Hotel & Motel Management - June 2, 2008 - (Page 36)

Special Report NYU INVESTMENT CONFERENCE H&MM June 2, 2008 | HotelMotel.com www.HotelMotel.com/digital_edition Credit crunch still tops list of lawyers’ concerns By Allie Johnson CONTRIBUTING EDITOR hen hotel lawyers are tossing and turning under sweat-soaked sheets, here’s what’s on their minds: lawsuits, foreclosures, new credit standards and liquidity constraints. At the New York University International Hospitality Industry Investment Conference, taking place June 1-3, a workshop titled “Hotel Legal Issues: A New World Order” will focus on these issues and more. “The burning issues on people’s minds today deﬁnitely are economic more than legal,” said panelist Carl B. Lee, a partner at Akin Gump Strauss Hauer & Feld LLP in Dallas. “It affects those who want to buy, sell and reﬁnance.” The discussion will focus on how the economy is impacting planned and ongoing projects, as well as existing hotels. Attorney William A. Weber, a partner at Hughes Hubbard & Reed LLP in Miami Beach, Fla., who will act as the moderator, said he plans to cover topics such as what effect new underwriting standards will have on new hotel acquisitions and development; how reﬁnancing and sales will be inﬂuenced by the CMBS market slowdown; and how the lack of liquidity will affect existing hotels and projects in mid-development. The slowing economy, We- W 30th Annual NYU International Hospitality Industry Investment Conference Name of panel: “Hotel Legal Issues: A New World Order” Time of panel: 11:30 a.m. – 12:45 p.m., Tues., June 3 Moderator: William A. Weber, partner, Hughes Hubbard & Reed Panelists: Sheri Chromow, partner, Katten Muchin Rosenman; Carl B. Lee, partner, Akin Gump Strauss Hauer & Feld; Michael J. Sullivan, co-managing shareholder, Orlando ofﬁce and cochair, hotel, resort and club practice group, Greenberg Traurig; Richard Van Duzer, partner, Farella Braun + Martel ber said, will provide more topics of debate—whether performance termination clauses will be more closely looked at if the economy does slow substantially; how new performance provisions will look for future deals; and what impact the slowdown will have on the residential condominium market for hotel projects. Finally, panelists will take a look at mixed-use projects, including what will happen to projects in which condominium components are not being sold as quickly as projected—and whether condo-hotels as a ﬁnancing device are dead and, if not, how they should be structured in the future. In lawyers’ minds, however, the credit crunch is at the top of the list of worries. “The pace of transactions is signiﬁcantly slower than this time last year,” Lee said. “I’ve had to analyze loan documents and possible ways to structure things to allow transactions to happen. I haven’t lost sleep over it, but I have used a lot of brainpower on it. And I’ve certainly seen it affect transactions where buyers are unable to attain ﬁnancing in the amount the deal called for.” In the current climate, panelists say loan terms are getting less borrower-friendly, just as they did after 9/11. “This is not new. This is something that we see periodically,” said Michael J. Sullivan, co-managing shareholder of the Orlando ofﬁce and co-chair of the resort and club practice group for Greenberg Traurig LLP. One such issue owners’ attorneys face is that more lenders are insisting on a so-called balancing or resizing provision, which, according to Sullivan, takes away the certainty of the size of the loan and allows a lender to call for appraisals periodically throughout the term of the loan. “That puts borrowers to a great degree, transin the position of thinkferring hotel control to ing they have a $100the management compamillion loan and then, ny, usually with 20-year one or two years later, minimum deals,” Chropossibly coming back mow said. “With the and ﬁnding out they acright management comtually have a $90-milpany, it’s the best thing lion loan,” Sullivan in world.” But ChroSullivan said. “These provisions GREENBERG TRAURIG mow saw one deal where are coming back, and the management compathey’re difﬁcult to negony dictated renovations tiate away.” above budget, ran out of money When negotiating on his cli- and sent the project into forecloents’ behalf, Sullivan also tries to sure. “It could have been headed resist stricter cash management off if the owner had more equity, regimes with provisions that call brought in more equity or could for hard or soft lock boxes that cap have kept a tighter leash on the operating expenses. management company.” “Hotels could be in