As long as San Antonio can withstand the effects of rising labor and commodity prices and the ever-present burden of local property taxes, the future of its development will be bright, some of area’s foremost real estate experts said Wednesday during the Business Journal first Business Pulse News Event on commercial real estate.
Titled “Opportunities and Challenges in Local Commercial Real Estate for 2018,” the event was highlighted by a panel discussion featuring Chris Carruth, strategic development officer of Metropolitan Contracting Co.; Kevin Covey, managing partner at GrayStreet Partners; Leah Gallagher, San Antonio city leader of Transwestern; and Rahul Patel, managing partner at Patel Gaines LLP.
While panelists generally agreed that San Antonio has a lot going for it, they weighed in on several issues that the city’s development and business sectors may face, including a shortage of construction labor and commodities, as well as the rise and uncertainty of property taxes.
Metropolitan’s Chris Carruth pointed out that Texas added 27,900 new construction jobs last year, but he said the number is hardly enough to keep teams full and projects from being delayed.
“In 2017 in the U.S., we were short 200,000 construction workers. In Texas, our shortage is more acute because of the job growth,” he said.
Factors like an aging work force and fewer young people coming into the industry have been significant factors for this labor shortage. Carruth also said rising commodity prices on things like lumber, steel and cement have had a major impact on project costs and delivery times.
In 2017, lumber prices rose 13 percent and national construction costs rose last year by 3.3 percent, Carruth said. He expects construction costs to rise another 3 percent this year also. On a local level, this will mean fewer subcontractors bidding on jobs.
“Typically, when we put a project out to bid for subcontractors, we like to see bids from four to seven different subcontractors, which creates a competitive market. Currently, we’re receiving one or two bids, sometimes three bids, because these subcontractors are so busy. We just can’t get the coverage,” Carruth said. “This ends up having tremendous impact on schedules. It doesn’t mean we can’t man the sites. We just can’t man the sites as we anticipated we could.”
Covey at GrayStreet Partner has also had to deal with labor and commodity shortages from the development side.
“What has happened is that it’s taken us a lot longer to get each project done. And God bless our tenants, they keep waiting patiently,” Covey said.
Not only did Covey agree with Carruth’s prediction for increasing construction costs, he is also concerned about the availability of fewer subcontractors, specifically those who specialize in “core and shell” projects.
“Not only have we seen a tightening there, but we also value quality construction. And we’ve seen an extreme shortage of that, quite frankly,” Covey said. “Due to all this, we’re adding about 25 percent to our construction timelines everywhere.”
Named the 5th fastest growing law firm in the nation by Law Firm 500, local Patel | Gaines is on the fast track to the top. Not only do they offer their clients innovative strategies to their commercial real estate challenges, but their new building, due to open in Spring 2018, is a physical manifestation of these innovative strategies as well. After working for several well-established law firms in the nation, Rahul Patel and Grant Gaines found themselves disillusioned by the corporate structure of the law practices in which they worked. They met while working at the same firm and opened their own practice together in San Antonio in 2013 — with one in Fort Worth soon to follow — vowing to bring out-of-the-box solutions to their clients and their workplace.
Innovation in Workplace Structure
In the past, law firms had the corporate model of principals located back in their massive corner offices, unapproachable, with their desks arranged in such a way to intimidate anyone who walked in. This is merely one example of the outdated concepts many law firms have worked under and firms like Patel | Gaines recognize these systems are not productive. This new generation of lawyers also recognizes that in order to have a successful and productive practice, they must change this mindset to that of a collaborative team as opposed to a “be-quiet-and-get-the-job-done” kind of workforce. Through this updated mindset, Patel | Gaines has been able to recruit some of the top talent in the nation.
Innovation in Real Estate Development
As the firm has grown, they realized that being commercial real estate and litigation lawyers, they should also put their money where their mouth is and practice what they preach. This logically led them in the direction to develop their own commercial real estate. Under construction now — and opening in Spring 2018 — the firm is developing a two-story commercial office building where the second floor will house the Patel | Gaines offices and first floor will be a series of leased tenant spaces.
Some of the Patel | Gaines real estate development strategies have involved paying attention to their neighboring businesses and their trajectory for success. They plan to meet the needs of these neighboring businesses by looking for potential tenants for their building that could also service the surrounding business community. Their team is being selective about their first floor tenants, seeking well-branded preferably local companies; and if the synergy is right, even willingness to aid start-ups in their success as tenants of their new building. Patel is hoping for a hip coffee shop and a salon to name a few.
