Zeidel & Associates Represents Resort Purchaser in Hotel Management Agreement Negotiations

Situation

Zeidel & Associates represented a real estate investment trust that owns a leading portfolio of diversified hotels and resorts in connection with its acquisition of a resort property in the Delaware Beaches region. As part of the transaction, the parties agreed that the seller would continue operating the resort following closing pursuant to a long-term hotel management agreement.

With the transaction moving on an accelerated timetable and the client’s general counsel expected to begin maternity leave imminently, the client engaged Zeidel & Associates to quickly become immersed in the transaction.

Because the client and manager had an established relationship, having previously negotiated hotel management agreements for other properties in the client’s portfolio, the expectation of the parties was to use their most recent management agreement as the basis for this new agreement. However, as the client had recently negotiated strong owner protective forms with other managers, the client was concerned that its agreement with this manager might be deficient. Accordingly, it asked the firm to evaluate whether its agreement with this manager reflected current market standards and the protections incorporated into its recently negotiated hotel management agreements, while seeking to preserve its excellent working relationship with the manager and maintaining momentum toward closing.

Approach

Drawing on its extensive experience representing hotel owners and management companies in hotel management agreements, Zeidel & Associates quickly developed an issues list that identified provisions warranting further review and helped the client determine which issues were most important to address during the negotiation. Following the commencement of the general counsel’s leave, the firm took the lead on the revisions to the agreement itself and negotiations with the management company. In order to expedite the transaction, the client negotiated the letter of intent for the transaction in parallel, and the firm updated the management agreement to reflect the evolution of the business terms.

A central focus of the representation was balancing the manager’s authority over day-to-day operations with the client’s need for meaningful oversight of matters affecting the property’s long-term value and performance. The firm also negotiated provisions addressing budgets, major expenditures, operating standards, centralized services, shared personnel arrangements, expense allocations, guest data ownership, privacy compliance, and owner remedies.

Zeidel & Associates worked closely with the client’s business team, advancing negotiations, addressing the manager’s comments, and guiding the agreement through execution while maintaining momentum toward closing.

Result

Zeidel & Associates successfully negotiated and finalized the hotel management agreement governing the resort’s operation following the acquisition. The agreement enabled the client to retain the incumbent manager’s operational experience and institutional knowledge while incorporating provisions aligned with the client’s objectives as a sophisticated institutional hotel owner.

Working within an accelerated timeline, the firm helped the client modernize an established management relationship while preserving a successful operating partnership.