Hotel Lawyer: The hotel transaction market is heating up!
By Jim Butler, Chairman, JMBM’s Global Hospitality Group
The transaction market is heating up, and I am still getting calls and comments about my interview with Eric Stoessel in the National Real Estate Investor last month, where we discussed how the hotel transaction market is poised for a big turnaround.
But, first things first.
Hotel Distress Buys: 'There's Something for Everyone Right Now'
Eric called me shortly after the $1.28 billon Ashford Hospitality Trust joint-venture acquisition of Highland Hospitality's 28-hotel portfolio deal closed last month, He wanted to know if more portfolio sales like the Ashford Hospitality Trust deal would be coming online. What did I think?
My answer: Absolutely! Will distressed hotel deals of all sizes be made this year? Absolutely!
Hotel values increased 10% to 15% in 2010 and prices are trending up. Industry fundamentals are improving, there is little new supply and there is virtually unlimited equity on the sideline. For opportunistic investors looking for value, it won't get better than this. The time is now!
As I told Eric in our interview:
"We're less likely to see as many bankruptcies and foreclosures as we saw in the 1990s, but we're more likely to see recapitalizations – meaning fresh capital investments, discounted payments, note sales, restructuring arrangements – where the new investor gets the lion's share or all the equity."
Eric and I discussed why how these kinds of deals are often good for the borrower as it may prevent negative tax consequences, or offer some forgiveness of indemnity. Sometimes the original borrower is left with some real economic interest, but the ownership structure generally favors the capital coming in. We discussed why note sales often work for lenders and what kinds of investors are doing deals. We covered a lot of ground in a short interview.
Click here to read the National Real Estate Investor article entitled, Hotel Distress Buys: 'There's Something for Everyone Right Now'.
There is no typical scenario for how investors and distressed borrowers come together to discuss distressed hotel deals, but you can be sure that providers and consumers of capital, and people looking to do deals will be at Meet the Money® 2011, May 2-4, 2011 in Los Angeles.
Meet the Money® is one of the "most efficient" hotel investment conferences. Attended by senior level executives, coming to "do business," this conference is always a reliable venue for providers and consumers of capital. But the timing and the dynamics for the Conference this year are particularly exciting. After a long drought of transactions and finance, deals are back! Simply put, investment opportunities are not going to get better than this, so you need to figure out how to find transactions now, and finance them now.
The timing is NOW. Even a delay of a few weeks or months may mean you miss out. To get more information and register for Meet the Money®, go to www.MeetTheMoney.com.
This is Jim Butler, author of www.HotelLawBlog.com and hotel lawyer, signing off. We've done more than $60 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?
About JMBM"s Taxation, Trusts & Estates Group
JMBM"s Taxation, Trusts & Estates Group is one of the largest and most active groups of its kind within a full-service law firm. Recognized by U.S. News & World Report / Best Law Firms® with a First-Tier ranking in the Los Angeles metropolitan area, our practice focuses on the needs of individuals and families, and their business interests. Our attorneys provide estate planning, wealth transfer planning, trust administration and the resolution of trust disputes. Our tax lawyers understand business concerns, and work closely with colleagues in the Firm"s corporate and real estate groups to ensure the tax efficiency of organizational and transactional decisions.
JMBM's Global Hospitality Group® provides business and legal advice to hotel owners, developers and investors, based on practical experience gained from more than $71 billion of hotel transactions, 1,000 hotel management agreements, 1,000 franchise agreements, and 3,800 properties worldwide. The Chinese Investment Group™ within the practice is a dedicated team of hotel and real estate lawyers that provide a gateway for Chinese investment in the United States. The Group and its network of reliable professional resources help Chinese investors identify, analyze, evaluate, validate, acquire, finance and manage hotel and real estate opportunities. We have closed more than $1.5 billion of EB-5 financing for our developer clients and sourced more than half of that.