Innovation in Design
The Patel | Gaines offices are at the forefront of modern law office design. To help them get there, they hired the local reputable architecture firm Chesney Morales to design both the exterior and interior design. With a reputation for building some of the most sophisticated spaces in San Antonio, Metropolitan Contracting will execute the design as their general contractor. Their furniture systems are being coordinated by the local furniture dealership CBI Group.
On the subject of physical space, what comes to mind when you think of the interior of a traditional law firm? Perhaps dark mahogany wood paneling on the walls with ornate crown molding? Wing-back chairs upholstered in burgundy or hunter green leather? Huge libraries with thick law books taking up valuable square footage? The law firm of the future is now heading in a direction that is modern in design, has a more efficient floor plan, encourages collaboration, and utilizes current technologies that allow them to meet or work from anywhere. According to leading design researchers, the following are 6 Key Points of the Law Office of the Future:
Less is more: Gone are the gratuitous corner offices giving way to a smaller footprint than the past with workers shifting to a more mobile/digital workstyle and lessening the need for paper.
Choice and Balance: When they are working in the office, they have a variety of places to touch-down for both focused work and collaborative work. For example a small conference room, a shared office, a workstation, etc.
Future Proof: Offices are modular and reconfigurable with moveable wall systems and workstations to change with technology and staff.
Ubiquitous Technology: Firms provide their workforce with mobile technologies enabling them to work from anywhere.
Connect the Dots: Technologies are set up to be able to engage virtually from anywhere, video chat, etc.
One Size Does Not Fit All: One office design should not be copy/pasted to another. The design and layout should fit the firm’s unique culture and brand.
Rahul Patel and Grant Gaines love working in San Antonio because of the ability to meet and work directly with top talent and local business/political leaders to shape the future and growth of our city, as well as the massive opportunities to fill certain gaps in our city – particularly when it comes to real estate and technology. This ties in perfectly with their corporate culture as their new offices are designed to be a law office by day and host occasional events by night to bring the community and its leaders together. Their main conference room will be multi-functional and serve as an event space with a conference table that is modular and reconfigurable to meet the needs of the event. The Marketing department will have a shared workstation to encourage and promote collaboration. Employees will have access to laptops to allow for remote work. Additionally, they offer full-time employees the latest iPhone and service plan at no additional cost to them. Their staff also will Skype to communicate with their DFW team and loop them in during their leadership workshops.
With exciting things on the horizon, the sky is the limit for the Patel | Gaines team and we applaud their efforts for placing value on the power of cutting-edge design strategies! You can follow their updates via social media at the links below.
As the Republican tax cut bill nears becoming law, San Antonio businesses are exploring how it will affect their operations. In the critical hotel and tourism industry, attorney Rahul Patel of the local firm Patel Gaines, which handles Real Estate and hotel law, says it should provide some boosts to the industry, News Radio 1200 WOAI reports.He says the main boost will be to encourage companies to attend more of the city’s conventions and trade shows and training events, and individuals will have more disposable income for travel.
“For the hospitality industry, it is generally based on corporations that will have additional dollars they want to pump back into their sales and their employees and work force,” he said.
Patel says in this era of ‘Skype’ and ‘Gotomeeting,’ many corporations will cut their travel budgets first and this will enable them to restore many of those cuts.
“Extra conventions and different association events that are outside of their town, those are things that frequently have to be cut back first,” he said. “Those are the things that can get back onto the table.”
Patel says hotels and other travel related companies will ‘definitely’ invest the corporate tax cuts in additional employees, because hospitality is a very people-based industry.
But Patel says the gains brought by the tax cut bill for the travel and tourism industry will simply offset the losses the industry is feeling from other Trump Administration policies, which have resulted in a $1.3 billion cut in travel related expenditures in the U.S. nationwide this year, mainly due to drops in international business.
He says just like many Americans won’t travel to Mexico, even though the vast majority of the country is safe, due to concerns about drug violence, many international travelers now have the ‘perception’ that the U.S. is an ‘unstable’ place to visit.
“We just banned travel from eight countries,” he said. “If you are looking from the outside about where to travel, and there is a certain area of political instability, you might not want to travel there.”
