3 November 2008
Hotel Lawyer in Dallas, Texas at the Fishing for Solutions conclave of special servicers and hotel mortgage loan default SWAT teams. JMBM has been privileged to sponsor and take a significant role for many years in Steve Van’s unique conference celebrating its 8th anniversary in Dallas this week. Steve and his hotel management companies — Prism Hotels & Resorts (the company for managing good, healthy hotels) and REMIC Hotels (the company for managing bad, distressed hotels) — dominate the hotel industry in terms of managing troubled hotels for lenders who appoint receivers, get bankruptcy trustees and take back troubled hotels. In the last few years, Steve has broadened his scope to include more traditional bank and other commercial hotel lenders and investors with troubled hotel assets. And of course Prism does an excellent job of managing the “good hotels” for Steve’s own account, his investors, and many discerning owners (including some of JMBM’s referred clients.)
Here are my thoughts from tonight’s reception . . .
“Year to date performance in the hospitality industry for 2008 is irrelevant. In September, the hospitality industry fell off a cliff . . . and is still in free fall, with business dropping as much as 30% in some markets and market segments.”
What are the special servicers saying about hotel mortgage loan defaults now?
The Conference kicked off tonight with the elite of those who manage troubled hotel loans and hotel mortgage loan defaults. Many do not want attribution, but the year-long rumors of “pipelines filling” appear to be reaching a new level of reality. . . and imminence.
We all read the headlines and we know the reasons the hospitality industry had to take a hit — the economic crisis, cost of oil, cut back in airline seat capacity, collapsing of consumer confidence, job layoffs, and corporate cut backs. But the magnitude of the sudden downturn for the hotel industry was summed up well by Steve Van, President and CEO of REMIC Hotels, when he said:
“Year to date performance in the hospitality industry for 2008 is irrelevant. In September, the hospitality industry fell off a cliff . . . and is still in free fall, with business dropping as much as 30% in some markets and market segments.”
And that seems to sum up the initial take on the conference. The new paradigms are dead. Fundamentals of the hotel industry don’t matter in a major economic downturn when consumers hide at home, and businesses lay off people. The leverage in the hotel industry will be excruciatingly painful to de-leverage, and many assets are likely to change hands.
A fundamental change in the way we approach things?
Tonight at the reception, I had a chance to talk with some of the head people running the troubled loan divisions of their companies. One of them shared a noteworthy thought, but asked NOT to be identified.
We were talking about the significance of TARP, the Bailout Bill, and Treasury’s partial nationalization of our banks through the “induced” investment of capital in major banks. My friend said, in essence:
First, you have to realize that we are talking about a fundamental change in the way we do things in the United States . . .
We are becoming “friends” with the United States Government. And if we become “friends,” who are you going to make fun of?
Good question! And one that does truly point out the profound consequences that this Financial Crisis may have on the way we do business and the way we live.
Steve Van is a “vegan” now!
Here is Steve enjoying a “vegan” delight – red wine. Steve has been on a vegan diet now for 10 weeks. He looks great, and swears by veggies, red wine, and other delights involving plants. He let me snap this photo of him with one of his favorite vegan pleasures.
More to come from the depths of one of the most important lender conclaves in the country at a particularly “interesting” time. Bob Kaplan, one of JMBM’s senior partners in bankruptcy and hospitality, and I will be speaking on a panel — and watching and listening very carefully — at the proceedings tomorrow.
Distressed hotel loans — Resource Library for hotel workouts, hotel bankruptcies, and hotel deeds in lieu of foreclosure
The hospitality lawyers at JMBM’s Global Hospitality Group have a great library of free resources on dealing with troubled hotel loans. Go to top of the home page at www.HotelLawBlog.com, click on the “HOTEL LAW TOPICS” tab, and then select “Workouts, Bankruptcies & Receiverships.”
Here are a few of the recent articles on troubled hotel loans and assets for your convenience:
The hospitality lawyers at JMBM’s Global Hospitality Group have a great library of free resources on dealing with troubled hotel loans. Go to top of the home page at www.HotelLawBlog.com, click on the “HOTEL LAW TOPICS” tab, and then select “Workouts, Bankruptcies & Receiverships.”
Hospitality Lawyer: Lender and borrower alternatives for troubled hotel mortgage loans
“Speed bumps” in the road to bankruptcy for hotels and resorts.
