Articles Posted in Hotel Mixed-Use

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14 August 2013
Hotel Lawyers on “hotel condo” units as securities (or NOT).

An important decision on when a condo hotel does NOT involve the sale of a “security”

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Jim Butler, Bob Braun and Guy Maisnik
Condo Hotel Lawyers

One of the most significant challenges for developers of a condo hotel project is whether the sale of the condo units constitutes the sale of a “security.” If it does, the principals and sellers of the project will have much greater compliance issues, costs and liabilities, which could make the project unworkable.

We have been advising clients on these issues in connection with more than 100 hotel mixed-use transactions since 2000. The deals usually have a significant residential component (condo hotels, hotel condos, single family homes or home sites, etc.) retail, entertainment and other uses added to a core hotel component. The Ninth Circuit opinion in Salameh v. Tarsadia Hotel (CA-9, No. 11-55479) discussed today provides a significant new level of comfort for all involved in such matters.

In an important decision yesterday (August 13, 2013) written by Judge Ronald M. Gould, a 3-judge panel of the Court of Appeals for the Ninth Circuit upheld the lower federal district court’s dismissal of plaintiff’s lawsuit arising out of their purchase of hotel condominium units at the Hard Rock Hotel San Diego, a “condo-hotel.”

The case was filed as a class action by Tamer Salameh and other named plaintiffs against some of the most respected people in Southern California’s hospitality industry, including Tarsadia Hotel, Tushar Patel, B.U. Patel, Gregory Casserly and other defendants. Notably, Playground Destination Properties, one of the first developers and most esteemed marketing companies for condo hotels, was also named in the action.

Essential to the plaintiffs’ claims was their characterization of their purchase as involving “securities” under the federal securities laws. They said that defendants offered condominium units together with a rental-management program, and doing so, constituted the sale of a “security.” The lower court dismissed the case after giving plaintiffs an opportunity to amend, finding that the amended complaint still did not state facts sufficient to find the existence of a “security.” The lower court also dismissed related common law fraud claims. For background on this issue and its importance, see “Condo Hotel Lawyer: Why does the SEC care about condo hotels?”
If you don’t know what a condo hotel is, or how it fits into hotel mixed-used, we have an entire section of HotelLawyer.com and HotelLawBlog devoted to condo hotels and to mixed-use. Just use the search bar at the top for any subject or click condo hotels or mixed use!

Why is this case important?

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15 March 2013

Great opportunity . . . and danger . . . await shopping center owners who seek to add hotels to their shopping centers, malls and retail centers.

An interesting confluence of factors has ignited a wave of hotel development — adding hotels to shopping centers, malls and retail centers. This trend is already underway and will be headline news for the next couple of years.

There are compelling synergies for both the shopping center and the hotel. These have been thoroughly documented by major players. One major shopping center owner performed a multi-year study on its 200+ properties and found that the right hotel can boost gross sales at shopping centers 20% to 40%. And the associated hotels also get a boost in Revenue Per Available Room (RevPAR) of 30% to 40% over hotels in their competitive set.

If you need more information on the basics — why people are adding hotels to shopping centers and malls — look at the articles posted on www.HotelLawyer.com. From the home page, scroll down and look on the right-hand side for under “Hotel Development” or go to www.hotellaw.jmbm.com/hotel_development.

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5 March 2013

Hotel Lawyer on adding a hotel to shopping centers and malls.

The ULI program held on February 20, 2013 in JMBM’s Los Angeles offices was a great success. The program title says it all — “Back to the Future: The Renaissance of Hotel-Retail Mixed-Use.”

As one might expect for a ULI event on a timely topic like this, there was a capacity crowd, sharing of the latest “technology” in adding hotels to shopping centers, and a veteran team of presenters.

Jim Butler, Chairman of JMBM’s Global Hospitality Group®, moderated the panel, which included:

  • Guy Maisnik, Partner and Vice Chairman of JMBM’s Global Hospitality Group®
  • Steve Mermell, Assistant City Manager, City of Pasadena
  • Bruce Baltin, Senior Vice President, PKF Consulting
  • Les Melcher, SVP – Business Development, Woodbine Development Corporation

The panel looked at why many shopping center owners and developers are adding hotels to their projects, and commented on some tips and traps along the way. There were some great case studies that the panelists worked on.

