Successful Joint Ventures For Hotel Development, Acquisition And Financing

Originally published by Hotel Online, HOTELS, and Hospitality Net.

At JMBM's recent hotel finance conference in Los Angeles, a panel of experts talked about how well joint ventures are working to provide financing for hotel development and acquisitions.

The hotel joint venture experts

The Joint Venture Panel from Meet the Money® 2012 featured 5 veteran hotel investors and operating partners, and was moderated by Guy Maisnik, hotel lawyer and Vice Chair of JMBM's Global Hospitality Group®. The panelists were:

Guy Maisnik, Vice Chair, JMBM's Global Hospitality Group® works extensively on hotel joint ventures and financings, as well as acquisitions.

Mark Burden, CEO, Rim Hospitality Lamont Meek, SVP and COO, Circa Capital Rick Frank, SVP Hospitality, Behringer Harvard Jonathan Martin, VP, AEW Capital Management Kam Babaoff, Managing Director, Ensemble Hotel Partners

Each of these participants has a long history of investing in and operating hotels, and they represent the spectrum of views currently prevailing in the industry. While each has been successful, each has taken a different road to achieve success. The individual strategies and approaches of each stands out, as does the talent and vision necessary to navigate some of the toughest years in the hotel industry.

Sweet spots for hotel joint ventures differ

While joint venture investors tend to have their individual sweet spot -- a specific set of criteria which makes a deal attractive -- they often find deals slightly outside their comfort zone. And we witnessed some indication of that on this panel.

Rick Frank sees this time as "the beginning of the next cycle" and believes the market remains out of equilibrium, with a disconnect between buyers and sellers. For example, Behringer Harvard itself wrestles with an internal conflict, as it is often unwilling to sell properties for the price it would pay for them.

Jonathan Martin tells us that AEW is focusing on the top 15-20 markets, returns in the upper teens, and assets from $10-20 million. Like most of the opportunity funds, AEW stays away from ground up development. For AEW, its all about the real estate. Branding is secondary.

In contrast to AEW, Mark Burdenof Rim Hospitality focuses on and believes heavily in branding. The right brand with the right asset can drive revenues. Rim also places a heavy emphasis on cost containment, particularly keeping labor costs in check. Mark is quite optimistic as Rim is closing out rate discounts...

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