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Hotel Lawyers -- featured subjects and articles
Meet the Money® 2014

ADA defense and compliance

EB-5 financing

Workouts, bankruptcies & receiverships

Hotel Management Agreements

Hotel Franchise & License Agreements

Hotel industry trends

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:

13 December 2013

Hotel Lawyer with some insights on buying and developing golf courses.

Hotel investors suddenly seem to be buying or building more golf courses. With the right expectations and circumstances, golf courses can make sense — particularly as an amenity for hotels, residential development and other real estate. But as more hospitality clients look at golf courses, it seems appropriate to consider the drivers of this renewed interest, and some of the similarities golf courses share with other hospitality investments such as hotels. And finally, we want to look at some of the big factors that make golf courses very different from other hospitality investments, so you can avoid some unnecessary pitfalls.

Why the increased interest in golf courses?

Interest in golf courses has likely increased for a number of reasons, including the continuing overall improvement in the economy, favorable projections for the hotel industry, the return of home builders to the active market, and the likely surge in new development in 2014 and beyond. In addition, it is now well proven that “mixed-use” really works, and that includes adding a golf amenity for hotels, condos, residential and other real estate product. On top of all this, there is a wave of Asian investment and tourism — particularly Chinese — that favors golf.

Many of these investors and developers are familiar with hotels, and have established teams of experts that are familiar with hotels — but they often don’t have golf course-specific experience and capabilities.

That is why it is important to realize that hotels are different (from golf courses) though they share a number of characteristics and are often both regarded as “hospitality” product. Recognizing the similarities and the important differences will enable investors and developers to fill in potential gaps of expertise to avoid unnecessary problems.

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Published on:

4 December 2013

Hotel Lawyer on the jump in hotel development and investment activity.

These are getting to be pretty exciting times to be in the hotel business. Hotel industry fundamentals have continued to improve since the Great Recession and none of the experts see a particular event or reason that fundamentals will stall. Although occupancy growth rate is slowing in some sectors, ADR growth generally continues to drive greater profits to the bottom line.

All this activity creates “management agreement opportunities”

New development is finally coming back, and 2014 may be a break-out year for long-delayed projects. The volume of purchase and sale transactions continues to grow. And owners or investors are seeking to maximize hotel value by repositioning existing assets.

The confluence of these factors is creating a lot of hotel management agreement opportunities for hotel brands, operators and owner/developers.
The 2 most important things affecting the value of your hotel

In the midst of all this activity, hotel developers and investors should remember that two of the most important things they can do with their hotel asset are to

  1. Choose the “right” brand and operator
  2. Negotiate a management agreement that preserves a reasonable amount of value, control and flexibility

And . . . get practical guidance on these issues from experienced veterans representing your interests (and only your interests) at the earliest possible time in the process.

New White Paper on short term management contracts
In case you missed it, Hotel Management recently published an excellent white paper that is highly relevant to all of these hotel management agreement opportunities. The article is called, “The Evolution of Short-Term Management Contracts“. Click here to download a PDF of the article.

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Published on:

10 November 2013

Hotel Lawyer with some tips for employers on handling tipping — the new IRS Rules.

Employer practices with tips at hotels and restaurants have spawned a lot of employee discontent, class actions and other litigation. Some employers have withheld all or a portion of employee tips to cover administrative costs and others have redistributed tips amongst employees, some of whom (like bus staff and kitchen crews) have no opportunity to earn tips. Even the IRS has gotten into the game by adopting new rules that go into effect in January 2014.

The latest development centers around the common practice for restaurants, hotels, and others in the hospitality industry to impose “mandatory gratuities” to large parties of patrons. (We’re all familiar with those menus that read, “A gratuity of 18% will be charged for parties over 6.”) While there may be legitimate reasons for this practice, the potential liability for mishandling automatic gratuities is significant, and about to get much bigger.

Plaintiffs have been fairly successful in arguing that such mandatory gratuities or service charges are compensation for employees, all of which must be paid to the employees, which may not be distributed to non-tipable employees, and are probably subject to employer reporting and withholding taxes, and are part of employees’ regular rates of pay for overtime calculation purposes.

But now the IRS is promulgating some rules that go into effect in 2014, and all employers should pay attention. My partner, hospitality employment lawyer Travis Gemoets, gives us the full story.

Change in IRS Rules on “Automatic Tipping”
Raises a red flag for hotels & restaurants

by
Travis Gemoets

One of the many new laws going into effect in 2014 will require hotels, restaurants and other employers in the hospitality industry to change their current practice when employees are paid “automatic” tips charged to large groups of patrons. This ruling will not only effect tax withholding, but also require employers to make additional overtime payments to the employees, above and beyond the automatic tip charged to the customer.

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Published on:

6 November 2013

Click here for the latest articles on ADA Compliance and Defense.

 

ADA Defense lawyer: Pool lift litigation proliferates. Why enterprise-wide compliance is the best solution.

