Articles Posted in Outlook and Trends

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19 June, 2018

Meet the Money® is a productive conference with a casual atmosphere; the executives and other hotel industry representatives who attend often speak candidly about their expectations for hotel finance, development and investment throughout the upcoming year.

The short video below highlights how some of our attendees feel about 2018—watch and find out what some of the industry’s most well-known brands, banks, consultants, mangers and developers have to say about what’s on the horizon.

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25 May 2018

The European Union’s General Data Privacy Regulation, rules protecting the privacy of personal information, has gone into effect and impacts every company that does business in the EU. This will impact hotel owners, developers, brands, operators and managers–any company with a hotel property in the EU or that collects information from EU citizens must adhere to the new regulations.

What does that mean for your business, and where should you start the process of compliance? Senior member of JMBM’s Global Hospitality Group® and Co-Chair of the Firm’s Cybersecurity & Privacy Group Bob Braun summarizes the issues, below.

Why should I Care About GDPR?
by
Bob Braun

The importance of May 25, 2018. If you are reading this, you have probably been inundated with emails from companies announcing that they have adopted new and better privacy and security policies and procedures. This isn’t a coincidence – as of May 25, 2018, the EU’s General Data Privacy Regulation (GDPR), requires every organization that does business in the EU, or that collects information from EU citizens, to guarantee the privacy and accuracy of personal information. While the purpose of the GDPR is to strengthen and unify data protection for all individuals within the EU, its effect is worldwide; every organization that does business in the European Union or collects personal information from individuals in the European Union is subject to this regulation. CONTINUE READING →

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07 May 2018

LOS ANGELES—Jeffer Mangels Butler & Mitchell LLP (JMBM) is pleased to announce that hospitality lawyer Jeffrey T. Myers has joined the Firm as a Partner in JMBM’s Global Hospitality Group® and Real Estate Department.

Myers’ practice focuses on the development, financing, acquisition, and operation of hotels, resorts and other hospitality properties. His clients include developers, capital providers, commercial lessors, and tenants. He has assisted clients in a full range of hospitality projects including hotels, resorts, casinos, restaurants, nightclubs, condo hotels, and mixed-use properties.

“We are thrilled to have Jeff join our team. He is a talented lawyer who further strengthens our capabilities and brings natural synergies to our group,” said Jim Butler, Chair of JMBM’s Global Hospitality Group. “Now Jeff can offer his clients assistance with important specialties such as ADA defense, cybersecurity, labor & employment (including union contract negotiations and union avoidance), land use, and litigation.”

Myers’ experience includes representing a national developer in the negotiation of a series of agreements for the development, management and licensing of a to-be-developed ultraluxury resort and spa in the Papagayo Peninsula region of Costa Rica; representing one of the largest hospitality REITs in the country from its inception through the acquisition, financing and management of a $1 billion portfolio of hotel assets; representing a major institutional developer in its collection of celebrity-chef curated restaurants for the Hudson Yards project in New York; and representing a sovereign investment company in connection with its investment and ownership of the largest privately funded mixed-use development in U.S. history, including all casino and gaming related structuring and licensing, and the negotiation of management and development agreements for each of the hotel and casino components.

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Advice from a Proposition 65 Compliance & Defense lawyer for hotels.

For many years, businesses operating in California have been plagued by “bounty hunter” and government lawsuits brought under Proposition 65 — the California law that requires warnings about hazardous substances. The technical disclosure requirements have bedeviled many legitimate businesses for some time. From our continuous interaction with members of the hotel industry, it appears to us that many are not aware of new requirements they must meet by August 30, 2018.

While the new regulations apply generally to all businesses in California, there are particular implications for hotels and restaurants given the nature of their operations. And if you are not in compliance by August 30, 2018, you can probably expect a lawsuit shortly thereafter. We expect these new requirements to stir up a lot of expensive litigation for the unprepared.

In this article, Jodi Smith, a senior member of JMBM’s Global Hospitality Group®, explains this significant development.

