LOS ANGELES-”Hotels are the canary in the mine when times are tough but the harbinger of spring when times are good.” That quote, from Phil Nichols, a founding partner of Pircher Nichols & Meeks, hits the nail on the head when describing the hospitality industry. GlobeSt.com recently caught up with Nichols and partner Michael Scheinberg, of the Los Angeles-based real estate law firm to talk about hotels and some specifics regarding investing, workouts and financial restructuring within the distressed hospitality market.

GlobeSt.com: Who is investing in distressed hotel debt? What are the returns?

Nichols: Opportunity funds and hedge funds are taking the opportunity to invest in distressed hotel debt. These funds have realized that even though the upside is capped, if the loan is paid at par, there is still a good risk-adjusted return with a low loan to value ratio. Ultimately, the investment can still be profitable so long as the debt is priced properly. And some hotel REITs are also looking at purchasing distressed debt as a way to acquire the property secured by the debt.

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