What is Receivership?
When a lender, asset manager or special servicer determines that the borrower is not managing the asset in an efficient or profitable manner or if there are signs of obvious negligence, they can choose to seek the appointment of a court appointed receiver. This process removes control from the borrower and is a means to avoid bankruptcy proceedings and the liquidation of assets. The initial main goal of the receiver is to secure the asset by making necessary management changes as well as other changes to maintain and improve the hotels revenue, profitability and value. In the case of hotel receiverships, most receivers are hotel management companies that have an expertise in the areas of sales, marketing, operations, food and beverage and overall management of hotel assets.
Some common duties of the receiver:
- Take possession of the hotel and all related bank accounts, keys, codes and records.
- Work closely with management to ensure the hotel is operating soundly and is maximizing it’s flow through potential.
- Implement efficient and proven sales, operational and accounting standard operating procedures.
- Determine if the property requires any renovations or capital improvements from the brand it is affiliated with.
- Notify all creditors and suppliers of the appointment as the receiver and create new accounts.
- Review and determine if franchise agreements, insurance policies and leases need to be continued, terminated or renegotiated.
- Make all necessary court reports.