California Proposition 65 Warnings for Hotels
Required by August 30, 2018
by
Proposition 65 Defense Lawyer Jodi Smith

New Prop 65 regulations for hotels going into effect. The Safe Drinking Water and Toxic Enforcement Act of 1986 (better known as “Proposition 65” or “Prop 65”) requires companies conducting business in California to warn consumers prior to exposing consumers to specific chemicals that have been identified pursuant to Proposition 65 as being chemicals known to cause cancer or birth defects or other reproductive harm.  The Proposition 65 regulations were substantially revised in August 2016 and the new regulations go into effect on August 30, 2018.  The new warnings can be used now.  Given the complexity of the new warning requirements for hotels, getting a head start would be prudent.

What’s a hotel for Prop 65 purposes? The new regulations require the owner and/or operator of a hotel to determine which of a number of different types of warnings may be required under the new regulations.  “Hotel” is defined broadly to include “any type of transient lodging establishment, including but not limited to, hotels, motels, bed and breakfast inns, resorts, spas, ski resorts, guest ranches, agricultural “homestays”, tourist homes, condominiums, timeshares, vacation home rentals, and extended stay establishments in which members of the public can obtain transient lodging accommodations.”  (Title 27 California Code of Regulations (CCR) § 25607.32(a))

Warnings required for registration desk or online. The Proposition 65 warning must either (1) be provided on a sign posted at the hotel’s registration desk in no smaller than 22-point type in a location where it will be likely to be seen, read, and understood prior to the completion of the registration or check-in process, or (2) provided to the hotel guest in electronic (directly or via a hyperlink) or hard copy form in the same size type as other consumer information prior to, or during the registration or check-in process.  (27 CCR § 25607.32.(b))  In addition, if written or electronic consumer information is given to hotel guests during the registration or check-in process in any language other than English, the warning must be given in both English and that language.  (27 CCR § 25607.32(c)) CONTINUE READING →

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5 March 2018

On Saturday, March 3, 2018, the hospitality industry gathered at the JW Marriott LA LIVE to honor industry icon Larry Shupnick, senior vice president of development & acquisitions at Interstate Hotels & Resorts. The sold-out event was the annual fund raiser organized by Cal Poly to benefit The Collins College of Hospitality Management.

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Larry Shupnick

Not to miss an opportunity to share life with his friends, the evening before at a private dinner party, Shupnick celebrated his birthday (it is really May 5, but why be picky), and as guests were getting ready to leave, Larry asked them to stay for a “surprise” wedding to Jo Frank!

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Larry Shupnick and Jo Frank

“I love this industry, and the opportunities are unlimited in hospitality,” said Shupnick of his time in the industry. “I do not measure my wealth in dollars. My wealth is really my family and friends. That is what is important in life.”

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Jim Butler, Jo (Frank) Shupnick and Larry Shupnick

Not a bad weekend! Larry celebrated a birthday, wedding, the Robert Mondavi Wine & Food Award, and honoree at Hospitality Uncorked.

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Larry Shupnick and the live auctioneer

JMBM’s Global Hospitality Group® was a Leadership Patron for the event, and all join in warmest congratulations to Larry and Jo.

This is Jim Butler, author of www.HotelLawBlog.com and hotel lawyer, signing off. Please contact us if you would like to discuss any issues that affect your hotel interests or see how our experience might help you create value and avoid unnecessary pitfalls. Who’s your hotel lawyer?

Picture of Jim ButlerJim Butler is a founder of the JMBM law firm and chairman of its Real Estate Department. He founded and chairs the Firm’s Global Hospitality Group® and its EB-5 Finance Group which provide business and legal advice to owners, developers and investors of commercial real estate, particularly hotels, resorts, restaurants, spas and senior living. This advice covers purchase, sale, development, financing, franchise, management, labor & employment, litigation, ADA, IP, and EB-5 matters for such properties.

Jim is recognized as one of the top hotel lawyers in the world and has led the Global Hospitality Group® in more than $71 billion of hotel transactions and more than 3,800 hotel properties located around the globe.

Jim’s group has advised on more than 100 EB-5 projects, closed more than $1.5 billion of EB-5 financing, and sourced more than half of that for our clients.

Contact Jim at +1-310.201-3526 or JButler@jmbm.com

Hotels we have worked on over the years. Visit our hotel photo gallery to see some of the more than 3,800 properties around the globe that the hotel lawyers of the Global Hospitality Group® have been involved with, on behalf of our clients. For a more comprehensive list of hotels properties and projects we have worked on, see our Credentials.

