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This is Jim Butler, author of www.HotelLawBlog.com and hotel lawyer. Please contact me at Jim Butler at jbutler@jmbm.com or 310.201.3526.

Published on:

25 September 2017
Click here for the latest articles on Resort Fee Litigation. 

Note: If you are a consumer with a Junk Fee issue, please do NOT contact us! We do not represent consumers. We represent owners, developers, lenders, and management of hotels, restaurants, and other hospitality-related properties. We advise them on litigation, labor, regulatory compliance, contracts, transactions, financing, development, and strategies.

Impending eruption of government and private litigation over Resort Fees (mandatory service fees) 

There were earthquakes and tremblors for at least 17 years before Pompeii was destroyed in the catastrophic eruption of Mount Vesuvius in 79 AD.  The past is prelude.

What are Resort Fees?

We define “Resort Fees” as any mandatory fees or surcharges to hotel guests that are not included in the stated price of the room. These Resort Fees are usually described as covering a bundle of services, facilities or amenities, but the key element is that these charges are not optional and do not depend upon whether a guest actually uses of any of bundle’s benefits.

The FTC has described Resort Fees as part of one subset of a bigger problem involving two pricing practices: partitioned pricing and drip pricing. According to the FTC’s January 2017 Economic Analysis of Hotel Resort Fees, “Partitioned pricing involves dividing the price into multiple components without disclosing the total. Drip pricing is the practice of advertising only part of the product’s price upfront and revealing additional charges later as consumers go through the buying process.”

What is the Resort Fee issue?

The government is on a mission to eliminate the practice of hotels charging their guests undisclosed Resort Fees, and is going after hotels for massive fines and penalties.

The first warning signs of an explosion of litigation over Resort Fees go back some 17 years to about the year 2000, when Resort Fees began to gain popularity with hotels and started a wave of consumer complaints about mandatory surcharges or other fees automatically added to a guest’s hotel bill. Although mandatory service fees may have different names, the most popular name for them is Resort Fees.

We are accustomed to seeing litigation trends take form quickly, and there is reason to believe that a new pressure is gathering critical force on the Resort Fees issue. We will discuss this serious threat of litigation in detail later. CONTINUE READING →

Published on:

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 →

Published on:

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 →

Published on:

07 September 2017
Click here for the latest articles on EB-5 Financing. 

President Trump’s budget deal with Congress includes extension of EB-5 through December 8, 2017

In a message to members of the Public Policy Committee today, the IIUSA confirmed the extension of the EB-5 regional center program as part of the budget deal struck yesterday by President Trump and Congressional leaders.

IIUSA message on EB-5 extension

The IIUSA is one of the leading EB-5 industry trade groups. Here is the text of the message from the IIUSA we received today:

Dear IIUSA Public Policy Committee,

As we are sure you’ve seen in media outlets, there is important news regarding government spending, and in turn, EB-5 reauthorization.

EB-5 Extension thru 12/8 Part of Congress/White House Spending Deal

Yesterday, Congress reached a deal with the White House that, once passed at some point this September, would extend existing funding levels and other program authorizations (such as EB-5) included on the last “continuing resolution” (“CR”) through 12/8/17.

The EB-5 authorization comes in Section 105 text of the deal released yesterday which:

Continues all authorities, requirements, and limitations from 2017 appropriations Acts through the date in section 106. Allows for valid obligations and expenditures during the period of the Continuing Resolution (CR).

Section 106 verifies the date:

Continues appropriations through December 8, 2017, or the enactment of the pertinent appropriations Act.

CONTINUE READING →

Published on:

 
15 August 2017
Click here for the latest articles on EB-5 Financing. 

JMBM’s Global Hospitality Group® and EB-5 Finance Group™ are pleased to announce the publication of The Developer’s EB-5 Handbook for EB-5 Construction Financing, a “must-read” resource for developers who are considering using EB-5 financing to complete or enhance their capital stack for construction projects . This is the much talked-about and often (inappropriately) maligned EB-5 program, also known as the immigrant investment visa program.

While there are many pending developments that could affect the EB-5 program, this is still a good time to learn how the program works and why so many developers have used EB-5 financing as part of the capital stack for their new projects. The Global Hospitality Group has developed an approach to guide clients through the EB-5 process with a minimal amount of financial risk to find and evaluate the reliable players and execute financing with a high degree of confidence.

