A hotel property derives much of its value from its operator and brand. When a hotel owner is in distress with respect to its loan obligations, the operator also plays a critical role in the resolution of the workout process between the owner and the lender. The rights and obligations of the operator contained in its agreements with the owner and the lender affect any workout decision that the parties may make. This legal alert will discuss the impact that hotel operators have on workouts of loans secured by hotel properties, and will summarize the likely considerations that inform the decisions of lenders and operators in the workout process.

Universe of Documents

The agreements among hotel owners, operators and lenders will affect the bargaining stance of the parties in any workout. An understanding of the parties’ rights and obligations, especially with respect to defaults and remedies, is essential to evaluating the parties’ positions.