Handling Your Hotel Loans Amid the Coronavirus Pandemic

With the sudden arrival of the Coronavirus Pandemic, the hospitality industry has been hit hard. Between the fear, anxiety and social isolation of consumers and the government ordered lockdowns and no travel orders, occupancy of many hotels is down to an alarming level. It is anticipated, by the American Hotel & Lodging Association that more than half of U.S. Hotels may close before the end of 2020.

How will Lender’s respond to the crisis?

Unfortunately, we cannot predict how the Banks are going to be responding to the sudden and severe financial distress of their Hotelier Borrowers. Unless your loan agreement, note, and mortgage specifically includes a force majeure clause or a similar clause including a viral pandemic (see Gulati Law Blog Coronavirus and How it Affects your Contracts) providing some type of cure, then the Lender has the right to default you and pursue all legal remedies including acceleration of the debt and foreclosure of the property.

What Can I do to Get Ahead of the Crisis?

It is important not to wait until you receive a notice of default to take action. Reaching out to your Lender in anticipation of default is vital to reaching a resolution. Gulati Law has trained attorneys who are able to reach out to your lender to discuss forbearance, deferment of payments, or other solutions that work for both you and your lender.

Is Refinancing an Option?

Even before the start of the pandemic, mortgage loan interest rates had been at an all time low. It is the hope of the industry that these will stay low or continue to fall leaving an opportunity for hotel owners to refinance their existing loans. It is of the utmost important to have a qualified attorney review any refinance documents prior to execution. Gulati law has been successful in negotiating refinances with the best terms for our clients and can close all loans in house.

In addition to the option of refinancing, there may be other options as Congress convened over the weekend to discuss legislation intended to provide stimulus for the American economy, called the CARES Act. Stay tuned for more updates on this proposed Act.

 Information Needed Prior to Reaching out to the Lender

  1. Actual Borrower Name, any Guarantor Names, Property Address and ID Number;
  2. History of good payments;
  3. Positive stories about the quality of your hotel and customer service;
  4. Occupancy issues and other current financial strains; and
  5. Possible financial payments you CAN make (if any) until the economy recovers.

Contact Gulati Law, P.L. for Assistance

We cannot reiterate enough that you should contact a qualified attorney to correspond with your lender on your behalf. Contact our office today to discuss retaining our services immediately (initial letters to your Lender may be complimentary on a case by case basis).

Remember to stay positive! We believe that once this crisis passes, we will be stronger than before!

 

Sources: Congress.gov, AHLA, AAHOA, Hospitality Mgmt

Tips For Purchasing A Hotel in Florida

Before looking under classified ads for hotels for sale, you must first start by having an idea of your needs and expectations for your new business. The location, appearance, and structure of the property will all affect how to choose to move forward with the purchase. Looking at the history of the business is a good place to start, as well as potential ways to make it more profitable for you in the long run.

Speaking with an experienced attorney will offer detailed information and advice about a specific property after you have gone through a preliminary process of consideration. Check out the location well before deciding to buy there. A hotel is unique in the sense that business can be affected by so many different factors. If it is on the coast or by a beach, you may only get bookings during certain months once a year. In that case you may count on seasonal income whereas in a big city or town, you will want to be near businesses that travel and year-round tourist attractions. Also be careful of locations that are overpopulated or riddled with competition.

Experienced operators have an advantage in that they have established repeat clientele and are usually well known. Make a list of questions to be answered when looking at hotels for sale. That way, if they don’t pass the checklist, they won’t be worth considering. This step could save you a lot of time if you know what you’re looking for. Some of these elements could include staff members, food service options, how many rooms or guests on average, tenant demographics, and the Unique Selling Proposition for that hotel.

Wyndam

Two key ratios that are important to note include the revenue per available room (revpar) and the staff costs to turnover. These numbers can help you calculate how profitable the hotel has been in the past and how much you will be making potentially. You can also ask current ownership on their approach with the hotel to see if  they have done anything new recently as far as management and/or renovations. The third major aspect of buying a hotel is the building.

It is necessary to first get a full survey and valuation taken, and also review the lease terms and conditions (if any) before moving forward with a purchase. Take a look at the physical condition of the rooms and public areas, making sure all fire and health regulations and codes are met. Check documentation for up to date licenses and everything you may need in order to make sure there is no more unfinished business on your part. A Real Estate Attorney can assist you by gathering all documents and information regarding the closing and offer any advice you may need for your new business venture. Contact us at Gulati Law and see how we can help you acquire a Florida Hotel!

 

Source: BizJournal

Pic Credit: Wyndham Hotels

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