The Developer’s EB-5 Handbook is written to help developers assess the potential opportunities for EB-5 financing while avoiding potential traps for the unwary. Written by legal and business advisors to top developers with great projects in the United States, the Handbook includes articles addressing the following topics: CONTINUE READING →

Published on:

 
06 August 2017
Click here for the latest articles on EB-5 Financing.

This article is an updated version of the one that was originally published on HotelLawBlog.com on 15 December 2014.

 
What JMBM does for developers with EB-5 financing
by
Jim Butler, Hotel & EB-5 Finance Lawyer

Focus on helping developers

Client confidentiality precludes us from listing clients and projects we have assisted with this program, but suffice it to say that some of the best known names in the business are tapping into this funding source to fill out their capital stack at a favorable cost. And we have helped some of the biggest and highest profile players.

JMBM has closed more than $1.5 billion of EB-5 financing and has sourced more than half of that for our development clients.

We specialize in representing developers and projects that we believe can qualify for “preferred” status. This concept is discussed in great detail in this article: “Development financing: How to win the race for EB-5 capital.

For developers and projects that qualify for “preferred” status, we provide business and legal advice to guide the developer through the entire capital raising process. This includes validating that the developer can qualify for the favorable financing and actually sourcing the capital.

Here is a more complete list of how we can usually assist: CONTINUE READING →

Published on:

 
04 August 2017
Click here for the latest articles on EB-5 Financing.

This article is an updated version of the one that was originally published about 3 years ago on HotelLawBlog.com on 30 July 2014.

 
Why you do NOT want to form your own regional center
by
Jim Butler, Hotel & EB-5 Finance Lawyer

How should developers pursue EB-5 financing?

Although the EB-5 immigrant visa program has been around since 1990, the current trend of using it as a source of financing for hotel and other real estate started 20 years later – around 2010. We worked on one of the first hotel EB-5 financings for the W Hotel & Residences in Hollywood, and we have since worked on more than 100 EB-5 projects all over the country. Now, the use of EB-5 financing for construction has gone mainstream. High profile EB-5 financing closings include $450 million for the Century Plaza Los Angeles, $100 million for the Ritz Carlton & JW Marriott in downtown Los Angeles, $150 million for the Waldorf Astoria in Beverly Hills, and $1 billion for the Silverstein project at the World Trade Center in New York City (with a Four Seasons Hotel).

As a growing number of savvy hotel developers hurry to assess the EB-5 financing opportunity, they frequently receive conflicting advice as to the best way to pursue EB-5 financing. Many immigration lawyers and advisors tout the advantages of the developer forming its own regional center – basically to shave a few points off the all-in cost of EB-5 financing.

This advice may work well for the EB-5 advisors (in that they may get $100,000 or more in fees) and for certain hotel developers. But for most of the hotel developers we know, forming a captive regional center is a bad idea. This article should provide a note of caution for developers considering this course.

Based on our extensive experience with financing hotel development from EB-5 funding sources, we believe that the answer for most hotel developers will be to obtain “preferred” status for themselves and their projects – if they can do so – and to tap into the very best established EB-5 funding sources. For more on this approach, see “Development financing: How to win the race for EB-5 capital.”

Restricted capacity in channels for accessing EB-5 capital

As hotel developers compete in a very crowded field seeking the finite amount of EB-5 funding available each fiscal year (because there are only 10,000 visas available per year), there is something of a “race” to gain access to the limited resources for tapping EB-5 capital. CONTINUE READING →

Published on:

 
4 August 2017
Click here for the latest articles on EB-5 Financing.

This article is an updated version of the one that was originally published about 3 years ago on HotelLawBlog.com on 25 July 2014.

The 5 questions every developer
is asking about EB-5 financing
by
Jim Butler, Hotel & EB-5 Finance Lawyer

EB-5 financing has gone mainstream for hotel development

The use of EB-5 financing has exploded over the past 8 years as an important funding source for new development – particularly for hotel developments. It is clearly now part of the “mainstream.” It is used by many institutional players, including government entities such as port authorities, major hotel brands like Marriott and Hilton, and some of America’s most successful and respected companies, such as Great Wolf Resorts, the Related Companies, and Silverstein Properties.

As lawyers who have worked on more than 100 EB-5 projects all over the country, we have noticed that everyone who investigates EB-5 financing wants answers to 5 big questions about the EB-5 financing opportunity for their project. It should come as no surprise that most of our EB-5 projects involve financing for new hotel development, because hotels are the most popular type of project for EB-5 investors, and we have one of the most prominent hotel law practices in the world. However, our team has also successfully used EB-5 financing for a number of non-hotel projects, including hospitals, senior living, restaurants, solar farms, and infrastructure projects.

