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How to Handle Hotel Receiverships & Problems Unique to the Hospitality Industry By Gemberling, Dennis* Given that many California hotels are teetering on the brink of foreclosure the Bay Area Chapter of the CRF hosted its July 15, 2010 luncheon program on “Hotel Receiverships – Unique Issues for these Special Assets” at The City Club in the San Francisco Financial District. More than 60 persons heard the speaker panel — Dennis Gemberling (Perry Group International), Jeffrey Roe (CB Richard Ellis), Randy Michelson (Michelson Law Group) and Joey Larsen (REsource Capital) – delve into hotel estate administration, legal issues peculiar to hotels, hotel management and unique problems arising in selling hotels. Randy Michelson, Esq., Bay Area Chapter President and a receivership counsel and Chapter 11 Bankruptcy Trustee, was the moderator and led the panel through a question and answer format. Mr. Gemberling – a receiver with special experience and expertise in hotel receiverships — described specific instructions and authority required for a hotel receivership order. He stated that such order should make “…sure all monies to be taken control of by the receiver were addressed and specified such as cash, credit cards, accounts receivables, FF&E reserve accounts, including set asides for internet travel commissions and franchise fees.” “Many hotels in trouble are often selling too many of their rooms through internet sites such as Expedia, Hotels.com and Priceline,” he said. “Often this means that 30-35% of the hotel’s revenues are paid out in fees to these third parties before it ever reaches the hotel bank accounts.” Joey Larsen, a lender and special assets officer specializing in SBA and 504 loans, addressed “assumptions that a secondary bank would make for troubled commercial real estate loans, including what prompts them to bring in a Receiver.” Ms. Larsen commented that “placing a Receiver in charge of the asset often brings significant improvements in cash flow, property oversight and valuations, usually resulting in a successful sale during the receivership.” Randy Michelson addressed another unique issue, the “transfer or sale of the liquor license during hotel receiverships.” She emphasized the “importance of the receiver being able to take control of the license separate from the receivership estate for possible sale purposes.” The panel described the value of a liquor license quite apart from the other hotel real and personal property. Hotel brokerage specialist Jeff Roe addressed the need to maintain the flag (i.e. franchise operator) during the receivership and its importance to both the valuation and ability to sell the hotel. He stated that “the number of hotel sale transactions were about to increase as the economic fundamentals of the lodging and travel industry are poised to improve going into 2011 and 2012.” A lively discourse between the audience and panel about the many other complex issues involving hotels in receivership followed the formal presentation. Special thanks are extended to Bay Area Chapter administrator Jodi Owens for her marketing and on-site logistical support. A set of informative handouts were also provided to attendees. A copy may be obtained by contacting Dennis Gemberling at dpg@perrygroup.com. * Mr. Gemberling is a principal of Perry Group International at One Market Spear Tower, Suite 3600, San Francisco, CA 94105 and has extensive background in hotel receivership administration. |