Due to the very specific nature of the hotel industry and the day-to-day realities of running a hotel, financing a hotel purchase or project can be complicated. If you are building, buying or selling a hotel, it is important to retain a team of lawyers who are familiar with the hospitality industry and who are tuned in to the unique requirements of hotel owner-operators.
A good lawyer with experience in hospitality properties will be able to save you more money than you will spend on legal fees. The opportunities to win or lose in hotel transaction negotiations is almost endless; it is one area of the law where having experienced counsel is especially important.
At Baker & Company, our highly skilled Toronto hotel lawyers have been advising clients on hotel financing for more than 30 years. We have helped prospective buyers and current owners of hotels of all sizes.
Complicated Aspects of Hotel Financing
There are a number of factors specific to hotels that make them a challenging proposition to finance. These factors include:
Hotels have only one purpose and cannot be easily adapted to other uses;
The banks or other lenders which would be providing the financing must undertake a challenging risk analysis involving highly specific factors such as upcoming capital requirements and local occupancy rates; and
Since the underlying real estate value can only be captured by demolishing the hotel itself, which is an expensive and time-consuming proposition.
As a result of these and other factors, banks have largely been unwilling to extend loans to value ratios much higher than 50%.
In addition, most lending agreements involving hotel financing require monthly reporting from the borrowers as well as a requirement to segregate a percentage of revenues for future capital expenses.
Obtaining financing for a hotel project can be challenging. A knowledgeable hotel lawyer can go a long way in helping you overcome the most demanding hurdles, can help you obtain the maximum amount possible, and can help you manage and address risk and liability.
At Baker & Company, we are known for being the firm that handles the “complicated stuff”. In addition to advising clients on obtaining hotel financing, we also provide guidance on other matters that arise in hotel ownership, including advice on hotel property improvement plans,hotel franchise license agreements, and matters that arise with respect to hotel employees. We do not shy away from the most complex of legal scenarios and regularly help clients through their most thorny and muddled issues.
Baker & Company: A Long History of Representing Clients in The Hospitality Industry Throughout Ontario