The 5 questions every hotel developer is asking about EB-5 financing

Our developer clients say their top concerns in pursuing EB-5 financing is to quickly and reliably determine the answers to the following 5 questions below before they spend substantial time and money or forego other opportunities. They don’t want to waste their time on a wild goose chase. We think every developer considering EB-5 financing should be asking the same questions.

  1. Will EB-5 work for me on my project?
  2. How much money can I get?
  3. How much will it cost?
  4. How long will it take?
  5. How can I get certainty of execution?

CONTINUE READING →

Published on:

 
01 August 2017
Click here for the latest articles on EB-5 Financing.

This article is an updated version of the one that was originally published on HotelLawBlog.com on 05 December 2014.

 
JMBM’s EB-5 construction financing program terms
for top developers
by
Jim Butler, Hotel & EB-5 Finance Lawyer

EB-5 financing comes in many colors and shapes

JMBM believes that for most developers, EB-5 financing is best structured as mezzanine debt or preferred equity, to optimize the total amount of financing and reduce the cost of the capital stack. Normally, senior construction debt (secured by a first priority lien) will be significantly cheaper than EB-5 money, but senior lenders (particularly if the subject project is a hotel) rarely lend more than 50% to 55% of the total cost of construction. Most of our clients like to use this cheap senior debt and then add some low-cost EB-5 mezzanine debt on top of it to get total loan-to-cost ratios up to 80% or more.

We also find that the structure outlined above is popular with the most experienced and reliable regional centers in the business (many of whom we have worked with). JMBM has closed more than $1.5 billion of EB-5 financing and has developed an expertise in structuring the EB-5 financing to address our client’s needs and goals. The highlights of the current market terms for this financing are described below.

JMBM is sourcing low-cost mezzanine capital for new construction through EB-5 financing for its top developer-clients.

To qualify for this program, the borrower must be an experienced developer with a superb track record, a superior reputation and a great project. If you do not meet those threshold requirements, then you don’t need to read any further, because this program likely is not suitable for you.

If you might benefit from mezzanine financing with an all-in cost to you of approximately 7% to 8% per annum, then you may want to consider JMBM’s “preferred” EB-5 financing program, which is summarized below. CONTINUE READING →

Published on:

 
01 August 2017
Click here for the latest articles on EB-5 Financing.

This article is an updated version of the one that was originally published approximately three years ago on HotelLawBlog.com on 14 August 2014.
FAQs: Essentials of EB-5
construction financing for developers
by
Jim Butler, Hotel & EB-5 Finance Lawyer

Below are some of the most Frequently Asked Questions (FAQs) and answers regarding EB-5 funding for developers (click the link for answer, or scroll down)

1What is EB-5?
2Why is there so much interest in EB-5 financing?
3Is EB-5 funding available for new construction?
4Can I use EB-5 funding to buy an existing project?
5Is there any limitation on the kind of project funded with EB-5?
6How much does EB-5 money cost?
7How do I know if EB-5 will work for me and my project?
8What is a regional center and do I need one?
9Why is getting the “right” regional center so critical?
10Should I form my own regional center?
11What is a TEA?
12How much money can I raise?
13What are the 6 biggest mistakes developers make with EB-5?
14What does JMBM do to help developers with EB-5 financing?

FAQs (with answers)

1.               What is EB-5?
EB-5 is a provision in the United States immigration laws. It is the fifth “Employment Based” immigration provision providing expedited visa processing (hence “EB-5”). The program is a win-win-win arrangement, giving wealthy immigrants the opportunity to earn a “fast-track” to US citizenship if they make a minimum investment of $500,000, and create a minimum of at least 10 new jobs in the United States. In return, communities get the benefit of economic stimulation created by this investment and the new jobs. And developers get a valuable source of financing for new projects that is otherwise more difficult to obtain and more expensive from other sources.

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2.               Why is there so much interest in EB-5 financing?

In the last 5 years, EB-5 financing has become extremely popular in development circles for financing projects in the United States, and it is being widely used by mainstream, institutional players including government entities such as port authorities, major hotel brands like Marriott, Hyatt, and Hilton, and some of the largest owners of hotels and restaurants. EB-5 financing has provided low-cost, non-recourse, 5 to 7 year term financing for the development and construction of new projects and offers a number of advantages to developers. For the past few years, the demand for EB-5 funding has exceeded the 10,000 annual visas available to raise such capital from immigrant investors and/or the capacity of the fund raising channels (mostly regional centers and marketing agents).

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3.               Is EB-5 funding available for new construction?

Generally, YES. CONTINUE READING →

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