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26 January 2018

If you are a hotel executive or other highly compensated individual in the hospitality industry, you need to be aware of how the new Tax Act (H.R. 1 – Tax Cuts and Jobs Act) might affect your estate plan. In some cases, the impact will be significant. In the brief article below, JMBM’s tax attorneys recommend that you review your existing estate plan to ensure that the Tax Act does not alter your plan’s original intentions. They also point to substantial new planning opportunities provided by the Tax Act, and you will want to be advised of those, as well. What better way to start the new year than by making sure your assets, and your family’s future, are protected?

How the New Tax Act Could Affect Your Estate Plan

President Trump signed into law H.R. 1, which has a major impact on estate planning. The new law doubled the federal exemption for estate tax, gift tax and the tax on generation-skipping transfers (GST), starting January 1, 2018; the lifetime exemption for each of these taxes is now $11.2 million per taxpayer. Married couples together have a total of $22.4 million of lifetime exemption. The exemptions are reduced by lifetime transfers prior to 2018 and are indexed for future inflation. The annual gift tax exclusion amount also increased to $15,000 per donee per year.

The increased gift, estate and GST tax exemptions are not permanent. This part of the Tax Act is scheduled to expire in 2026 and return to the prior exemption amounts ($5.6 million plus inflation after 2018). Changes in control of Congress and the Presidency could also terminate the increased exemptions. While it may make sense for some clients to take advantage of the increased exemptions to engage in additional estate planning, there is also a potential risk that the new exemptions will unintentionally alter existing estate plans, requiring important immediate changes.

As the increased exemptions may significantly skew a client’s existing estate plan, it is important for all clients to review their estate planning documents to make sure they continue to reflect their intentions. Many estate plans for married couples use a formula to divide assets at the first death between a “marital” portion passing to or held in a trust for the surviving spouse and a “bypass” portion intended to bypass the estate of the surviving spouse. The bypass portion may be allocated to a trust for the surviving spouse and/or descendants. It may also be allocated directly to descendants, skipping the surviving spouse entirely, or may provide fewer benefits to the surviving spouse than the marital trust. Similarly, at the second death, the estate plan may have a formula dividing assets, based on the GST exemption, between children and grandchildren.

Depending on the exact language of the document, these divisions may be very different now because of the larger exemptions. For some clients, the new division will be acceptable. For others, it will be important to update the language of their estate planning documents to avoid a sharp reduction in what the surviving spouse receives and what the children and grandchildren receive.

Clients may also want to take advantage of the opportunity to pass larger portions of their wealth to younger family members at minimal tax cost, through lifetime gifts and other traditional wealth transfer techniques.

The estate, gift and GST provisions of the new Tax Act present substantial new planning opportunities. They also have a potentially significant impact on existing estate plans. Clients need to review their existing documents to determine this impact. We are ready to help you with all aspects of this analysis and to advise you on the various available alternatives.

About JMBM’s Taxation, Trusts & Estates Group

JMBM’s Taxation, Trusts & Estates Group is one of the largest and most active groups of its kind within a full-service law firm. Recognized by U.S. News & World Report / Best Law Firms® with a First-Tier ranking in the Los Angeles metropolitan area, our practice focuses on the needs of individuals and families, and their business interests. Our attorneys provide estate planning, wealth transfer planning, trust administration and the resolution of trust disputes. Our tax lawyers understand business concerns, and work closely with colleagues in the Firm’s corporate and real estate groups to ensure the tax efficiency of organizational and transactional decisions.

This is Jim Butler, author of www.HotelLawBlog.com and hotel lawyer, signing off. Please contact us if you would like to discuss any issues that affect your hotel interests or see how our experience might help you create value and avoid unnecessary pitfalls. Who’s your hotel lawyer?

Picture of Jim ButlerJim Butler is a founder of the JMBM law firm and chairman of its Real Estate Department. He founded and chairs the Firm’s Global Hospitality Group® and its EB-5 Finance Group which provide business and legal advice to owners, developers and investors of commercial real estate, particularly hotels, resorts, restaurants, spas and senior living. This advice covers purchase, sale, development, financing, franchise, management, labor & employment, litigation, ADA, IP, and EB-5 matters for such properties.