jeopardy As for mixed-use developof being starved for basic operat- ments, panelists say they are going ing funds and capital improve- to continue to be robust, despite ment loans,” Sullivan said. “I try the challenges of getting them ﬁto argue that if you starve the ho- nanced. But Chromow worries tel, you’re going to worsabout what will happen to en it, and that if you’re in projects when fractionals the hands of one of the don’t sell as expected, and major brands, you’re gothe completion of the hoing to do as well as you tel depends on their sale. can.” “I’ve got four or ﬁve Panelist Sheri P. deals coming down the Chromow, a partner at stretch on construction Katten Muchin Rosenwhere there’s a shortman LLP in New York, Chromow fall—not enough monwho represents lenders KATTEN MUCHIN ey left to complete the 65 percent of the time hotel,” Chromow said. and owners the rest of the time, “One of the deals is sprinkled with said the major ﬂags have more mechanics’ liens. It’s a nightmare power than ever. This can be a for the owners as well as the lendgood thing or lead to problems. ers. It’s a sign of the times.” “Today your owner is really, hmm@questex.com Mixed-use funding bleak, panelists say By Christine Blank CONTRIBUTING EDITOR M opment, RockResorts and Vail Lodging Co., Broomﬁeld, Colo. ixed-use properties “Those deals that were wellcan still perform well underwritten and well-conduring a recession, acceived are doing just ﬁne, even cording to a panel of experts that with a soft market,” said Rick will speak at the New York UniverRoss, chairman, global hospitalsity International Hospitality Inity practice, Sonnenschein Nath vestment Conference June 1-3. & Rosenthal, Phoenix. O’Donnell At the same time, the panel of ROCKRESORTS One of the most successful owners, attorneys and consultants models involves mixed-use projsay it will be difﬁcult to obtain ﬁects centered on hotel operations nancing on new construction. Many proj- on site, with optional hotel amenities and ects have been delayed during the current services available for residents. credit crunch and soft real-estate market. “You see that model throughout the “The trend toward mixed use is go- world now. Ritz-Carlton and Four Seaing to continue; I don’t see it going away,” sons are doing this, and my impression is said James O’Donnell, v.p., lodging devel- that they are successful,” said Jay Neveloff, partner, Kramer Levin Naftalis & Frankel, New York. Neveloff’s ﬁrm has been involved in successful projects such as Trump International Plaza Hotel, Trump Soho and the St. Regis in New York. “The concept does work. It makes sense for a certain part of the market,” Neveloff said. Financing for new mixed-use projects is hard to come by. “The properties that we have under construction are ﬁne, but if we had to be ﬁnanced on a large, mixed-use development, I don’t think there is anyone today who See Mixed-use | page 38 30th Annual NYU International Hospitality Industry Investment Conference Name of panel: “Mixed-Use Development” Time of panel: 11:15 - 12:30, Mon., June 2 Moderator: Richard F. Ross, chairman, global hospitality practice Sonnenschein Nath & Rosenthal Panelists: Frank A. Anderson, president, Anderson Hospitality Consultants; Marty Collins, president and c.e.o., Gatehouse Capital Corp.; Ted Ent, senior director, franchise development, Hilton Hotels Corp.; Jay A. Neveloff, partner, Kramer Levin Naftalis & Frankel; James C. O’Donnell, v.p., lodging development, RockResorts and Vail Resorts Lodging Co.; Richard A. Warnick, president and founder, Warnick & Co. http://HotelMotel.com http://www.HotelMotel.com/digital_edition

Table of Contents Feed for the Digital Edition of Hotel & Motel Management - June 2, 2008

Hotel & Motel Management - June 2, 2008 Contents State Programs Help Define Green Hotels AmericInn Boosts its American Presence Questex, The Bench to Host Russia Event Perspective Letter to the Editor Legally Speaking Guest Column Marketing Matters Consultant's Corner Satisfaction Trends On Finance Travel Trends Cornell Insights Energy Star Update Maintenance Doctor Management Trends Trends & Stats Finding Financing Challenges Developers Credit Crunch Still Tops List of Lawyers' Concerns Mixed-use Funding Bleak, Panelists Say Luxury Landscape Keeps Pushing Higher PTACs Events Casegoods Seating Energy Controls and Sensors Pest Control Electronic Locks Transactions Supplier News Timeshare Misconceptions Still Prevalent Awards People Ad/Edit Index Marketplace Classifieds Checking Out

Hotel & Motel Management - June 2, 2008

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