He says these concerns are particularly warranted in San Antonio because much of the city’s travel growth is seen as in international visitors, following the declaration of the Spanish Colonial Missions as World Heritage Sites.
ax reform is the hottest legislative topic in Washington as Congress lurches toward its holiday break. As I write this, passing a bill and getting it to the president’s desk before Christmas is certainly not a done deal. Time is running extremely short.
The details of the legislation are evolving daily. So, it’s impossible to say with certainty whether the eventual final package is good or bad for a particular industry.
But a November study by the American Hotel & Lodging Association estimated that “tax cuts could generate $131.7 billion in economic activity for hotels and related industries over the next 10 years.”
“Tax cuts will stimulate the economy and are expected to generate a boost to hotel industry operations, cause additional guest spending at restaurants and stores in the travel destination, and increase hotel capital investment—all benefiting the broader national economy,” the AHLA said.
As Congress continued to move the ball down the field on tax reform, AHLA president and CEO Katherine Lugar reiterated support for tax reform, which she believes will be especially helpful to the three out of every five hotels that are small businesses. She makes a great point.
AAHOA, the Asian American Hotel Owners Association also weighed in.
“Tax reform, done correctly, will have a generational impact on our economy and our industry. This is a legacy-defining moment for lawmakers and President Trump. Lower taxes and a simpler, fairer tax code for all of America are within their reach. Join me in urging them to get the job done before the end of 2017, and we can all look forward to continued prosperity and growth for years to come,” said Chip Rogers, AAHOA CEO.
Happy days are here again? Not so fast.
Tax reform is only part of the story as we turn the page to 2018 and beyond. The reality is that Trump administration policies regarding travel to the U.S. from abroad are already inflicting significant damage on the U.S. travel industry.
The Global Business Travel Association estimates that the U.S. will lose $1.3 billion in travel-related expenditures in 2017, taking hotels food, rental cars and shopping into account. The organization thinks more than 4,200 jobs could be lost as a result.
Numerous studies have already documented substantial hits to U.S. tourism as foreign travelers have opted to spend their money and time elsewhere this year.
In early December, the Supreme Court upheld the latest version of the Trump administration’s travel restrictions aimed at eight countries. This ruling likely will encourage the president to pursue more restrictions, in fact.
In addition, his aggressive rhetoric about Mexico and his pursuit of a southern border wall is also discouraging travel from Latin America to the U.S.
So, although tax reform is certainly critical for the lodging industry, there are still other policy concerns that could outweigh any benefits. AHLA and AAHOA are right to say that tax reform has the potential to be hugely helpful to hotels. I certainly hope that Congress can get it done. Thousands of independent hotel operators across the U.S. could use the help.
But it’s not all butterflies and rainbows as long as the administration continues to push for overly restrictive rules on foreign travel to the U.S. In his efforts to keep hostile forces out of the U.S., the president is also sending the world a clear message that not all foreigners are equally welcome. Much like the economic crisis in Greece and political instability in the Middle East, when tensions rise, travel typically to and from the U.S. can also decrease.
“We are British Muslims and live in London,” Sabaa Farrukh wrote in a commentary published by The New York Times. “We wanted to visit NYC this summer but decided against it simply because we felt we wouldn’t be welcome there and didn’t want to waste precious holiday time in case there was a problem at passport control at the airport.”
That kind of feeling around the world is terrible for the hotel business, even while tax reform has the potential to be quite helpful.
Every construction business owner and executive’s plate is overflowing on a daily basis. That’s just the way it is. The last thing any of them need to add to their neverending to-do list is switch law firms. But every vendor is crucial to the company’s success. Sub-par performance is simply not acceptable, whether you’re talking about the company’s legal counsel, its accountant, IT consultant or the company responsible for cleaning the offices. If you have doubts about your legal counsel, here are the two biggest questions that come to mind:
Is it the right time to change firms, and how do you know?
How do you select a new law firm that is the right fit for you?
Reasons to make a change are as varied as the names on law firm doors. Some of the more common indicators include:
Laziness—The firm just doesn’t seem to be motivated.
Timeliness—They’ll get the job done, but on their time frame, not yours.
Sloppiness—In legal work, like construction, attention to detail is everything. Sloppy work leads to more problems.
Happy talk—The lawyers tell you what they think you want to hear, not what you need to hear.
Personality conflict—You simply don’t like working with them.
Excuses—They always have a reason for why they’re slow, sloppy or missing a deadline.
Competence—Not all lawyers are created equal, and the work you need done just might not be in the firm’s wheelhouse.
