Jim Butler began practicing hotel law more than 25 years ago. In that time, he has worked with hotel owners, developers and lenders to negotiate more than 1,000 management and franchise agreements. While the bulk of his work has taken him elsewhere – he has worked on projects in Mexico, the Caribbean, Europe and the Middle East – he has worked on many major projects in Los Angeles, from small independent hotels to large luxury hotels such as the Beverly Hilton, Sheraton Universal and W Hollywood.
When and how did you get started in the hotel business?
In the 1987 banking and real estate crash, I was a banking and real estate lawyer. Many of the troubled assets turned out to be huge luxury hotels and resorts in Hawaii, California and New York. Many of the distressed hotel loans were the largest assets in the respective banks that made them and no one knew how to deal with them properly. We were fortunate to have a partner who had worked on more than 200 hotel deals worth more than $2 billion. The hotel practice took off, I had a great mentor and I enjoyed working with the people in the industry so much that I have never wanted to do anything else.
What makes a hotel deal different from other commercial real estate deals?
More than half the value of a hotel is in the hotel’s operating business, which is inextricably intertwined with the special purpose real estate asset. There can be hundreds of moving parts in a hotel deal, which makes them risky, complex and very interesting. Hotel operations are complicated and intense; they involve a significant workforce, management companies with long-term agreements, brands and long-term franchise agreements. Lacking leases, the hotel must market and sell its rooms every day.
What unique legal issues must be addressed developing/buying a hotel versus other commercial real estate?
Hotel legal issues require a practical, working knowledge of this special class of real estate as well as the operating business associated with it. Hotel matters are governed by norms, customs and practices unique to the industry, and there is a very small group of players who comprise the industry – developers, owners, brokers, lenders, consultants and the like. As an active, operating business, hotels must deal with labor and human resources issues from its active workforce, long-term management and franchise agreements with hotel companies and brands, Americans With Disabilities Act challenges and litigation over questions that arise from the unique relationships hotels have with various parties.
What’s the most challenging aspect of working on hotel projects?
I take all my projects very personally. I try to put myself inside the client’s head to understand the business needs and goals, but also the personal hopes, fears, passions, frustrations and excitement. I “own” the project – I think about it in the middle of the night and in the shower in the morning – and I am always focusing on every possible way we can get the job done. This is particularly challenging – and rewarding – in hotel development, which seems to be ramping up in a big way again. In hotel development projects, we are an important part of the development team. Many of our clients are veteran hotel developers and owners.
What is the most rewarding?
Each type of client is looking for something different and finding the right approach is like finding the sweet spot. Meeting a client’s needs, no matter how tough, is very satisfying.
What is your favorite hotel that you have not been part of?
The Begawan Giri Hotel in Ubud, Bali. It is a magical place high in the mountains of Bali. I was there shortly after it opened in 2005, and it is now known as the Como Shambhala Estate. It has been named among the top 10 best spas in the world.
– Bethany Firnhaber
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