Hotel Joint Ventures: Share the Equity and the Experience - but at What Cost?

In recent times we have noticed a significant increase in the number of hotel joint ventures in the Asia Pacific region.

Whilst there are many and varied reasons driving a desire to joint venture, there are a couple of factors that have heightened popularity in the post-GFC world.

First, as everybody knows, there is still a substantial capital drought. Simply put, there is significantly less capital available to fund new investment. When faced with an attractive investment opportunity but limited funding, teaming up with another party and combining resources can make the deal happen. We are seeing numerous examples of traditional investors teaming up with other investors or operators for the purpose of putting in place the infrastructure to fund existing hotel acquisitions or new project development.

Second, in a more conservative post-GFC world, there is a growing desire to "share the risk and the reward" with international investors recognising the value of local knowledge when entering a new jurisdiction.

However, like all things in life, benefits seldom come without complications. Joint ventures are like marriages, and the joint venture equivalent to a pre-nuptial agreement is the joint venture agreement, where parties have identified the benefits of teaming up, they have bonded and usually have reduced to writing a one or two page summary of the key aspects of their proposed commercial arrangement.

There can be any number of joint venture parties, with complexity increasing with the number of parties involved. Each party is usually represented by its own lawyers, both in-house and external. External lenders, if involved, will also have representation, both in-house and external.

You can read the April edition of the Hotels, Resorts & Tourism May 2011 Newsletter here.

 

About Baker & McKenzie

Founded in 1949, Baker & McKenzie provides sophisticated advice and legal services to many of the world’s most dynamic and successful organizations through more than 3,800 locally qualified lawyers and more than 5,700 professional staff in 68 offices and 40 countries.  Baker & McKenzie is known for having a deep understanding of the language and culture of business, an uncompromising commitment to excellence, and world-class fluency in the way we think, work and behave.  (www.bakermckenzie.com)

Reader Comments:

Be the first to leave a comment for this article