Published on: May 13, 2009

Hospitality Lawyer Insights from MTM: #3. When is it time to buy hotels?

By Jim Butler and the Global Hospitality Group®

13 May 2009

Hospitality Lawyer Insights from Meet the Money® 2009: The hospitality lawyers of JMBM’s Global Hospitality Group® have presented an annual hotel conference for 19 years. On May 5-7, 2009 in Los Angeles, California, nearly 400 industry leaders gathered at the Sheraton LAX for Meet the Money® 2009.

Hotel industry information presented by industry leaders at Meet the Money® 2009

The PowerPoint presentations from a number of industry leaders at Meet the Money® 2009 are listed with hyperlinks at JEWELS from Meet the Money® 2009 — the “best ever” hotel conference.

Commentary and observations from the hospitality lawyers of JMBM and other industry experts on some of the critical industry issues are available at Hospitality Lawyer Insights series from Meet the Money® 2009.

Hotel industry leader insights from JMBM’s Hospitality Lawyers at Meet the Money® 2009: #3. When is the time to buy hotels?

Mark Woodworth:

Woodworth%20Mark%20resized%20for%20web.jpg

Mark Woodworth
President
PKF Hospitality Research
404-842-1150
mark.woodworth@pkfc.com

This slide shows that 2009 and 2010 will be the maximum opportunity to buy hotel investments.

Jonathan Roth:

Jonathan Roth
Principal
Canyon Capital Realty Advisors
310-272-1500
jroth@canyonpartners.com

“Now is the time to buy debt. We have close to $2 billion of capital to put out, but we are challenged because even at historically low interest rates, the assets are not covering debt. Borrowers are saying, “what are we going to do now?” There are also confusing messages from the federal government on down as to what is going to happen.

We are looking to buy debt at a discount. We are seeing a capital stack that has been over-levered and it needs to be de-levered.”

Deric Eubanks:

Deric Eubanks
Ashford Hospitality Trust, Inc.
972-490-9600
deubanks@ahtreit.com

“The challenge is finding a mezzanine debt opportunity or acquisition that is a better return than buying back our own stock. We think that buying back our stock is pretty good.”

Chad Christensen:

Chad Christensen
Vice President
Washington Real Estate Holdings, LLC
310-234-6731
cchristensen@waholdings.com

“Over all, there is a complete reappraisal of values. We have been an investor across a spectrum of property types. The real issue is cash flow from the investment.

We think this is going away from opportunistic investment. There will be some opportunities, but it is all about cash flow — buying assets at a discount. Buying cash flow.”

Michael Depatie:

Michael Depatie
President and CEO
Kimpton Hotel & Restaurant Group, LLC
415-955-5426
michael.depatie@kimptongroup.com

“The next 24-36 months will be the greatest buying opportunity for a generation. But only those with capital will be able to play. We are looking to partner with people to help them out.”

Bruce G. Wiles:

Wiles%20Bruce%20resized%20for%20web.jpg

Bruce G. Wiles
Managing Director & Principal
Thayer Lodging Group
(301) 581-5910
bruce.wiles@meristar.com

“This is a great opportunity. We think it has started already. We are attracting more capital now. Investors sense the opportunity and want to participate. ”
Mike Cahill on LIIC study:

Cahill%20Make%20resized%20for%20web.jpg

Michael Cahill, CRE, MAI, FRICS, CHA
CEO and Founder
HREC – Hospitality Real Estate Counselors
303-267-0057
mcahill@hrec.com

“The greatest hotel buying opportunity of our lifetime will be the next 12-18 months. The key is having all equity to close without mortgage financing.”

Thomas Corcoran:

Corcoran%20Tom%20resized%20for%20web.jpg

Thomas Corcoran
Chairman of the Board
Felcor Lodging Trust Incorporated
972-444-4901
tcorcoran@felcor.com

“I have never seen this much negative RevPAR and it keeps going on. We have had double digit negative RevPAR for many months and I don’t see what turns it around. Nobody knows when it goes positive.

Once there is some clarity, there will be great opportunity.”

Bruce G. Wiles:

“We will turn this around — maybe something like invention of the car — but it will happen.”

Russ Urban:

Russ Urban
Senior Vice President, Development
HEI Hotels & Resorts LLC
203-849-2279
rurban@heihotels.com

“We want to see 3-4 months of flattened RevPAR to indicate stabilization before we invest.”