So, let’s say you’re seeing one or more of these troubling signs, and you know you must make a change. You don’t want the changeover to be a huge time suck since the leadership team is already running at full capacity. And you want the switch to be as painless, smooth and quick as possible. How do you do that? The most important thing to do before letting your current counsel go is to first locate new counsel. Here are some important issues to discuss with any new law firm you consider:
Specific experience—The new firm should have experience with the particular issues your company faces. Ask them to explain their experience in these issues. If they don’t have it, look elsewhere.
Conflicts—Probe whether the firm has any client relationships that conflict with your company. They could be working with one of your competitors. Or with a plaintiff who plans to take legal action against you. All lawyers should do this first anyway, but it’s always good to confirm before you waste more time.
Deadlines—Make sure you inform the prospective law firm about any upcoming deadlines that you know about. There could be court deadlines, administrative deadlines or financial filings, to name a few. Your prospective new legal counsel needs to make sure they can handle those deadlines.
Litigation—Make sure the new firm knows what your goals are if the company is involved in any litigation. “Handle it” isn’t enough guidance. They need to understand what kind of outcome you hope to achieve. It is also important to be honest with them about your case. Sugar coating the facts will only lead to more issues down the road.
Opposing counsel—If you are involved in litigation, ask your prospective legal counsel what kind of relationship they have, if any, with the opposing counsel. Although attorneys should not let their emotions affect the case, determining up front if they play well together can help in the long run.
Fees—You need to know not only the rates the new firm charges, but how they assign work and do their billing. If your company is involved in current litigation, discuss how the firms new billing structure might affect your bottom line.
Staffing—Make sure you know exactly who will be working on your company’s legal issues, their personal experience level and their billing rates. On one hand, it helps keep your costs down when associates, paralegals and other staff work on your issues because their billing rates are usually lower. However, you need to be confident that the specific attorney you expect to lead the legal team stays involved and in control of the group.
Once you check all those boxes and decide on a new law firm, it is time to transition. The new firm should be willing to help contact your current legal counsel and break up with them on your behalf, if you prefer, taking one chore off your list and usually leading to a smoother transition. Nonetheless, you should always reach out to your prior firm during the transition to explain the reasons for switching. This will provide useful knowledge for the firm moving forward and hopefully allow you to leave on good terms.
It is also important to understand that you will still owe the outgoing firm for any time billed or expenses accumulated before you hired the new firm, and that your new firm is not usually there to handle prior billing disputes.
Be patient with the new legal team as they ramp up on your account. Assuming you provided all the information previously discussed, everyone should have a clear grasp of the goals, timelines and expectations. That will allow the new relationship to get off to a solid start without any surprises.
The best time to talk about how to handle the inevitable downturn is when times are good. Even better, hoteliers should really be planning for the next market downturn before they even purchase or build a hotel.
“Planning for a market downturn is one of the most important critical steps, and hotel owners don’t spend enough time on it or plan for it at the onset,” said Rahul Patel, managing partner of law firm Patel Gaines.
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He said the core starts with having all the correct structures in place with a solid, well-thought-out business plan that will ensure everyone is informed and understands their roles during down times.
Drew A. Senulis, associate attorney at Patel Gaines, said the pre-planning phase before a downturn is a great opportunity to talk to stakeholders about the plan while there are no hard times and nothing is causing pressure.
“Keeping stakeholders informed and aware of both their rights and obligations during the good times, such as making required capital contributions when necessary, can help smooth things out during any downturn,” he said.
That said, entity documents—operating or company agreements—should directly address funding matters.
“Do a good job during the strong time to make sure the hotel has enough cash flow or reserves to get through it,” Senulis said. For example, if during the good times a hotel has high occupancy, that will translate to more wear and tear on furniture, fixtures and equipment, so hotels need to have enough reserves for continued success.
When it comes to financing versus funding, Patel said hoteliers can’t have a 20-year plan with only a five-year loan. They need to know the pros and cons of the different loan structures they face. For example:
Small Business Administration loans have good rates and terms, but the personal guarantee for larger investors in the entity might affect the ability to secure other loans.
Conventional loans are all about the details because these can vary widely, but here hoteliers are usually dealing with local bankers.
Commercial mortgage-backed securities offer low rates, can be nonrecourse or full amortizations, but hoteliers might not be able to refinance or pay them off early without a penalty.
