01 June 2011
Debt is returning, equity is out looking, and we’ve passed the bottom of the trough. Why now is the time to purchase a hotel.
We promised to let you know when Hotel Business® published its coverage of its 2011 Executive Roundtable–Capital Ideas: Financing Solutions For Opportunistic Dealmakers that took place on May 2, 2011 in Los Angeles prior to Meet the Money®. The current issue of Hotel Business® just hit my mail box and the articles covering the Executive Roundtable and Meet the Money® provide some thoughtful reading.
If you do not know why now is the time to invest in a hotel, you will want to read these articles!
Why the time to purchase a hotel is now
Hosted by JMBM’s Global Hospitality Group®, sponsored by CSI MasterCard and moderated by Hotel Business® editor Dennis Nessler, the Executive Roundtable brought together hospitality industry leaders to address today’s dynamic hotel finance market. I was fortunate to be a participant in the Roundtable discussion and believe that reporter Bruce Serlen of Hotel Business® captured the group’s optimism, explained the issues they remain cautious about, and why they think this recovery is different.
Some of the items mentioned in Serlen’s story, which we have covered in the Hotel Law Blog over the past year or two, include:
- Yes, debt is becoming available.
- Purchase and sale activity is starting to increase.
- Portfolio lenders are going to be forced to deal with their troubled loans.
- We will see more sales through receivership.
- There is still tremendous stress in many assets, and workouts will go forward for the next 3-5 years.
- There are hundreds of new funds chasing deals, many more than during the last cycle.
- Many Asian investors believe that the US property market hasn’t hit bottom yet and do not see the bargains that exist right now.
- The recovery is market-driven — some markets will have significantly more appreciation than others. While the gateway cities are appreciating faster, there are interesting sub-markets worth pursuing.
In the same issue of Hotel Business®, Serlen’s article, Meet the Money: optimism reigns as hospitality deals gain momentum, echoes some of the themes that arose during the Executive Roundtable and touches on others, including:
- Deals are beginning to happen; hotel metrics are creeping up.
- Now is an attractive time to be lending in the hotel industry.
- If underwriting is done correctly, we can get a sense of how hotel loans are going to do for the next year or two.
- We are at the trough of the market.
- Hotel deals tend to be better structured than other real estate classes, which gives investors comfort.
- Asset valuations are still an issue.
- REITs are paying top-of-the-market prices.
- Private equity funds have to invest the money raised according to the terms of their fund, so they have to start spending.
- The pace of defaults is slowing, but the number of defaults is growing.
To read the full stories, see the May 21, 2011 issue of Hotel Business®. If you are not a subscriber to Hotel Business®, subscribe at www.hotelbusiness.com
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This is Jim Butler, author of www.HotelLawBlog.com and hotel lawyer, signing off. We’ve done more than $87 billion of hotel transactions and have developed innovative solutions to help investors be successful in bidding for hotel acquisitions, and helping investors and lenders to unlock value from troubled hotel transactions. Who’s your hotel lawyer?
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Our Perspective. We represent hotel lenders, owners and investors. We have helped our clients find business and legal solutions for more than $125 billion of hotel transactions, involving more than 4,700 properties all over the world. For more information, please contact Jim Butler at jbutler@jmbm.com or 310.201.3526.
Jim Butler is a founding partner of JMBM and Chairman of its Global Hospitality Group®. Jim is one of the top hospitality attorneys in the world. GOOGLE “hotel lawyer” and you will see why.
JMBM’s troubled asset team has handled more than 1,000 receiverships and many complex insolvency issues. But Jim and his team are more than “just” great hotel lawyers. They are also hospitality consultants and business advisors. For example, they have developed some unique proprietary approaches to unlock value in underwater hotels that can benefit lenders, borrowers and investors. (GOOGLE “JMBM SAVE® program”.)
Whether it is a troubled investment or new transaction, JMBM’s Global Hospitality Group® creates legal and business solutions for hotel owners and lenders. They are deal makers. They can help find the right operator or capital provider. They know who to call and how to reach them.