- Part 1 — Special Purpose Entities getting approval to file bankruptcy.
- Part 2 — Can a hotel ever be a “single asset” for bankruptcy purposes?
Hospitality Lawyer: Troubled Hotel Loan Solution — JMBM’s SAVE® Program
Restructuring distressed condo hotels
- Part 1 — the background and structure of the typical condo hotel,
- Part 2 — critical differences between condo hotel restructurings and those with traditional hotels, and
- Part 3 — a unique approach to working out some troubled condo hotel projects.
CONDO HOTEL bankruptcies, workouts and turnarounds fill the headlines, the nightmares of lenders and the dreams of opportunistic investors
- Part 1 — The magnitude of the opportunity and the first part of 100+ questions you should ask when looking for distressed condo hotel opportunities
- Part 2 — the rest of the 100+ questions you should ask when looking for distressed condo hotel opportunities
Terminating hotel management agreements when things don’t work? Not easy, but not impossible either.
If you are interested in reviewing how the hotel industry can be shocked from boom to bust overnight, you may find these articles interesting:
- Hospitality Lawyer: Fortunes will be made . . . or lost . . . in the wake of The Financial Bailout and the Panic of 2008.
- Hospitality Attorney with pearls from NYU, Part 5: Whither Lodging Demand, GDP and the Cost of Gasoline?
- What’s the price of gasoline have to do with the future of the lodging industry?
- Hotel Lawyer: As goes the economy, so goes the hospitality industry — the ineluctable elasticity of demand!
- “Hotel Attorney on Hotel Cap Rates. What’s happening to hotel cap rates, values and financing?”
To see how little it takes to turn a hotel loan upside down, see the discussions and examples in the Section entitled “Benefits and detriments of leverage, and the vicissitudes of changing cap rates and LTVs” in the “Fortunes will be made . . . or lost . . “ article.
JMBM’s Distressed Assets Expertise
JMBM’s Global Hospitality Group® includes an experienced Distressed Assets Team that mobilizes quickly to address the complex issues surrounding distressed hospitality properties and stalled developments. Whether it is a solution to a lender’s troubled loan or the response to a buyer’s opportunity, we work quickly to preserve value and increase cash flow.
Because hotels are special assets, with operating companies, numerous issues come into play in a workout or bankruptcy scenario. Because we have represented creditors, owners and investors in the hospitality arena for more than two decades, we do not need to “get up to speed” on the special issues.
Regardless of where we are in the market cycle, JMBM’s Distressed Assets Team is involved, day in and day out, in restructuring and working out deals that go sideways. Our experience — together with our knowledge of the current capital markets where distressed assets often include complex deal structures and securitized loans — allows us to bring creative and effective strategies to the table. When aggressive litigation is the best strategy, we are effective, rigorous advocates for our clients’ interests.
For information about how we can help, contact one of the senior members of the team, below.
Jim Butler 310.201.3526 JButler@JMBM.com
Neil Erickson 310.201.3516 NErickson@JMBM.com
Robert Kaplan 415.398.9673 RKaplan@JMBM.com
Guy Maisnik 310.201.3588 GMaisnik@JMBM.com
David Poitras 310.201.3571 DPoitras@JMBM.com
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 more than 100 hotel mixed-used deals in the last 5 years alone. Who’s your hotel lawyer?
Our Perspective. We represent developers, owners and lenders. We have helped our clients as business and legal advisors on 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 one of the top hospitality attorneys in the world. GOOGLE “hotel lawyer” or “hotel mixed-use” or “condo hotel lawyer” and you will see why.
Jim devotes 100% of his practice to hospitality, representing hotel owners, developers and lenders. Jim leads JMBM’s Global Hospitality Group® — a team of 50 seasoned professionals with more than $87 billion of hotel transactional experience, involving more than 3,900 properties located around the globe. In the last 5 years alone, Jim and his team have assisted clients with more than 100 hotel mixed-use projects — frequently integrated with energizing lifestyle elements.
Jim and his team are more than “just” great hotel lawyers. They are also hospitality consultants and business advisors. They are deal makers. They can help find the right operator or capital provider. They know who to call and how to reach them.
Contact him at jbutler@jmbm.com or 310.201.3526. For his views on current industry issues, visit www.HotelLawBlog.com.