Patel advised hoteliers to consider putting more cash in up front for a 75 percent loan-to-value or less versus an 80 percent LTV.
“Give yourself a buffer and cushion with the lender,” he said. “It’s really about using that positioning to leverage yourself to get what you need.”
During a Downturn
Patel said that hoteliers need to remember that cash is king, both in making and keeping it. Fully-Verfied experts advised hoteliers to do the following to keep that cash:
review existing financing arrangements, including banking;
communicate regularly with stakeholders and key employees to increase transparency;
manage cash more aggressively and investigate discrepancies immediately; and
track performance against financial and nonfinancial parameters to ensure all of the information and documents are in one place.
Patel said that communication with lenders can be OK during rough times, but hoteliers need to be cautious. He said that hoteliers will often reach out to their lenders during a downturn to work out solutions, but they could be doing themselves a disservice.
“This is where you create a bevy of legal problems by giving information away in hopes of getting a work-out [solution]. You are giving them legal ammunition,” Patel said.
One of the biggest pitfalls is entering forbearance agreements, the attorneys said.
“Let’s say you get a six-month forbearance. The lender is not doing you a favor; think about what they are getting out of it,” Senulis said. “It always entails a lot of documentation. We see lenders asking for more documents than [when] you originally signed up for the loan. What they are doing is they are going into defensive mode.”
He said forbearance can just be a Band-Aid, and if hoteliers get their six months yet have zero plan, then they will be worse for it.
“You’ll still have interest and it doesn’t solve the problem,” he said. “Although, it can be good if you have an exit strategy.”
Finally, if hoteliers wish to sell their properties during a downturn, Patel said it is critical to disclose everything to avoid being sued.
Senulis said hoteliers need keep all documentation with them when selling during a downturn.
“Those are your records, and the problem is if you get into a dispute you are giving the purchaser all your documents that you don’t have copies of,” he said. “You will need those documents, and it’s difficult to get them after the fact. It’s a point of weakness when you have to ask for them.”
Two law firms with deep experience and substantial result records in the lodging industry are teaming up to support hotel owners in the wake of massive destruction caused by flooding and winds from hurricanes Harvey and Irma. Patel Gaines and Farrell & Patel are working together to ensure that hoteliers receive just and fair treatment of property damage claims by the insurance industry.
Two law firms with experience in the lodging industry are teaming up to support hotel owners in the wake of massive destruction caused by flooding and winds from hurricanes Harvey and Irma. Texas-based Patel Gaines and Florida-based Farrell & Patel are working together to ensure that hoteliers receive just and fair treatment of their property damage claims by the insurance industry.
“Each of our firms has done huge amounts of work in the hospitality industry,” said Rahul Patel, managing partner of Patel Gaines. “I literally grew up in my parents’ hotels. Our two law practices are very involved with the Asian American Hotel Owners Association (AAHOA) and the Texas Hotel & Lodging Association, among others. So, we’re keenly aware of the legal and insurance issues so many in the industry are now facing. They know us and our track record well.”
Ricky Patel and Wesley Farrell, partners at Farrell & Patel, represented more than 3,000 hospitality clients affected by the 2010 BP oil drilling platform disaster in the Gulf of Mexico. In turn, Ricky Patel received the AAHOA Chairman’s Award for leadership and ongoing services. Farrell & Patel is recognized as a Platinum Founding Member of AAHOA.
“The insurance industry is going to do everything it possibly can to avoid their obligations and reduce their payments on legitimate claims to the lowest amounts they can get away with,” said Ricky Patel. “Our job is to watch out for the livelihoods of the thousands of hotel owners–and their employees–who are trying to get back on their feet. We’re going to fight very hard for their interests. And we’ve proven we know how to win.”
Ricky Patel also is extremely active in numerous philanthropic projects. As vice chairman of the Miami Children’s Health Foundation, he’s donated more than $1.8 million to the foundation since 2010. He also started an orphanage in Haiti for 38 children who lost their parents in Hurricane Matthew and makes frequent visits to bring supplies to the home, among many other community projects he supports financially and as a volunteer.
Patel Gaines recently rounded up several truckloads of household necessities and emergency supplies and delivered them to Rockport, Texas, a small fishing and tourism town on the middle Texas coast. Rockport suffered a direct hit from Hurricane Harvey’s first landfall, which destroyed much of the town and surrounding areas.
