| |
| |
One moment, please... we are searching the news archive.
|
|
|
Hotel Industry News |
Sunday November 23rd, 2008 |
 |
Condo Hotel Lawyer: What is fanning the condo hotel wild fire in Latin America, the Caribbean, Europe, China, India and the Middle East? - By Jim Butler, author of www.HotelLawBlog.com |
|
While there are a lot of reasons that condo hotels make sense and have an enduring legacy, the wildfire that has been burning in the U.S. for the past 5 years is now pulsing out in all directions. What has caused the condo hotel craze to spread to Latin America, the Caribbean, Europe, China, India and the Middle East? And why is anyone looking to emulate the state of the art developed over the past 5 years in the U.S.?
|
Foreign markets are hot!
As I noted yesterday, from our own experience and from the IMN Condo Hotel Symposium in Las Vegas last week, it looks like the condo hotel market outside the U.S. is exploding, particularly in Mexico, Costa Rica, the Caribbean, London, Spain, in other spots throughout Europe, Dubai and elsewhere in the Middle East, China, and perhaps India.
Why? Why hasn't this phenomenon burned itself out? Why is it spreading to other continents and jumping oceans?
Why the condo hotel market is on fire outside the U.S.
I won't go over all the basics again. (send me an email at jbutler@jmbm.com if you need the primer or poke around www.HotelLawBlog.com a bit). Initially condo hotels are catching on elsewhere for all the reasons they have in the U.S.-the confluence of benefits to all stakeholders, including real estate investment for unit buyers, convenience, amenities, lifestyle, ego gratification, and so on. But outside the U.S., there may be even more advantages than available here.
The additional advantages largely stem from freedom, or potential freedom, from U.S. securities laws. In some jurisdictions, the unit sale may still be treated as a 'security' (such as in Canada), but the government is sufficiently enlightened to make that a reasonable and predictable process. In many others, as long as there is no fraud or misrepresentation, the sale is free from significant government intervention. In general, however, it is permissible in these other jurisdictions to sell the condo hotel unit as an 'investment' and to treat buyers as 'investors' instead of insisting that they use the units for personal purposes without any current income expectations.
As a result, foreign developers may be able to do all the things that U.S. developers would like to do but generally cannot. These things include the following:
1. Structure and market the condo hotel unit sale as an 'investment' in real estate - both for current income and for long term appreciation. Some may even guarantee a minimum return on investment.
2. Require each condo hotel unit purchaser to place his or her unit into a clearly defined rental program, and if they do not wish to participate, they may be refused the ability to purchase the unit.
3. Pool income and expense from the condo hotel units so that the risk of buying an individual condo hotel unit is spread over all the units in the hotel, or all units in a particular class or group of units.
4. Provide potential condo hotel unit purchasers with all the relevant documents for the condo hotel program while they are evaluating their investment, instead of requiring a purchase before they can find out the relevant details of the rental program, see the rental agreement, learn about the 'splits' and the like.
5. Provide potential investors with reasonable and well-founded projections, comparables and other economic data to help them evaluate the investment.
6. Impose use restrictions on the condo hotel unit purchaser either limiting the owner's use of the unit to some time period (i.e. not more than 90 days per year on some kind of notice arrangement) or prohibiting it altogether to guarantee smooth hotel operations with a predictable hotel rooms inventory. After all, a condo hotel project must work first and foremost as a hotel ... and a condo project.
WOW! What a concept! If only the U.S. SEC could get comfortable with a procedure to permit this in the U.S.
And of course many foreign investors have a great appreciation for the everlasting value of real estate. So add the condo hotel advantages of hassle free ownership, the quality available from luxury brand management, a ready rental program from the hotel, plus all the lifestyle, convenience, and other benefits, and who needs to ask why this is catching on outside the U.S.? The question is, how did it work in the U.S. so well with all these crazy SEC-generated restrictions and contortions?
Why foreign condo hotel projects need U.S. condo hotel 'technology'
Foreign markets are importing US condo hotel technology.
