Hotel & Motel Management - August 2008 - (Page 141) www.HotelMotel.com/digital_edition HotelMotel.com | H&MM August 2008 On The Block SALE PREPARATION 141 done deals Mazili Hotel Group, a hotel investment brokerage company, announced the grand opening of its new offices, located in Atlanta, Boston, Charlotte, N.C., Denver, Detroit, Lexington, Ky., and Los Angeles. Its original office remains open in Tampa, Fla. With its new offices, Mazili intends to expand outside of the Southeast and Florida and into the Midwest and West Coast. Mazili currently is present in 15 states, and the company hopes to be in 30 states by 2010. Hunter Realty Associates represented Lodgian in the sale of the Holiday Inn of Frederick, Md., for an undisclosed price. West Patrick Hospitality LLC purchased the 158-unit exterior corridor hotel. Jones Lang LaSalle Hotels provided brokerage advisory services to Ashford Hospitality Trust in the sale of the Hilton Dallas Lincoln Centre to AP VEF Hilton Dallas Owner’s LLC, an affiliate of Apollo Real Estate Advisors LP for $72.3 million. The Hilton Dallas Lincoln Centre is a 20-story property that contains 500 guestrooms and 35,000 square feet of meeting space. The hotel will undergo a complete renovation of the guestrooms, meeting space and public areas, and a branded restaurant will be added to the property. Mumford Co. represented Henry F. Brandenstein, trustee, in the sale of the Hampton Bay Plaza and Suites of Hampton, Va., to CAAP Hospitality LLC for $2.3 million. The buyers are a local hospitality investment group that plan to renovate a portion of the existing hotel and redevelop the balance of the property. Compiled by Emily Hanna, ehanna@questex.com Maximizing hotel profitability before sale IN THE details Preparing for a sale What you do before going to market with a hotel will help maximize your profit as a seller. A year of preparation will yield the simplest negotiations and the best sale price. In those 12 months, prospective sellers should: Make property improvements Review important documents Anticipate questions By Gina LaVecchia Ragone CONTRIBUTING EDITOR MUMFORD CO. hen it is time to sell a hotel, every owner wants to get top dollar for his or her property. To fetch the highest selling price, pay attention to the physical asset, the financial picture it presents and any potential questions a buyer might have. W The Holiday Inn Express of Little Rock, Ark., was sold recently. Before putting a hotel on the block, sellers should reduce unnecessary expenses, gather documentation and review contracts, among other preparation steps. Making a good impression A common question is whether to implement a brand’s product improvement plan before it is listed or market the property at a lower price and let the buyer execute the updates. Richard Conti, president of the Plasencia Group said, “Typically, the brand will do a property improvement plan for the new buyer who then incurs that cost. But you, as the seller, want to manage that process for the buyer.” What sellers also should do is invest in minor improvements that contribute to a good first impression, such as new landscaping and updated lobby furniture. Other cost-effective preparations include thorough cleaning, paint touch-ups and the resolution of cosmetic flaws, such as stained ceiling tiles. “You don’t need to renovate, just clean it up and show that it is well-maintained,” said Mike Cahill, president and founder of HREC. Making a good financial impression is important as well. Boost your property’s appeal by reducing unnecessary expenses and improving its bottom line. Most buyers will examine a hotel’s trailing 12-month income and expense statement, “so be certain it reflects the income-generating capacity of the hotel,” Conti said. “A year before you put it on the market, you want to start … making sure there are no extra expenses a buyer might penalize you for,” Cahill said. These include variable expenditures, such as extraneous staffing, and even fixed expenditures, such as real-estate taxes and insurance, which often can be lowered. Also keep in mind what Con- ti describes as the biggest dealbreaker when it comes to selling a hotel property: operating numbers that diminish while the buyer and seller are still in negotiations. He recommends providing incentives for key employees, such as bonuses to stay on the job through the transaction and incentives to keep up the numbers as well. Paperwork prep pays off Reviewing records and financial data and being able to present pertinent information in detail is essential. Before deciding to sell, hotel owners should closely read all of their mortgage documents and review pre-payment penalties, assumption provisions, fees and required escrows, said Mike Francis, principal, Mumford Co. “All sellers need to understand any existing mortgage commitments,” he said. “In some cases, the prepayment penalties may make a proposed transaction unattainable.” Sellers also should review the property’s title for any possible liens. Resolving any problems or errors before attempting to sell will make for a smoother transaction. Similarly, a review of the property’s survey allows for the resolution of mistakes before the buyer’s due diligence process begins. Hotel owners also should review their capital leases and operating agreements and understand all related prepayment or cancellation penalties. A buyer probably will not wish to inherit existing furniture, fixtures and equipment leases, service agreements or union contracts. “Know your agreements and which ones will cause problems when you sell,” Francis said. Francis also emphasized that sellers would do well to anticipate potential buyers’ questions and documentation requests. Papers to have on hand include: Title report and survey Environmental inspection report A listing of all property to be included in the sale The property’s last two quality inspection reports Detailed profit and loss statements for the last three years Tax returns for the last three years Ready to sell The right marketing strategy is vital to a successful sale, so selecting the right broker is essential. “You need to have somebody with knowledge of the region and the area where the hotel is located,” Conti said. “They know the regional and the local buyers.” hmm@questex.com Statesboro, Ga. Mumford Co. advised in the disposition of the Holiday Inn Express in Statesboro, Ga. The four-story, 92-room hotel was to be repositioned to another brand in July after undergoing cosmetic renovations. MUMFORD CO. http://HotelMotel.com http://www.HotelMotel.com/digital_edition
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