Asset Workout Plans

The recent severe economic contraction we experienced as a result of the global financial crisis has left in its wake some particular conditions in the hospitality industry:

  1. Severely limited financing has reduced the pipeline of new construction although projects under construction continued to add to supply through 2010 (albeit at half the rate of 2008 & ’09)
  2. Banks extended various forms of concessions to hoteliers which allowed them to weather the worst of the downturn
  3. Brands extended grace periods for property improvement and brand upgrades in light of depressed earnings and lack of capital

THE ISSUE

  • After deferring property upgrade plans for 2-3 years, many brands are now re-launching/have already re-launched their refresh programs to capture a larger share of the now-growing demand cycle.
  • Revenue declines and operating income shortfalls have resulted in situations of financial distress.
  • Lenders were willing to negotiate repayment plans during the depth of the downturn, typically for one year extension periods; after one or two extensions, they are now less willing to extend these concessions further.
  • Brand standards, relaxed to some extent during the declining market, are now more demanding of product improvement as a part of their brand upgrade and relicensing strategies. Lender requirements may make it very challenging to finance these improvements.

RevMax Hospitality can help:

Lending institutions have specific and particular expectations that would need to be met in order to arrive at a negotiated workout plan.

  • RevMax can undertake discussions with the lending institution and work with both the owner and lender to design a workout plan which could allow for recovery and a sound financial outcome.
  • Typically workouts require a plan to restore the asset to positive financial performance, a clear strategy to achieve the change and an assurance that the outcome is achievable: RevMax can provide the plan, the strategy and the support to achieve meaningful outcomes.

 

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