Articles Posted in Outlook and Trends

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17 September 2013

The hotel world has been fascinated by the civil litigation and criminal actions swirling around the former President and owner of Molinaro Koger, Robert T. Koger.

In response to many inquiries, the hotel lawyers of JMBM’s Global Hospitality Group® has posted the 17-page affidavit sworn to by an FBI special agent with more than 17 years of experience, most of it in investigating white collar crimes like those charged against Koger.

If you just want the highlights, see the articles listed below.

If you want to read the details, click here to download a copy of the FBI affidavit on USA v. Koger.

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11 September 2013

Hotel Lawyer with the latest on the arrest and jailing of Rob Koger, formerly of Molinaro Koger

There are some significant new developments in the saga of Robert T. (“Rob”) Koger and the high profile civil and criminal cases surrounding him. Here is the latest. (Earlier articles are cited below.)

On Monday, September 9, 2013, Robert T. Koger, 47, was arrested and brought before a federal judge in the Eastern District of Virginia. At the detention hearing, a court determines whether an accused will be released from jail (on bail or otherwise) before the trial. In Koger’s case the court found that Koger is a “flight risk” and he will therefore be held behind bars where he will stay until his trial for mail fraud and other criminal charges.

Background on the case

Koger was one of the principals in the Virginia-based hotel brokerage firm of Molinaro Koger, Inc., until the publicity of Koger’s fraud and deceptions of client Host Hotels & Resorts led to the demise of his firm.

Earlier this year, on February 19, 2013, the US Attorneys’ office announced that the COO of Molinaro Koger (Jonathan Propp) had pled guilty in federal court to conspiracy to commit wire fraud as part of a 3-year, $20 million “straw buyer” scheme involving the sale of hotels for the account of Host Hotels & Resorts.

It was only a matter of time until action was taken against Koger, and now the public process has started with the arrest and incarceration of Koger.

What happened at Monday’s hearing?

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15 August 2013

Hotel Lawyer on the reported sale by Marriott of 3 Edition hotels.

Craig Karmin and Alexandra Berzon of the Wall Street Journal broke a big story yesterday evening which appeared in the August 15, 2013 US edition of the paper at page C3. The headline is “Marriott Close to Deal to Sell Three Hotels to Abu Dhabi Fund.”
The story, in which I am quoted, describes reports from people close to the deal, that Marriott International is about to close a sale of 3 Edition hotels in London, New York and Miami Beach. The reported buyer is Abu Dhabi Investment Authority, or ADIA.

Other highlights of the article:

  • Marriott has said that it planned to invest up to $800 million in the 3 hotels
  • David Loeb of RW Baird estimates that Marriott has already spent about $575 million to buy, convert and upgrade the 3 properties
  • Marriott is expected to make a profit on the sale

So what does this transaction mean?

Here is what I think this transaction means:

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www.MeetTheMoney.com
11 May 2013

Meet the Money® is one of the best places in the country for meeting the Who’s Who of the hotel world, getting financing and transactions done and catching up on the latest strategies and approaches. This year’s conference was held at the Sheraton LAX, May 6-8, 2013 and was attended by approximately 350 hotel industry leaders. Here’s a quick take on the mood of the conference and some information about
Mood of the hotel industry: optimism and sustainability of recovery

JMBM wrapped up its 23rd annual hotel conference this week amidst the strongest optimism for the hotel industry that hotel experts have seen for six years. The consensus was there is a lot of blue sky ahead. Some think the good times will only last for a couple of years, but many see a good run for at least 5 years!

Everyone at Meet the Money® seemed to be fairly comfortable that the recovery has significant sustainability, because the debt and equity markets have not gotten too frothy, and new supply has been very restrained.

Mark Woodworth of PKF summarized it well after presenting industry fundamentals by saying: “It is a great time to be in the hotel business!”
And Vail Brown gave the STR forecast that the outlook of continuing improvements is “Steady as she goes.”

Greg Hartmann of JLL sounded a slightly more cautious note. He agrees that everything looks pretty good for the next couple of years, but questions how long it can last, and suggests that investors might consider selling in the next year and a half to two years.

What inning are we in? Almost every panel gave its views, with the biggest consensus being that we are in the 4th or 5th inning — still early in the ballgame. John Alderson of Westfield thinks that the shopping center owners now getting active in adding hotels to their malls are way behind the rest of the industry (2nd inning?) and are likely to have their games continue as they implement strategic plans.

Hotel Industry Presentations from Meet the Money® 2013

Meet the Money® 2013 was buzzing with action and great information. We have decided to release some of the presentations for free download. Select presentations from Meet the Money® 2013 (described below) and are now available at www.HotelLawyer.com. Click on “RESOURCE CENTER” and then “Hotel Industry Presentations.”

