first priority lien) will be significantly cheaper than EB-5 money, but senior lenders (particularly if the subject project is a hotel) rarely lend more than 50% to 55% of the total cost of construction. Most of our clients like to use this cheap senior debt and then add some low-cost EB-5 mezzanine debt on top of it to get total loan-to-cost ratios up to 80% or more.

We also find that the structure outlined above is popular with the most experienced and reliable regional centers in the business (many of whom we have worked with). JMBM has closed more than $1.5 billion of EB-5 financing and has developed an expertise in structuring the EB-5 financing to address our client’s needs and goals. The highlights of the current market terms for this financing are described below.

JMBM is sourcing low-cost mezzanine capital for new construction through EB-5 financing for its top developer-clients.

To qualify for this program, the borrower must be an experienced developer with a superb track record, a superior reputation and a great project. If you do not meet those threshold requirements, then you don’t need to read any further, because this program likely is not suitable for you.

If you might benefit from mezzanine financing with an all-in cost to you of approximately 7% to 8% per annum, then you may want to consider JMBM’s “preferred” EB-5 financing program, which is summarized below. CONTINUE READING →

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01 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 approximately three years ago on HotelLawBlog.com on 14 August 2014.
FAQs: Essentials of EB-5
construction financing for developers
by
Jim Butler, Hotel & EB-5 Finance Lawyer
Below are some of the most Frequently Asked Questions (FAQs) and answers regarding EB-5 funding for developers (click the link for answer, or scroll down)

1What is EB-5?
2Why is there so much interest in EB-5 financing?
3Is EB-5 funding available for new construction?
4Can I use EB-5 funding to buy an existing project?
5Is there any limitation on the kind of project funded with EB-5?
6How much does EB-5 money cost?
7How do I know if EB-5 will work for me and my project?
8What is a regional center and do I need one?
9Why is getting the “right” regional center so critical?
10Should I form my own regional center?
11What is a TEA?
12How much money can I raise?
13What are the 6 biggest mistakes developers make with EB-5?
14What does JMBM do to help developers with EB-5 financing?

FAQs (with answers)

1.               What is EB-5?
EB-5 is a provision in the United States immigration laws. It is the fifth “Employment Based” immigration provision providing expedited visa processing (hence “EB-5”). The program is a win-win-win arrangement, giving wealthy immigrants the opportunity to earn a “fast-track” to US citizenship if they make a minimum investment of $500,000, and create a minimum of at least 10 new jobs in the United States. In return, communities get the benefit of economic stimulation created by this investment and the new jobs. And developers get a valuable source of financing for new projects that is otherwise more difficult to obtain and more expensive from other sources.

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2.               Why is there so much interest in EB-5 financing?

In the last 5 years, EB-5 financing has become extremely popular in development circles for financing projects in the United States, and it is being widely used by mainstream, institutional players including government entities such as port authorities, major hotel brands like Marriott, Hyatt, and Hilton, and some of the largest owners of hotels and restaurants. EB-5 financing has provided low-cost, non-recourse, 5 to 7 year term financing for the development and construction of new projects and offers a number of advantages to developers. For the past few years, the demand for EB-5 funding has exceeded the 10,000 annual visas available to raise such capital from immigrant investors and/or the capacity of the fund raising channels (mostly regional centers and marketing agents).

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3.               Is EB-5 funding available for new construction?

Generally, YES. CONTINUE READING →

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29 July 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 08 May 2017.
More than $1.5 billion of
EB-5 construction financing closed for JMBM clients
by
Jim Butler, Hotel & EB-5 Finance Lawyer
EB-5 is a proven means of financing for development projects.

EB-5 financing is an important and viable source of construction financing for hotels, hotel enhanced mixed-use, and other development projects. 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. 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 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 & A below.

Q: How much EB-5 financing has JMBM provided to its clients?

By mid-2017, the JMBM 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.

Over the last 8 years, we have worked on more than 100 EB-5 projects, primarily representing developers in securing and closing their EB-5 financing projects all over the country; this includes high profile locations in California, Florida, New York, and Texas, but also in more bread-and-butter locations including Georgia, Nebraska and Maryland. CONTINUE READING →

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25 July 2017
Click here for the latest articles on EB-5 Financing. 

The article below was updated in July 2017 based upon an earlier version which appeared on HotelLawBlog.com.

The EB-5 immigrant investor visa program has provided billions of dollars of affordable construction financing for a wide variety of projects ranging from high tech and alternate energy to traditional types of commercial real estate.

Over the last decade, EB-5 investors have overwhelmingly chosen real estate projects, particularly those with hotel, multifamily, senior living, and mixed-use components. While the enabling legislation for the program does not limit the type of project financed, it does require that at least 10 new jobs be created in the United States for each investor seeking a visa.

This article discusses why hotels are consistently among the investments most favored for EB-5 financing, and why they are likely to remain so for some time to come.
Are hotels still the darling of EB-5 financing?
by
Jim Butler, Hotel & EB-5 Finance Lawyer
As EB-5 financing has become an important part of new development and construction financing over the past 5 to 10 years, EB-5 investors and EB-5 lenders have shown a strong preference for hotel projects. Here are some of the reasons that hotels continue to be the “darling” of EB-5 financing: CONTINUE READING →

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20 July 2017
Click here for the latest articles on EB-5 Financing. 

The article below is updated as of July 2017. It first appeared on HotelLawBlog.com on 8 May 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 & EB-5 Finance 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 →

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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 →

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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 →

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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 $87 billion in hotel transaction experience, involving more than 3,900 properties located around the globe, and providing one of the most extensive virtual data bases of market terms for deals and financings.

Contact Information
Jim Butler, Chairman
Global Hospitality Group®
Jeffer Mangels Butler & Mitchell LLP
(310) 201-3526 • jbutler@jmbm.com
www.HotelLawyer.com

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