Paul Novak:

Paul Novak
President
Bedrock Partners
305-365-7880
pnovak@bedrockpartners.com

“Where are we? Still early, unfortunately. Most of the stuff coming on the market is in tertiary markets or is junk. I am afraid that we are 6-9 months away from our ability to invest money. That gives time to look at opportunities and raise equity.

I think rates will keep falling through the end of the year.”

Jack vanHartesvelt

Jack vanHartesvelt
Executive Vice President – Partner
Kennedy Associates Real Estate
206-623-4739
jackv@kennedyusa.com

“This is a good time to buy, if you can. Here is the secret sauce: if you take the economy quarter by quarter, over time, it correlates with lodging demand exactly, with a few notable exceptions, like 9-11. Right now, the economy is down 2 percent, but lodging demand is down 9 percent. I believe that whenever the country believes the recession is over, demand will go right back up to where the economy is. We are in artificial down. We are looking at 20 percent drop in RevPAR when the economy is only down 2 percent! Five star properties have been hurt the worse. When the recession is over, people will relax and take that vacation, companies will send more people to conferences. Buy. Buy now!”
Barry Olson

Barry Olson
Managing Director
Archorn Group, LP
972-368-2573
barry.olson@archon.com

“We are looking to invest. We have raised $3.5 billion in capital and have invested only 5% of equity in the last 12 months, due to the economy. But, we have a patient view. We are waiting for the deleveraging of the industry.”

Bernard N. Siegel:

Siegel%20Bernie%20resized%20for%20web.jpg

Bernard N. Siegel
Principal
KSL Capital Partners, LLC
(720) 284-6440
bernard.siegel@kslcapital.com

“Many pension funds are clearly experiencing the downdraft in real estate portfolios. The more savvy of funds will want to invest now, as they will underperform in the next few years if they don’t.”

Michael Depatie:

“This is the best buying opportunity in 20 years, if you have capital. We operate in the boutique space where demand is 3 times that of the average demand. We have capital and we are actively looking.”

Scott Brown:

Scott Brown
CEO/Co-Founder
ABA Development, LLC
415-526-0070
scott@abadevelopment.com

“We are not seeing the deal flow, yet. What is being shown to us is off market or plain junk. I wouldn’t take the stuff for free because there is no profitability. For the assets worth acquiring, the bid-ask spread is still too wide.”

Stephen Krooth:

Stephen Krooth
President
Krooth Advisory Services LLC
917-494-1028
skrooth@kroothadvisory.com

“There are already opportunities for buy positions – but they are going to get cheaper.”

Patrick O’Neal

Patrick O’Neal
Vice President
Midland Loan Services, Inc.
913-253-9623
patrick.oneal@midlandls.com

“Lots of properties were listed with receivers this year, and they will select brokers soon. You might see transactions involving smaller assets available this year. The bigger ones still have band aids on them.”

When is it time to buy hotels?

When is it time to buy hotels? The time is now — or as soon as prices and values are right.

Billions of dollars are ready to buy debt or properties. But the question is value, pricing and strategy. It requires massive de-levering.

We will give you our hospitality lawyer insights on those questions in the next few articles.

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 unlock value from troubled hotel transactions. Who’s your hotel lawyer?

________________________
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.

Jim Butler

Jim Butler is recognized as one of the top hotel lawyers in the world. He devotes 100% of his practice to hospitality, representing hotel owners, developers and lenders. Jim leads JMBM’s Global Hospitality Group® — a team of seasoned professionals who have helped clients around the world with more than 4,700 hospitality properties worth more than $125 billion.
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Robert Braun

Robert Braun is a partner in JMBM's Corporate Department and a senior member of JMBM's Global Hospitality Group® -- a team of seasoned professionals who have helped clients around the world with more than 4,700 hospitality properties worth more than $125 billion. Bob represents owners in both transactional and operational issues. He advises clients with respect to business formation, financing, mergers and acquisitions, venture capital financing, joint ventures and strategic partnerships. He has represented hotel owners in the negotiation of several hundred management agreements, as well as spa management and franchise agreements. Bob also advises hotel owners regarding telecommunications, software, internet, e-commerce, data processing and outsourcing agreements. To read Bob's articles, go to www.HotelLawBlog.com and select "Management Agreements." For more information, please contact Bob Braun at 310.785.5331 or rbraun@jmbm.com.