Jim is recognized as one of the top hotel lawyers in the world and has led the Global Hospitality Group® in more than $71 billion of hotel transactions and more than 3,800 hotel properties located around the globe. They have helped clients with more than 1,000 hotel management agreements, 1,000 hotel franchise agreements and more than 100 hotel mixed-use projects.

JMBM’s EB-5 Finance Group has advised on more than 100 EB-5 projects, closed more than $1.5 billion of EB-5 financing, and sourced more than half of that for our clients. EB-5 Investors Magazine named Jim one of the top 25 EB-5 lawyers in the United States, and Jim serves on the Public Policy Committee of the IIUSA, the EB-5 industry’s trade group for regional centers.

Contact Jim at +1-310-201-3526 or JButler@jmbm.com

Hotels we have worked on over the years. Visit our hotel photo gallery to see some of the more than 3,800 properties around the globe that the hotel lawyers of the Global Hospitality Group® have been involved with, on behalf of our clients. For a more comprehensive list of hotels properties and projects we have worked on, see our Credentials.

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17 November 2017

We are saddened to learn of the death of Jerry Merkin, former publisher of Hotel Management and a well-known and admired industry leader. Jerry’s long career in hospitality helped shaped the industry and the careers of those who had the good fortune to get to know him. We will miss him.

The Merkin family is in our thoughts and prayers.

Information about Jerry’s life, career, and donations are available in the news release, below.

Hotel Industry Icon Publisher, Jerry Merkin, Passes Away at 85

New York, NY, November 17, 2017—Hotel industry publisher Jerry Merkin, an industry icon for more than four decades, passed away at 85 earlier this week following an extended illness. He is survived by his children, Joan and David.

Merkin spent his entire career in publishing, most of which was covering the hotel industry, first as publisher of Hotel & Motel Management, now Hotel Management, and in 1992 as founder/publisher of Hotel Business. Both publications continue to be industry leaders. He is a recipient of the Lodging Conference Above and Beyond Award.

“In 1989, Jerry was one of the first to join the newly formed board of directors of AAHOA,” said Mike Leven, retired president of Las Vegas Sands and founding father of AAHOA. “He was a champion of human rights and contributed mightily to the successful effort to free so many from discrimination and injustice. His life was a model to be admired and honored.”

“I am deeply saddened by the loss of my dear friend and colleague Jerry Merkin,” said Steven Belmonte, CEO, Vimana Franchise Systems, LLC. “Our industry has truly lost one of the good ones. I can sum up Jerry in three simple words… kind, gentle, and honorable. I will always remember Jerry walking around the various hotel conference floors with a giant stack of Hotel Business magazines under his arm. I remember I advertised in his very first issue. I don’t believe that magazine would be here today if it weren’t for Jerry, his passion, and his love of the industry. I have known him for over 25 years and I never saw him do anything that wasn’t good, helpful and meaningful.”

“After his family, hotels were Jerry’s life,” said Stacy Silver, president of Silver Hospitality Group and former publisher of Hotel Business. “He was a true mentor to me and shared his passion for the industry and news on a daily basis. He taught me that selling is not a business, but an art and our job was to understand a client’s needs and help them be successful. If you were able to do that, then they will want to do business with you and that is true success. He will be greatly missed.”

In lieu of flowers, donations may be made by check payable to New York University, indicating that the donation is in Mr. Merkin’s honor. Please mail checks to:

Reshma Persaud
In honor of Jerry Merkin
New York University
Office of University Development
25 West Fourth Street, Room 334
New York, NY 10012

Picture of Jim ButlerJim Butler is a founder of the JMBM law firm and chairman of its Real Estate Department. He founded and chairs the Firm’s Global Hospitality Group® and its EB-5 Finance Group which provide business and legal advice to owners, developers and investors of commercial real estate, particularly hotels, resorts, restaurants, spas and senior living. This advice covers purchase, sale, development, financing, franchise, management, labor & employment, litigation, ADA, IP, and EB-5 matters for such properties.