To get a leg up, developers outside the U.S. are studying the latest condo hotel 'technology' from the U.S. for 3 reasons:
(1) after hundreds of deals and billions of dollars of projects, in the U.S., a handful of lawyers and advisors have figured out some excellent solutions to business and legal problems that have plagued condo hotel developers for 30 years-solutions to integrating the functional and operational aspects of the mixed hotel, residential and other real estate uses,
(2) many of the ultra-refined U.S. approaches will deliver highest levels of satisfaction to local and international buyers of condo hotel units without reinventing the wheel,
(3) many foreign-based projects will be marketed to or purchased by U.S. residents and it is wise to consider U.S. legal implications and deliver a product that looks like something they expect. In fact, many of the expectations of U.S. condo hotel unit buyers may reflect the needs and desires of their off shore brethren.
Foreign market condo hotel product may be free from U.S. SEC restrictions (or not, as noted above when marketing to US residents), and experienced U.S. advisors know all the sticking points to help develop an ideal regime structure for marketing. This will be very interesting to watch!
Our Perspective. We represent developers, owners and lenders. We have helped our clients as business and legal advisors on more than 85 hotel-enhanced mixed-use projects, all of which have at least a significant condo hotel element. These deals are in every major market in the U.S., as well as Latin America and Europe. They are a part of our $40 billion of hotel transactional experience involving more than 1,000 properties all over the world. For more information, please contact Jim Butler at jbutler@jmbm.com or 310.201.3526.
Jim Butler is recognized as one of the top hotel lawyers in the world. He devotes 100% of his practice to hospitality, representing hotel owners, developers and lenders. Jim leads JMBM's Global Hospitality Group(R) -- a team of 50 seasoned professionals with more than $40 billion of hotel transactional experience, involving more than 1,000 properties located around the globe. Jim sees the condo hotel phenomenon as just one part of the long-term trend toward "hotel-enhanced mixed-use" where hotels work together with shopping center, residential, office, retail, spa and sports facility components to mutually enhance the entire project's excitement and success.
Jim and his team are more than "just" great hotel lawyers. They are also hospitality consultants and business advisors. They are deal makers. They can help find the right operator or capital provider. They know who to call and how to reach them. They are a major gateway of hotel finance, facilitating the flow of capital with their legal skill, hospitality industry knowledge and ability to find the right "fit" for all parts of the capital stack. Because they are part of the very fabric of the hotel industry, they are able to help clients identify key business goals, assemble the right team, strategize the approach to optimize value and then get the deal done.
About the Author
Jim Butler is recognized as one of the top hotel lawyers in the world. He devotes 100% of his practice to hospitality, representing hotel owners, developers and lenders. Jim leads JMBM's Global Hospitality Group(R) -- a team of 50 seasoned professionals with more than $40 billion of hotel transactional experience, involving more than 1,000 properties located around the globe. In the last 5 years alone, they have brought their practical advice to more than 80 "hotel-enhanced mixed-use" projects, a term Jim coined to fill a void in industry lexicon. This term describes one of the hottest developments in real estate-where hotels work together with shopping center, residential, office, retail, spa and sports facility components to mutually enhance the entire project's excitement and success.
Jim and his team are more than "just" great hotel lawyers. They are also hospitality consultants and business advisors. They are deal makers. They can help find the right operator or capital provider. They know who to call and how to reach them. They are a major gateway of hotel finance, facilitating the flow of capital with their legal skill, hospitality industry knowledge and ability to find the right "fit" for all parts of the capital stack. Because they are part of the very fabric of the hotel industry, they are able to help clients identify key business goals, assemble the right team, strategize the approach to optimize value and then get the deal done.
Jim is the author of the www.HotelLawBlog.com. He can be reached at +1 310.201.3526 or jbutler@jmbm.com .
|
|
|
 |
|
 |
|
|
|
Jim Butler is the author of Hotel Law Blog, the premier source for hotel related legal news and information.
He is recognized as one of the top hotel lawyers in the world. He devotes 100% of his practice to hospitality, representing hotel owners, developers and lenders. Jim leads JMBM's Global Hospitality Group(R) -- a team of 50 seasoned professionals with more than $40 billion of hotel transactional experience, involving more than 1,000 properties located around the globe. |
|
|
|
Post Release
Get Content
Email News Brief
Saved Articles
Advertising
Handheld
XML/RSS
Post News