Marta Fernandez

Marta Fernandez is a partner in JMBM's Employment and Labor Department and a senior member of JMBM’s Global Hospitality Group® -- a team of seasoned professionals who have helped clients around the world with more than 4,700 hospitality properties worth more than $125 billion. As a management labor lawyer with more than 20 years of experience, Marta specializes in representing hospitality industry clients in all aspects of labor and employment including labor-management relations such as union prevention, collective bargaining for single as well as multi-employer bargaining units, neutrality agreements and defense of unfair labor practice charges before the NLRB. She defends employers in administrative and litigation claims, such as employee claims of sexual harassment and discrimination and counsels clients in preventative strategies such as executive training, arbitration enforcement, and policies and procedures. To read Marta's articles, go to www.HotelLawBlog.com and select "Labor & Employment." For more information, please contact Marta Fernandez at 310.201.3534 or at mfernandez@jmbm.com.

Guy Maisnik

Guy Maisnik is a partner in JMBM's Real Estate Department and a senior member of JMBM's Global Hospitality Group® -- a team of seasoned professionals who have helped clients around the world with more than 4,700 hospitality properties worth more than $125 billion. Guy's deep and broad transactional practice includes complex real estate finance and venture capital transactions, including project finance, commercial finance, leveraged leasing and real estate acquisitions. He assists clients with development, leasing and disposition, loan portfolio acquisitions, loan and debt restructure, workouts and real estate exchanges. Go to www.HotelLawBlog.com for current information in these areas. For more information, please contact Guy Maisnik at 310.201.3588 or mgm@jmbm.com.

David Sudeck

David Sudeck is a Partner in JMBM's Real Estate Department and a senior member of JMBM’s Global Hospitality Group® -- a team of seasoned professionals who have helped clients around the world with more than 4,700 hospitality properties worth more than $125 billion. David has significant experience in the vacation ownership arena, focusing on the formation and registration of condominiums, timeshares and fractional interest regimes. He negotiates hotel, spa and restaurant management agreements, and assists client in the development, acquisition, sale and leasing of hotels, golf courses and restaurants. For David's take on current issues in the timeshare arena, go to www.HotelLawBlog.com and click on the topic, "Timeshare." For more information, please contact David Sudeck at 310.201.3518 or dsudeck @jmbm.com.

Robert Kaplan

Robert Kaplan is a partner in JMBM's Bankruptcy, Insolvency and Restructurings Group and a senior member of the Global Hospitality Group® -- a team of seasoned professionals who have helped clients around the world with more than 4,700 hospitality properties worth more than $125 billion. Bob represents lenders, special servicers, hard money lenders, community banks, national banking associations, distressed debt investors, and equity investors, positioning them for the best possible outcome by acting expeditiously to preserve value and increase cash flow. His industry experience and his knowledge of the current capital markets -- where distressed assets often include complex deal structures and securitized loans -- allows him to bring creative and effective strategies to the table. When aggressive litigation is the best strategy, he is a vigorous and effective advocate for his clients. Bob represented the securitized lender in the Chapter 11 bankruptcy case filed by the Clift Hotel in San Francisco, and in the subsequent negotiations and successful sale of the loan to a third party. The lender -- acting by and through GMAC Commercial Mortgage Corporation as special servicer -- was the holder of a $60 million loan secured by a Deed of Trust on the Clift Hotel. He has also served as counsel to CapMark, J.E. Robert Company, Inc., AMRESCO Management Inc. and Midland Loan Servicer in their capacity as special servicers on troubled hotel loans in CMBS pools. For more information, contact Robert Kaplan at 415.984.9673 or rkaplan@jmbm.com.

Martin Orlick

Martin Orlick is a partner in JMBM's Real Estate Department and a senior member of JMBM's Global Hospitality Group® -- a team of seasoned professionals who have helped clients around the world with more than 4,700 hospitality properties worth more than $125 billion. Marty specializes in representing hospitality industry clients in Americans With Disabilities Act (ADA) compliance and defense. He has represented more than 500 businesses in ADA issues, many of them hotels and restaurants, as well as hotel mixed-use properties. Marty is a member of the American College of Real Estate Lawyers (ACREL) and a frequent speaker on the ADA and other topics. To read Marty's articles, go to www.HotelLawBlog.comand select "ADA." For more information, please contact Marty Orlick at 415.984.9667 or morlick@jmbm.com.

Scott Brink

Scott Brink is a senior member of JMBM's Global Hospitality Group® and a partner in JMBM's Labor & Employment Law Department. Scott is a management labor lawyer with more than two decades of experience representing employers in all aspects of labor relations and employment law including union prevention, collective bargaining negotiations, defense of unfair labor practice charges before the NLRB, wrongful discharge litigation, individual and class action employment discrimination and wage-and-hour claims, sexual-harassment litigation, arbitrations, personnel policies, California wage and hour law, and employee discipline and discharge. An experienced trial attorney, Scott has litigated a number of high-profile and complex cases involving a wide range of labor and employment law matters. For more information, contact Scott Brink at RSB@jmbm.com or 310.785.5365.