Jim is recognized as one of the top hotel lawyers in the world and has led the Global Hospitality Group® in more than $71 billion of hotel transactions and more than 3,800 hotel properties located around the globe. They have helped clients with more than 1,000 hotel management agreements, 1,000 hotel franchise agreements and more than 100 hotel mixed-use projects.

JMBM’s EB-5 Finance Group has advised on more than 100 EB-5 projects, closed more than $1.5 billion of EB-5 financing, and sourced more than half of that for our clients. EB-5 Investors Magazine named Jim one of the top 25 EB-5 lawyers in the United States, and Jim serves on the Public Policy Committee of the IIUSA, the EB-5 industry’s trade group for regional centers.

Contact Jim at +1-310-201-3526 or JButler@jmbm.com

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19 September 2017

As of January 1, 2018 owners of General Partnerships, Limited Partnerships or multi-member Limited Liability Companies may soon find themselves economically liable for the unpaid tax of former partners/members of those entities. JMBM Tax Attorney Jamie Ogden briefly describes the new audit regime, who it affects, and what you need to do to protect yourself from uncertainties.

 

Important tax news for owners of
Partnerships and LLCs
by
Jamie Ogden, Tax Lawyer

On June 13, 2017, the Treasury Department republished Proposed Treasury Regulations regarding the new partnership audit regime enacted as part of the Bipartisan Budget Act of 2015. Generally, the new partnership audit rules will be effective January 1, 2018.

As a result of the new partnership audit regime: (1) individuals and/or entities that were formerly owners of General Partnerships, Limited Partnerships and multi-member Limited Liability Companies (together “Partnerships”) during prior, audited tax years may escape liability for unpaid tax, and correspondingly (2) the existing owners of such Partnership (i.e., the owners of the Partnership at the time of the IRS collection process) will bear the economic burden entirely. Thus, in the absence of properly drafted Partnership and Operating Agreements, any existing owner of a Partnership may be economically liable for the unpaid tax of former partners/members of the Partnership. It is therefore critical that Partnerships and their owners review and modify their existing partnership and operating agreements immediately. CONTINUE READING →

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17 September 2017

EB-5, Mixed-Use Development and Deal Making: See you at the 2017 Lodging Conference

The Lodging Conference is taking place at the Arizona Biltmore in Phoenix, October 30-November 2, 2017, and hotel lawyers from JMBM’s Global Hospitality Group® will be there to visit our friends in the hospitality industry, share our knowledge, learn from the experts (and do some deals!).

At the conference, I will moderate the panel,  Navigating the EB-5 Landscape taking place at 4:00 pm on October 31st. Funding obtained through the EB-5 Immigrant Investor Visa program continues to play a vital role in the capital stack for new hotel development and we will provide up-to-the-minute information on the status of the program, as well as share some great success stories. To get up to speed on what’s happening with EB-5, check out my recent blogs.

Also from our team, JMBM Global Hospitality Group’s  Vice-Chair Guy Maisnik will speak on the panel Structuring Mixed-Use Development on November 1st at 11:30 am. Guy has represented developers and owners of hotel mixed-use properties for decades, and he will share his experience in financing, management agreements, and other critical issues. CONTINUE READING →

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10 May 2017

Hotel Real Estate: Forecasting Clear Skies with Some Clouds and Slightly Cooling Temperatures

For well over a decade, the members of the hotel industry’s preeminent think tank, “LIIC – The Lodging Industry Investment Council,” are annually surveyed to develop a list of the major hotel investment opportunities and challenges for the coming year.  This exhaustive survey results in the LIIC Top Ten; a highly regarded profile of investment sentiment and attitudes for the lodging industry for the forthcoming 12 months. Altogether, the members of LIIC represent direct acquisition and disposition control of well over $40 billion of lodging real estate.

Members are highly active and have the pulse of the market, with 45% of LIIC hotel investors having successfully purchased a hotel in the last 12 months and an additional 16% having made offers but not been the winner.  Moreover, 76% plan to sell a hotel over the next 24 months.

The hospitality industry’s most influential investors, lenders, corporate real estate executives, REIT’s, public hotel companies, brokers and significant lodging equity sources are represented on the Council.  LIIC serves as the leading industry think tank for the lodging business (www.liic.org).

