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Course Details

Course Information
  • smart_display Format

    On-Demand

  • signal_cellular_alt Difficulty Level

  • work Practice Area

    Real Property - Finance

Date & Time
  • event Date

    Thursday, June 18, 2020

  • schedule Time

    1:00 p.m. ET./10:00 a.m. PT

  • timer Program Length

    90 minutes

Credit Information

  • This 90-minute webinar is eligible in most states for 1.5 CLE credits.

$347.00
CLE
ALL

This CLE course will discuss the options currently available to hotel operators and their lenders impacted by the COVID-19 economic and travel shutdown. The panel will discuss the complex issues presented with foreclosure or restructuring of distressed hotel loans. The panel will also address how new CARES Act loan programs--the Paycheck Protection Program (PPP) and the Main Street Lending Program--might facilitate new financing to enable operators to survive the shutdown and how they may fall short for hotel operators.

Faculty

Geoffrey M. White
Office Member-in-Charge
Frost Brown Todd

Mr. White represents borrowers, developers, owners, investors, lenders, loan servicers, and managers in the financing, workout, servicing, purchase, sale, development and management of commercial real estate properties. He has represented life insurance companies, CMBS loan originators, national banks and FHA-insured lenders in closing billions of dollars in loans in 41 states. Mr. White has also represented publicly traded REITs, national real estate investors and developers, and regional and local developers in closing billions of dollars of CMBS, mortgage REIT, mezzanine, life insurance company, national bank, FHA-insured, Fannie Mae DUS, and Freddie Mac loans in over 20 states. These loans have been for the new construction, purchase or refinancing of multifamily housing, hotels, offices, retail centers, medical offices, industrial properties, senior housing, nursing homes and assisted living facilities. Mr. White has also represented borrowers, special servicers, life insurance companies and FHA-insured lenders in connection with a multitude of servicing related matters for both distressed and performing assets. He previously served as the firm’s Real Estate Service Team Leader

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Joshua D. Brock
Attorney
Frost Brown Todd

Mr. Brock represents institutional lenders and borrowers in complex real estate transactions. He has represented lenders in closing CMBS and mezzanine loans across all major commercial asset classes. Mr. Brock’s transactional experience includes DST borrower structures, ground leases, condominium regimes, mortgage/mezzanine transactions, assorted tax credit/PILOT arrangements, master lease transactions and New York and Florida assignments. Mr. Brock has represented property owners on a large array of real estate transactions including acquisitions, sales and refinancings, with a focus on hotel properties. This experience includes publicly-traded hotel REITs, ground lease transactions, 1031 exchanges, mortgage and mezzanine loans, variable rate loans and mixed-use properties.

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Ann Hambly
Founder & CEO
1st Service Solutions, Inc

Ms. Hambly has been involved in every aspect of the CMBS industry throughout her 35+ year career. She has been an intentionally integral part in shaping the CMBS industry since its inception. Ms. Hambly created from scratch and ran many large servicing shops before creating 1st Service Solutions in 2005 which has grown into what is now known as the preeminent CMBS Borrower Advocate practice. Ms. Hambly has been and continues to be highly involved in industry leadership as a featured keynote speaker at conferences across the country speaking on CMBS structure, CMBS workouts, assumptions, and hot topics in the general CRE industry.

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Keith H. Mullen
Miscellaneous

Description

The economic fallout from the COVID-19 pandemic has raised many issues for real estate borrowers and lenders. Perhaps the most immediate impact has been in the shutdown of the hotel industry. Most hotel loans are or likely will be in default in the near term. There are alternatives to loan restructuring or foreclosure of distressed hotel properties; counsel needs to be well-versed on the options. Hotel owners and their counsel should also understand how to address covenant defaults related to COVID-19 and understand strategies to avoid triggering recourse to the loan sponsor.

Hotel loan workouts are more complex than other real estate workouts. The hotel management and franchise agreements may give control and exclusive rights to the operator and franchisor--with approval right to lenders and other interested parties. Licenses, permits, and contracts may be in the name of the manager--and steps must be taken (or side-stepped) in order to avoid or limit personal liability of the loan sponsor. Operating agreements, hotel franchise agreements, loan documents, and governmental requirements might be inconsistent, with competing interests of the parties. The dynamics of those arrangements (and more) must be considered in the context of a loan modification foreclosure, workout, or bankruptcy of the borrower--and the ultimate impact upon the sponsor.

The CARES Act provides potential financing alternatives that might enable hotel borrowers and lenders to avoid workout and foreclosure. Loans administered by the SBA, such as the PPP, offer a short-term funding solution to cover payroll, mortgage interest, and other costs, but available funds are limited and certain program requirements pose difficulties in the context of hotel owners and operators.

The Main Street Lending Program could provide more long-term relief. It provides hotel owners and hotel operators the ability to either upsize an existing term loan or take out a new loan, with the government taking substantially all of the repayment risk by purchasing 95% of the loan from the lender. The program might enable hotel owners/operators to obtain much needed liquidity and avoid possibly complicated intercreditor issues and covenant restrictions because existing lenders are providing the additional funds and thereby consenting to further debt, although many details of the how the program will function in practice remain to be seen.

Listen as our authoritative panel analyzes the financing options available to hotel borrowers during the business and travel shutdown.

Outline

  1. Working out a hotel loan: issues unique to hotels; competing stakeholders
    1. Preserving the franchise
    2. Management company with exclusive rights, continuing control
    3. Licenses, permits, and contracts
    4. Employees
    5. Covenant defaults
    6. Recourse obligations
  2. The Paycheck Protection Program: short-term relief, limited funds and hotel complexities
  3. The Main Street Lending Program
    1. Ability to upsize existing loan
    2. The federal government takes on 95% of repayment risk
    3. Favorable terms
    4. Unknown details

Benefits

The panel will review these and other issues:

  • What concerns particular to hotels (and their sponsors) must be addressed before proceeding with restructuring or foreclosure of a hotel loan?
  • Are hotels eligible to participate in the Paycheck Protection Program? Is consent of the current lender required?
  • How does the Main Street New Loan Facility differ from the Main Street Expanded Loan Facility?
  • What is the process for applying for and closing a loan under one of the Main Street Lending Program facilities?