Travis Gemoets

Travis Gemoets is an experienced trial attorney and represents management in all facets of labor and employment law, including wage/hour class actions, claims of discrimination, harassment, wrongful termination, trade secrets and unfair competition, union/management relations and workplace violence. He is a member of JMBM's Global Hospitality Group(r), in which capacity he negotiates union contracts and resolves labor disputes throughout the country, defends class action claims, develops strategies for the mass onboarding and separation of employees, and recommends proactive changes to employers' policies and practices in order to minimize potential liability risks. Reach him at 310.785.5387 or tgemoets@jmbm.com.

Mark S. Adams

Mark S. Adams is an experienced trial lawyer and a member of JMBM's Global Hospitality Group® and Chinese Investment Group™. He focuses his practice on business litigation including contracts, corporate and partnership disputes, and hospitality disputes and litigation. On behalf of hotel and resort owners, Mark has successfully litigated the termination of long-term, no-cut, hotel management agreements, franchise agreements, fiduciary duty issues, investor-owner disputes, TOT assessments, and more. He has wide-ranging trial experience in a variety of commercial disputes, including complex multi-party litigation and class actions. He has tried numerous cases in state courts, federal courts, and in domestic and international arbitrations, and is a frequent author and speaker on trial practice. Mark's trial wins have been covered by Forbes, Reuters, and other publications. He has obtained two of California's annual 50 largest jury verdicts in the same year. Mark has taken or defended nearly 1,000 depositions throughout North America, Europe and the Middle East. He has been quoted as an expert on noncompete agreements in the Wall Street Journal. For more information, contact Mark at 949. 623.7230 or markadams@jmbm.com.

Bennett Young

Bennett Young is a partner in JMBM's Bankruptcy, Insolvency and Restructurings Group and a senior member of the Global Hospitality Group® -- a team of seasoned professionals who have helped clients around the world with more than 4,700 hospitality properties worth more than $125 billion. His clients include lenders, financial institutions, secured and unsecured creditors, distressed investment funds, businesses, receivers, special servicers and creditors' committees. Ben represented the owner of a partially completed multi-billion dollar resort property in the restructuring of its finances and has represented lenders to hotels and casinos. For more information, contact Ben Young at 415.984.9626 or byoung@jmbm.com

Sheri Bonstelle

Sheri Bonstelle is a partner in JMBM's Government, Land Use, Environment and Energy Department, and a member of JMBM's Global Hospitality Group®. She represents owners and developers in land use, zoning, environmental, litigation and construction matters. She manages all aspects of the entitlement process, including representing clients before local and state agencies, commissions and councils. Sheri also represents clients in a variety of land use and real estate litigation matters in state and federal courts, including cases arising under CEQA and other environmental laws. Her hotel experience includes handling the adaptive reuse of an historic office building as a luxury boutique hotel. For more information, please contact Sheri Bonstelle at 310.712.6847 or SBonstelle@jmbm.com.

Kevin McDonnell

Kevin McDonnell is a partner in JMBM's Government, Land Use, Environment and Energy Department, and a member of JMBM's Global Hospitality Group®. Kevin represents developers and owners of hotels in a broad range of land use and zoning issues including entitlements, code enforcement, easements and parking requirements, as well as related Parcel Map and Tract Map subdivision issues. His hospitality experience includes hotels, condo-hotels and mixed-use projects. A registered Civil Engineer and Structural Engineer in California, and a former building official for the City of Los Angeles, Kevin brings unique experience and insight in Zoning and Building Code applications and Code Enforcement issues. For more information, please contact Kevin McDonnell at 310.201.3590 or kkm@jmbm.com.

Jamie Ogden

Jamie Ogden is a tax lawyer at Jeffer Mangels Butler & Mitchell LLP. He advises individuals and businesses on a range of tax planning, tax controversy and estate planning matters. Jamie’s experience includes all tax aspects with respect to the hospitality industry, including acquisitions and dispositions (including Section 1031 exchanges), financing and management agreements. He also serves as lead tax counsel on M&A transactions, financing, internal corporate restructurings and deferred compensation matters. Jamie also works frequently with litigators on the tax aspects of litigation, judgments and settlements. Jamie has extensive experience with foreign compliance matters, including each variation of the IRS amnesty programs. In addition to his experience in private practice, Jamie also brings several years of service from both state and federal government. For more information, contact Jamie at JOgden@jmbm.com or 310.201.3510.