Farrell & Patel’s offices are in Miami, Tampa, Houston and Puerto Rico. Patel Gaines’ offices are in San Antonio and Fort Worth.
No hoteliers in Texas are praying for rain. After Hurricane Harvey dumped nearly 50 inches of water across the state’s eastern coast, many of them are scrambling to get their businesses up and running again, while others are reeling from total property loss. In such situations, A top Florida roofing contractor’s licenses & insurance can be of great support. A week later, Hurricane Irma left hoteliers in Florida and the Caribbean in a similar state. Their biggest fear is that while raging waters left hotels without the ability to book new guests, properties heavily damaged from the storm still have to pay rent — and in many cases, franchise fees.
Doug Jones, managing partner at JAG Insurance Group in Coral Gables, Fla., said storms can be good for hotels because travelers flock to them for shelter, but they also run the risk of being damaged and shut down in the wake of natural disasters. The biggest challenge for hotels in Miami, according to Jones, is that by the time Hurricane Irma reached land it was downgraded to a Category 1 storm in many places. Because of this, winds from the storm were strong enough to damage many properties but in many cases the damage wasn’t extensive enough to reach the lofty deductibles covering hotels, which are much higher than the average deductibles for homeowners.
“It’s leading to a large out-of-pocket cost for hotels,” Jones said. “For example, some insurance plans require a 72-hour loss of power to reach a deductible, but I’m not sure how many hotels were down for 72 hours. That’s a big loss of income for hotels during that period.”
Jones said part of the problem is that consumers in general, not just hotels, simply don’t understand the policies they have. Furthermore, many hotel operators don’t realize that there are clauses built into policies that require them to “mitigate further damage” in the event of a natural disaster. For example, if a hotel lobby is flooded it is up to the hotel to ensure the property’s carpet doesn’t generate mold and mildew after humidity returns. If operators fail to mitigate further damage in this way, they could run into difficulty when an insurance adjuster finally arrives to survey the damage.
“You can’t wait for an adjuster to come out and give you the green light to fix things,” Jones said. “If your carpet is wet, work with a water restoration company to get that cleared up. Fix broken windows and clear up any water as soon as possible.”
Rahul Patel, managing partner at law firm Patel Gaines in San Antonio, agreed that mitigating damage is crucial for successfully filing insurance claims following the hurricanes. This is particularly true, he said, for the many hotels that relaxed their pet policies. Patel said operators’ No. 1 concern right now is to prevent further damage and to protect their assets, and then to investigate the types of assistance available during the recovery process. According to the experienced lawyers from The Bianchi Law Firm in Red Bank, New Jersey, organizations such as the Federal Emergency Management Agency and other state and federal government assistance programs exist to be of use during times like these, and Patel said to look into those first before relying on insurance companies.
In early September the U.S. House of Representatives approved a $15 billion relief bill for those affected by Hurricane Harvey, according to the BBC, and Patel said whether or not the hospitality industry sees any of that money will come down to how well the hospitality industry can articulate its needs and amplify its voice.
“We need folks in Washington to know that our industry housed people, allowed them in at maximum capacity during this period,” Patel said. “We were the first line of defense during this storm, but it will take a collective effort… to ensure a portion of those funds are allocated to lodging, or it will be earmarked to those with louder voices. Homeowners, public schools, roads, apartments… all of it was under water and is now asking for relief.”
Some of Patel’s concern stems from his claim, according to his franchise advisor, that many hotel operators will still be on the hook for franchise and association fees as well as mortgage payments. This is true even if an asset has been completely destroyed by a storm, making it fully the operator’s liability. At publication time, a Hilton spokesperson said the company is now preparing for the incoming Hurricane Maria, which has reached Category 5 status, and isn’t prepared to comment on the state of franchise fees. No other hotel companies have responded to requests for comment.
“I have seen some brands make financial contributions to recovery efforts, but I have yet to see a brand step up and make a statement on franchise fees in the wake of this,” Patel said. “I’m seeing the opposite, in fact. I see [brands] making investments in their public image, but they aren’t coming to the aid of franchisees.”
Jones urged operators to look to industry associations and speak with those affected by the storm when purchasing plans for the future because they are in the best position to inform others about insurance liability. Jones also said hotel operators need to think about other operational concerns following a disaster, such as where they will do their laundry if local laundry companies are damaged or without power, or how to help staff get to the hotel if they lack personal transportation.
