Why now is the time to purchase a hotel
By Jim Butler, Chairman, JMBM’s Global Hospitality Group
Debt is returning, equity is out looking, and we've passed the bottom of the trough. Why now is the time to purchase a hotel.
If you do not know why now is the time to invest in a hotel, you will want to read these articles!
Why the time to purchase a hotel is now
Hosted by JMBM's Global Hospitality Group®, sponsored by CSI MasterCard and moderated by Hotel Business® editor Dennis Nessler, the Executive Roundtable brought together hospitality industry leaders to address today's dynamic hotel finance market. I was fortunate to be a participant in the Roundtable discussion and believe that reporter Bruce Serlen of Hotel Business® captured the group's optimism, explained the issues they remain cautious about, and why they think this recovery is different.
Some of the items mentioned in Serlen's story, which we have covered in the Hotel Law Blog over the past year or two, include:
- Yes, debt is becoming available.
- Purchase and sale activity is starting to increase.
- Portfolio lenders are going to be forced to deal with their troubled loans.
- We will see more sales through receivership.
- There is still tremendous stress in many assets, and workouts will go forward for the next 3-5 years.
- There are hundreds of new funds chasing deals, many more than during the last cycle.
- Many Asian investors believe that the US property market hasn't hit bottom yet and do not see the bargains that exist right now.
- The recovery is market-driven – some markets will have significantly more appreciation than others. While the gateway cities are appreciating faster, there are interesting sub-markets worth pursuing.
In the same issue of Hotel Business®, Serlen's article, Meet the Money: optimism reigns as hospitality deals gain momentum, echoes some of the themes that arose during the Executive Roundtable and touches on others, including:
- Deals are beginning to happen; hotel metrics are creeping up.
- Now is an attractive time to be lending in the hotel industry.
- If underwriting is done correctly, we can get a sense of how hotel loans are going to do for the next year or two.
- We are at the trough of the market.
- Hotel deals tend to be better structured than other real estate classes, which gives investors comfort.
- Asset valuations are still an issue.
- REITs are paying top-of-the-market prices.
- Private equity funds have to invest the money raised according to the terms of their fund, so they have to start spending.
- The pace of defaults is slowing, but the number of defaults is growing.
To read the full stories, see the May 21, 2011 issue of Hotel Business®. If you are not a subscriber to Hotel Business®, subscribe at http://www.hotelbusiness.com/main.asp
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.