Wei Deng

Wei Deng is General Counsel of Bosen American Capital, Inc. where in addition to his legal duties, he is responsible for sourcing, evaluating and proposing United States investment opportunities to the company. Wei was previously with JMBM, where he focused on transactional and litigation matters.

Jay Thompson

Jay Thompson has extensive experience representing private companies, business owners, family offices and investors in mergers and acquisitions, private equity and venture capital transactions and private securities offerings. Jay serves as general counsel to many of his clients, their management, and board of directors, helping to shape and execute their business strategies, facilitate growth and liquidity, as well as to advise them on day-to-day legal and other strategic issues. He is known for his practical approach to business issues. Contact Jay at JThompson@jmbm.com or 949.623.7258

Marianne Martin

Marianne Martin has nearly fifteen years of experience advising clients on a variety of commercial, financing, bankruptcy, restructuring and M&A matters, with a particular niche dealing with distressed and/or turnaround situations. Her clients frequently include private equity and hedge funds, independent sponsors, family offices, public and private corporations, financial institutions and banks, healthcare-related companies, municipalities and venture capital funds. She has represented clients in various capacities, including as borrowers/debtors, lenders, acquirers, and agents/trustees in negotiating and documenting complex commercial transactions, out-of-court restructuring transactions and advising on purchasing considerations in secondary market debt transactions. Contact Marianne at MMartin@jmbm.com or 310.201.3531

Trevor Countryman

Trevor Countryman is an associate in the firm's Real Estate Department. He advises clients in all aspects of real estate transactions including property acquisitions and dispositions, financing, leasing, development and construction. Trevor's clients range from large funds to individual developers and opportunistic investors, engaged in deals involving office, retail, multi-family, single-family, mixed-use and hotel properties. Contact Trevor Countryman at 310.201.3546 or TCountryman@jmbm.com.

Vanessa Han

Vanessa Han is an associate in JMBM's Corporate group. Vanessa can be reached at VHan@jmbm.com or 310.785.5383

Vince Farhat

Vince Farhat is Chair of JMBM's White Collar Defense and Investigations practice. Vince has extensive jury trial experience and focuses his practice on representing companies and individuals in criminal and civil investigations and prosecutions by government enforcement agencies, as well as complex federal litigation. He also advises companies in connection with complex and sensitive internal investigations. Prior to joining JMBM, Vince served as an assistant United States attorney in the Major Frauds Section of the U.S. Attorney's Office for the Central District of California. Contact Vince Farhat at 310.785.5382 or VFarhat@jmbm.com.

Sarah G. Hartman

Sarah G. Hartman is a partner in JMBM's Litigation Group and a member of JMBM's Global Hospitality Group® -- a team of seasoned professionals who have helped clients around the world with more than 4,700 hospitality properties worth more than $125 billion. Sarah is an experienced litigator who advises and represents clients through all aspects of litigation, from inception through trial and appeal. She advises and represents clients in the hospitality industry, including the termination of hotel management agreements and franchise agreements. Sarah also advises and represents clients on women's health technology issues, intellectual property matters, and complex commercial disputes, including breach of fiduciary duty, fraud, breach of contract, unfair competition, products liability, employment litigation, class action defense, false advertising and other complex financial disputes. Contact Sarah Hartman at 949.623.7243 or SGHartman@jmbm.com.

Michael H. Strub, Jr.

Michael H. Strub, Jr. is a partner in JMBM's Litigation Group and a member of JMBM's Global Hospitality Group® -- a team of seasoned professionals who have helped clients around the world with more than 4,700 hospitality properties worth more than $125 billion. He is a highly skilled trial and appellate attorney who has handled high-stakes, complex commercial and business cases for 30 years including disputes arising out of hotel construction, lending, and bankruptcy. In addition, he has represented plaintiffs and defendants in business and commercial disputes in a variety of areas. Contact Michael H. Strub, Jr. at 949.623.7233 or MStrub@jmbm.com.

Ask the Hotel Lawyer™ is a quarterly column that I write for JMBM's Global Hospitality Advisor®. If you have a question you would like to submit to Ask the Hotel Lawyer™ please use the comments box below. While your question may not be of sufficient general interest for the column, I will try to respond to you individually if you leave your contact information below.
Jim Butler.