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Jim Butler and the Global Hospitality Group®

08 May 2013

Lodging Industry Investment Council
Annual Top Ten Survey
Trends And Challenges

Strong hotel property value growth predicted, fueled by increasingly favorable hotel debt — despite overall sluggish economic growth, sequestration, unionization and Obamacare. According to the LIIC 2013 Survey, this is what the hotel industry has in store in 2013.

The Lodging Industry Investment Council (LIIC) is the hotel industry “think tank” whose membership includes the hospitality industry’s most influential investors, lenders, corporate real estate executives, REITs, public hotel companies, brokers and significant lodging equity sources. More than 80% of surveyed LIIC members have purchased a hotel in the last 12 months. Together, the members of LIIC represent ownership, control or disposition of well over $20 billion of lodging real estate.

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1 April 2013

Hotel owners: How the appellate decision in Marriott International v Eden Roc can affect your hotel investment (and why you should understand the law behind the court’s decision)

As we reported in our 27 March 2013 blog, a New York Appellate Division court made it possible for the owners of the Eden Roc Renaissance hotel in Miami Beach to oust Marriott as its operator — despite the long-term hotel management contract between the two, which would have lasted another 43 years. (See “Marriott loses appeal in Eden Roc case: Why all long-term hotel management agreements are now terminable.”)

Setting the stage: owner-operator disputes over hotel management agreements

The relationship between a hotel owner and hotel operator is complex. While the owner bears the financial risk of the hotel’s success or failure and its gain or loss in value, the operator has the exclusive right to manage the owner’s business and is paid “off the top” whether the hotel is profitable or not. The contract between the owner and operator — the hotel management agreement — typically transfers control of the hotel’s assets to the operator.

Hotel owners nationwide are keenly aware of both the benefits and impediments of long term hotel management agreements with branded operators (and nearly all such contracts are long term, often running 40 or 50 years). On the upside, the brand can provide stability, consistent standards, a reservation system, marketing expertise and professional staffing. But the downside can be hard for owners to live with — brands can rigidly incur needless expenses, be unresponsive to market conditions and impervious to the owner’s need to run a profitable business and protect its asset.

While the majority of hotel owners and operators work hard to achieve a balance that is a win-win for both parties, it is easy to understand how things can go badly, fast.

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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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21 February 2013

US Attorney’s Office announces criminal convictions arising from Host’s claims against Molinaro Koger

On February 19, 2013, the US attorney’s office announced that Jonathan Propp, 48, of McLean, Va., pleaded guilty today to conspiring with others to steal more than $20 million from Host Hotels and Resorts L.P. (Host), one of the nation’s largest hotel owners, by executing a series of illegal sales of hotels.”

According to court records, Propp was the chief operating officer of Molinaro-Koger, an international hotel real estate brokerage firm headquartered in Tysons Corner, VA From 2009 through 2012, Propp conspired with others to illegally sell hotels owned by Host to straw buyers, who would then immediately sell the properties to a buyer at a higher price, with the conspirators pocketing the difference. Propp admitted that he posed as a straw buyer, forged signatures, and obtained a driver’s license for one of the straw buyers who had died before the fraudulent sale could be completed.

Todd Lawyer, 53, of Fairfax, VA, also pleaded guilty today for his role as a straw buyer in the conspiracy. The conspirators earned more than $20 million by illegally flipping the hotels.

In addition, Propp admitted that he participated in a scheme to steal and launder an additional $15 million from deposits provided by prospective buyers of hotels, which they purported to hold in escrow but instead used to pay for personal and business expenses. Propp used the money to pay Molinaro-Koger’s expenses and employee salaries, despite knowing the escrowed funds were obtained fraudulently.

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21 February 2013

Hotel Lawyers with Lodging Industry assessment: Demand is strong, supply is weak. RevPAR is healthy. What’s not to like?

We continue to receive calls from hotel owners, developers, investors, lenders, and members of the media asking, “What is the hospitality investment outlook for 2013 and beyond?”
There is a growing optimism among industry veterans and many of them are revitalizing acquisition (and a few development) projects. The level of activity has kicked up a notch or two.

One thing that everyone likes: barring unforeseen events, the stage is set for continuing improvement in hotel industry fundamentals and hotel valuations for at least 5 years – through 2017.

This presents a very attractive backdrop for investors, and experienced investors are already putting their plans in motion.

1. Fundamentals: What the numbers say

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16 February 2013

Hotel Lawyer on the Pros and Cons of dual-branded hotels

Dual-branding of hotels in a single structure or complex is quite a trend in the hotel industry and has been picked up by the popular press.

The hotel lawyers in JMBM’s Global Hospitality Group® have been working on dual-branded hotels for some time, so we thought we would share some our observations on the pros and cons of this approach.

My partner, Bob Braun, has worked on many hundreds of hotel management agreements and franchise agreements, and has written this article to provide an important update on this subject.

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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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