“It’s time for people to stop thinking these things can’t happen to them,” Jones said. “Three days before Irma hit south Florida, we had people calling us asking if they were covered. That’s a very broad question that is impossible to answer in that short period of time. Insurance is so broad and exclusions are very specific. Was your power shut off from damage on property or from something off site, for example? All of that matters.”
Meanwhile, Patel wanted to tell operators whose insurance claims are denied that litigation is an option. Interested parties should begin gathering all relevant documentation regarding their hotel’s insurance policies, loans and any costs incurred due to damage. However, Patel said that due to the extent of the damage wrought by the hurricanes, there is an unprecedented number of attorneys and insurance adjusters soliciting anyone and everyone they can find, so he urged hoteliers to show a level of discernment when considering their legal partners.
“Some of those who will reach out to hoteliers aren’t always licensed contractors, or may not know the process to success in litigation with a hotel client,” Patel said. “It’s different than with regular real estate.”
Jones agreed with Patel’s call for caution. “From a legal perspective, you can always find a lawyer who will say yes to every case,” he said. “I’ve been telling people not to be too quick to hire an attorney. Wait until your insurance company does their job first, because if you show up with an attorney right out of the gate that sends a message to them that you are looking to fight, and you don’t want to do battle with those deep pockets until you know for sure you are out of options.”
Lastly, Patel said that hoteliers should look to industry associations for guidance should they need it. “I’ve never seen the leaders of the [American Hotel & Lodging Association] or [Asian American Hotel Owners Association]
turn anyone away from seeking advice just because they weren’t a member,” he said. “This is an absolutely difficult time these communities are facing. It will be a difficult and lengthy process for everyone. Seek out the right people, the right time, and find a way to get your property in working condition.”
Did Travis County lower the typical homeowner’s property tax bill in the last year? It depends on how you look at it. Travis County took issue with a KUT story that said despite the county lowering its tax rate, most homeowners ended up paying more in county property taxes.
According to Travis County’s current budget, owners of an average-priced home (roughly $285,000) saved 4 cents on their property tax bill compared to the year before. But, the owner of a median-priced home (roughly $219,000) paid an additional $10 in property taxes this year. This difference doesn’t actually change your property taxes. It’s just about how the numbers are presented.
That raises this question: Which measure more accurately shows what’s happening for a typical homeowner? The answer requires a trip back to, say, fourth grade.
“When you get an average, you’re simply taking every home or every property in that classification, adding the values up and the dividing by the total number there might be,” said Rahul Patel, a property tax lawyer with firm Patel Gaines, which has offices in San Antonio and Fort Worth. A median, on the other hand, is calculated by stacking up the values and picking out the literal middle number.
Patel said he thinks there are more disadvantages to using an average home value, including the fact that an average is more easily swayed by outlying values.
“So you could have a particular segment where you have a few very, very high-dollar properties and significantly more lower-dollar properties, but you end up getting an average that’s somewhat in the middle or higher than that,” he said.
Charles Gilliland, who studies land value at the Real Estate Center at Texas A&M, said he is always more inclined to use the median home value.
“If you’re trying to describe what is typical for the housing stock,” he said, “you would probably focus on the median more than the average because the average is unduly influenced by those really large outliers.”
Gilliland said home values tend to be unevenly distributed, and because of that, a median value can get closer to a more real middle number.
But Deece Eckstein with the Travis County Intergovernmental Relations Office disagreed.
“We think that the average is a more helpful indicator of what’s going on in the quote unquote average person’s tax bill,” he said. He said he favors the average for its melting-pot approach to numbers.
“[Values] all get kind of blended together into a beautiful frappe of information,” Eckstein said.
Travis County Executive Jessica Rio said the county uses average because state law requires that tax notices published by taxing entities include average home values. The county publishes the median so the public can see both.
“Just for transparency issues,” she said, “I think it’s important to have both out there.”
The City of Austin, on the other hand, uses median home value when calculating the property tax impact of its budget on the public. In a statement, the city reiterated much of what Patel and Gilliland said.
“The City of Austin uses median over the average because we think it is more representative of the ‘typical’ homeowner. The average is going to skew higher because of very high-dollar properties, but this doesn’t necessarily represent where someone truly in the middle is at,” wrote Bryce Bencivengo, a city spokesperson. “Whereas, by definition, the median means that there are an equal number of properties valued both higher and lower and really provides the homeowner that is located right in the middle.”