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28 January 2013

We are at the beginning of what looks to be a renaissance of “hotel-retail mixed-use” development. Shopping center developers nationwide are exploring the feasibility of adding a hotels to existing retail properties, while others are already implementing plans that have been in the pipeline. Some are adding hotels to the mix for new ground up development. Fueling this trend is research showing that both retailers and hoteliers make huge gains in revenue when they come together in the “hotel-retail mixed-use” environment.

My partner, Guy Maisnik, and I recently wrote an article on this subject for Hotel Business and it is reprinted below, with permission.

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17 December 2012

A wave of “hotel-retail mixed-use” is coming. It may mark the rebirth of bricks and mortar.

Put on the back burner by the Great Recession, the hotel-retail mixed-use development is back in play. Virtually every major shopping center and mall owner is exploring whether it makes sense to add a hotel component to existing projects, and are checking feasibility for new ones. Some new hotel-retail projects are underway, and many others are in the planning stage.
What’s behind this trend is a simple and powerful driver: The right hotel added to the right project can boost retail sales by 20-40%! And the retail shopping can boost hotel RevPAR by a comparable amount over the competitive set.

My partner, Guy Maisnik, and I were asked by Globe St to write a guest column for their publication on the hotel-retail trend. It is reprinted below, with permission.

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28 April 2011

Hotel Lawyer with more on the long-term future of condo hotels.

It is interesting that I got calls from two reporters about the state of the condo hotel sector this week. One from a major daily paper doing background research, and the other from a well-respected industry publication, MortgageOrb, published by Zackin Publications (which also publishes Commercial Mortgage Insight and Secondary Marketing Executive.)

Condo hotels have not been in the news for some time, and as hospitality transactions heat up, many are now wondering how and when this niche product will be resurrected.

Phil Hall of MortgageOrb asked some excellent questions about the condo hotel sector and our interview, titled Jim Butler Checks Out the Condo-Hotel Niche, published in MortgageOrb’s Person of the Week column, is reprinted below.

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14 April 2011

Hotel Lawyer with good news for well-structured condo hotel deals. With the experience gained as legal and business advisors on more than 100 condo hotel and hotel condo projects, we have said for many years that this type of project has earned an enduring place in the landscape of hotel and real estate development. We still believe that.

The main issues of successful hotel mixed-use development are managing consumer expectations, fulfilling those expectations, and creating a viable mixed-use regime structure. In the case of condo hotels, a viable structure must work from an operational standpoint, be economically sustainable, and avoid triggering violations of Federal and State securities laws.

In a recent lawsuit, involving the Hard Rock Hotel San Diego, a federal district court in California ruled against the condo hotel buyers, finding that no securities laws were violated — the plaintiffs did not allege facts that would cause the condo hotel units to constitute “securities.” We see the case as affirming the effectiveness in defeating plaintiffs’ claims of two structural elements we have encouraged all our clients to use.

My partner, Catherine Holmes, who structures most of our condo hotel regimes, talks about these factors and the case below. Catherine advises clients in the specific business and legal aspects of condo hotel regime structuring and documentation, including securities compliance matters, documentation and training. In her article below, she talks about the case and what it means for us in the condo hotel world. It is good news!

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22 November 2010

Mixed-use can be a key to unlock value. But “standards” can be critical to protect the value of your hotel mixed-use asset

Some years ago, we coined the term “hotel-enhanced mixed-use” to describe those dynamic mixed-use properties where the hotel acts as the “spark plug” that energizes the entire project.
Hotels can be the “ultimate amenity” for mixed-use projects because they can distinguish the project, provide a great driver of traffic, and offer an integrating hub for residential and retail customers.

Since that time, we have seen hotels in successful mixed-use properties achieve RevPAR premiums of 30% to 40%. But these success stories are written about hotel developers and brands that understood — on the front end — that quality control had to be hard-wired into the regime. Hotel owners and hotel brands that failed to do that have not been so lucky.

In her article below, which was recently published by Hotel Business, hotel lawyer Catherine Holmes, a senior member of the JMBM Global Hospitality Group®, offers experienced advice on how you can “Protect your mixed-use asset by creating and maintaining standards.”

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4 February 2009

Hotel lawyer in Beverly Hills at the ULI “Reinventing Retail and Mixed-Use” program, the Beverly Hilton, Beverly Hills, California, February 4-5, 2009. The Urban Land Institute’s big retail conference is underway and one of the lead off panels had some great information about why hotels are being added to retail mixed-use projects.

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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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