It has been almost a year since the Department of Justice’s ADA requirement for fixed or permanent pool lifts in “places of public accommodation” has been in effect. Now a fact (and cost) of doing business in the hospitality industry, many of our clients and friends in the industry are asking, “what’s the result of all this activity, what’s going on now?” Well, after all the lobbying, education, handwringing, headaches, counseling, and expense, we can say …. things went pretty much as predicted:

  • Many hotel owners complied with the requirements and were prompted to take a comprehensive look at all ADA requirements and bring their properties and procedures into enterprise-wide compliance.
  • Others are getting sued by serial plaintiffs, armed with a new reason to sue hotel owners under the ADA.

Marty Orlick, Chair of JMBM’s ADA Compliance and Defense Group and senior member of its Global Hospitality Group® has been helping hotels, restaurants, retailers, banks and other commercial properties bring their properties and operations into enterprise-wide ADA compliance for years. Here’s his report on what’s going on.

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Published on:

20 September 2013

Since August 2011, HotelLawyer.com has been following some of the significant events in the unfolding story of surrounding Robert T. Koger and his fraudulent schemes. But yesterday (September 19, 2013), Jason Freed of Hotel News Now published a great article that provides a more comprehensive timeline and overview, and puts together the whole story from many parts of this fascinating tale. I highly recommend it.

I was pleased to be interviewed by Jason to provide some background and insights, and to be quoted in the article. To read this article, click on the link below.

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Published on:

18 September 2013

A version of this article was first published in the September 21, 2013 issue of Hotel Business and is reprinted with permission.

The number of hotel transactions is up by more than 50% for the first 6 months of 2013 over the comparable period last year, and is expected to top $18 billion for 2013, according to Jones Lang LaSalle. And HVS reports that the sales transaction volume of hotels is now intersecting its 22-year moving average, and predicts that hotel values will continue to grow at an average of 12% for each of the next 3 years (substantially less than the past couple of years, but still a nice increase in value).

These numbers are only the tip of the economic iceberg that hotel owners and investors analyze in depth, to help make decisions as to the right time to buy and sell hotels. As they delve deeper, they are finding a confluence of economic and market conditions that spell “opportunity.”

But how can it be a great time to buy and sell hotels? Why does the same environment indicate such different courses of investment strategy?

We will look at some of the factors that create this fertile ground, while keeping in mind that every owner and investor has a specific circumstance, investment horizon, capital situation and objective, and every hotel property has a specific condition, value, and potential for additional appreciation.

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Published on:

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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Published on:

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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Published on:

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:

CONTINUE READING →

Published on:

14 August 2013
Hotel Lawyers on “hotel condo” units as securities (or NOT).

An important decision on when a condo hotel does NOT involve the sale of a “security”

by

Jim Butler, Bob Braun and Guy Maisnik
Condo Hotel Lawyers

One of the most significant challenges for developers of a condo hotel project is whether the sale of the condo units constitutes the sale of a “security.” If it does, the principals and sellers of the project will have much greater compliance issues, costs and liabilities, which could make the project unworkable.

We have been advising clients on these issues in connection with more than 100 hotel mixed-use transactions since 2000. The deals usually have a significant residential component (condo hotels, hotel condos, single family homes or home sites, etc.) retail, entertainment and other uses added to a core hotel component. The Ninth Circuit opinion in Salameh v. Tarsadia Hotel (CA-9, No. 11-55479) discussed today provides a significant new level of comfort for all involved in such matters.

In an important decision yesterday (August 13, 2013) written by Judge Ronald M. Gould, a 3-judge panel of the Court of Appeals for the Ninth Circuit upheld the lower federal district court’s dismissal of plaintiff’s lawsuit arising out of their purchase of hotel condominium units at the Hard Rock Hotel San Diego, a “condo-hotel.”

The case was filed as a class action by Tamer Salameh and other named plaintiffs against some of the most respected people in Southern California’s hospitality industry, including Tarsadia Hotel, Tushar Patel, B.U. Patel, Gregory Casserly and other defendants. Notably, Playground Destination Properties, one of the first developers and most esteemed marketing companies for condo hotels, was also named in the action.

Essential to the plaintiffs’ claims was their characterization of their purchase as involving “securities” under the federal securities laws. They said that defendants offered condominium units together with a rental-management program, and doing so, constituted the sale of a “security.” The lower court dismissed the case after giving plaintiffs an opportunity to amend, finding that the amended complaint still did not state facts sufficient to find the existence of a “security.” The lower court also dismissed related common law fraud claims. For background on this issue and its importance, see “Condo Hotel Lawyer: Why does the SEC care about condo hotels?
If you don’t know what a condo hotel is, or how it fits into hotel mixed-used, we have an entire section of HotelLawyer.com and HotelLawBlog devoted to condo hotels and to mixed-use. Just use the search bar at the top for any subject or click condo hotels or mixed use!

Why is this case important?

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