Mike Cahill, LIIC co-chairman, produced this year’s survey (www.mikecahill.com).  Mr. Cahill is CEO and Founder of HREC – Hospitality Real Estate Counselors, a leading international hotel and casino brokerage and advisory firm (16 offices nationwide) specializing in lodging property sales, debt financing, consulting, appraisals and litigation support (www.hrec.com).  Nate Shartar and Alexander Cammarata, Associates in HREC’s Denver office, assisted throughout the process.

2017 Top Ten LIIC Survey Results

  1. Hotel Real Estate: Forecasting Clear Skies with Some Clouds and Slightly Cooling Temperatures: Overall, the 2017 LIIC Survey is more positive than 2016 and starkly different than the peak year survey in 2015.  Responses reveal a calmness, compared with wide spread nervousness in April 2016.  Chinese investment is expected (36%) to slow slightly and Brexit’s impact on US hotels is considered slight.  Private Equity followed by Listed REITs are predicted to dominate the purchase of Upscale to Luxury hotels; while, Regional Owner/Operators are projected to dominate the purchase of Economy to Upper Midscale hotels.
  2. Movement in the Hotel Real Estate Cycle?: Most investors (68%) believe we are still in the extra innings of the current cycle which began in 2009; however, an astute, highly intelligent minority (32%) believe we have begun a new cycle.  Projections for the US economy are positive, with 60% forecasting GDP growth averaging greater than 2% over the next 24 months.
  3. Asset Pricing Bid/Ask Settles, Values Flat to Maybe Increasing: Over the next 12 months, 54% project that lodging real estate values will be flat in comparison to 2016.  However, a sizable group (36%) forecast a slight increase in values (up to 5%).  Favorite investment target, Upper Upscale lodging properties.
  4. 2017’s Greatest Threats to Hotel Investment?: The top three threats on the horizon:
    • New Lodging Supply: 90% of LIIC members cited new hotel supply as the current and dominant top investment concern.  Hypocritically, 81% are building new lodging assets.
    • Increasing Interest Rates: With interest rates increasing gradually up to 100bps over the next 24 months, sellers need to understand the impact on asset pricing for hotels they are looking to sell.
    • Government Mandated Minimum Wage Increases: Investors (28%; down from last year) are threatened by government mandated minimum wage increases and the corresponding impact on hotel operating costs (74% anticipate a gradual negative impact over the next five years).
  5. Hotel Transaction Market Continues Slight Cooling: 52% of responders forecast the total dollar volume of U.S. hotel transactions in calendar 2017 will be down relative to year-end 2016 and 22% believe volume will be flat.  Similarly, 46% believe the number of assets sold to be down; while, 32% anticipate the number of assets sold to be flat.
  6. Hotel Debt Available, Yet Less Favorable: Hotel investors are “debt leery” causing 56% to seek refinancing of existing debt over the coming year even though 52% believe the optimum refinance window closed in the last six months.  Owners have more concern with interest rate increases on senior debt than lender’s available leverage percentages.
  7. Lodging Development Marches Along: Investor attitude stays positive on the concept of building new lodging properties.  As to developing hotels, 66% of LIIC responds “yes, if you are selective about product and markets”.  Respondents are putting their money behind their votes, with 81% of relevant LIIC members having new hotels actively under development.
  8. Want to Buy a Hotel?  Quantity and Quality:  Quantity:  42% of investors believe that a “below average quantity” of hotels are available for purchase closely followed by 44% at “average quantity.”  Quality (desirability to purchase):  52% believe the quality is average and 28% suggest negatively “slightly worse than 2016”.
  9. Markets NOT to Invest in?:  LIIC members were asked which of the top 25 markets they “would not consider buying a hotel” in: Houston, TX (64%), Nashville, TN (32%), Detroit, MI (28%), New York, NY (28%), St. Louis, MO-IL (28%)Sleeper – where to buy?  New Orleans! Not one vote against recorded.
  10. Marriott and Starwood Merger?  If you own a Starwood branded hotel, 36% surprisingly believe the value of Starwood lodging investments have increased specifically due to the merger.  On the other hand, the primary concern (22%) stressing hotel owners is decreasing negotiating leverage with Mega Marriott going forward.

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