TORONTO — When it comes to buying and selling hotels, it’s all about getting the right product at the right price. But there’s also many other variables that come into play — financing, structuring the right deal and crafting a purchasing agreement that ensures the buyer understands what they’re doing. Those were among the topics discussed yesterday at the inaugural Hotel Capital Connection, held at the St. Andrew’s Club in Toronto’s financial core.
Organized by Toronto’s Big Picture Conferences, the day-long summit attracted 140 hotel owners, lenders and lawyers who examined the ins and outs of structuring deals. Kevin Newman, CTV News correspondent and co-host, kicked off the conference by moderating a discussion by a panel of operators who provided examples of how they took chances, sourced investors and structured companies to leverage returns. “We’re operating in a pretty mature market,” stated George Kosziwka, Mississauga, Ont.-based InnVest REIT. “It’s never been easy to find debt, but now is a really good time. GE is very active, and Wells Fargo is now in the mix. We’re in a very good place and base rates remain very attractive,” he added, pointing to strong occupancy rates. “We’re going to hit 65 per cent next year, and 2016 will exceed 65 per cent with 2017 being the peak,” he said. For Jean-Yves Germain, co-president of Le Germain, “debt is not an issue. We have many lenders; we try to be very disciplined on ratio. We don’t work with the big four [banks].” With 10 hotels across the country, Germain is looking to expand the Alt brand, the company’s newest offering. “So far, it’s going well. We’re very optimistic in terms of growth and market.”
Later, in a session moderated by Jean-Charles Angers, of Montreal’s RBC Capital Market, a group of lawyers discussed the issues impacting hotel ownership and operations. One of the most important considerations in buying a hotel business is ensuring thorough due diligence. “On the employee side, the buyer may not want to take on all the employees, so you need to have a major discussion as to who’s responsible for severance. The hotel employees may also be unionized, therefore the buyer may be a party to the union contract,” said Beth Gearing of Toronto-based Delta Hotels & Resorts. Above all, the group stressed the need for transparency. “If you act like you have something to hide, people will think you do,” cautioned Phil Thompson of Richmond Hill, Ont.-based Thompson Dymond.