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Investing in Hotels in China:
What You Need to Know
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The China Hotel Investment Summit 2005
April 2005
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OUR PRESENTERS
Our Presenters
 Bruce Parmley – Washington, DC
 Steve Robinson – Shanghai
 Jun Wei - Beijing
FIRM HIGHLIGHTS
Firm Highlights

Over 1,000 lawyers practicing in 21 offices worldwide

Our worldwide services structure and common firm culture
foster innovation, knowledge sharing and quality service

Full-service “Top 30” global law firm (Legal Business, 2004)

#1 real estate practice in Washington, DC, with client
appreciation for “the team’s responsiveness and positive
firm culture” (Chambers USA, 2004)

Consistently ranked in Top 10 of lobbying powerhouses

Represent over half of Fortune 500 companies and more
than 65% of Fortune 250

Ranked in 40 categories in European Legal 500 in 2003

Provide “one-stop-shop” seamless service wherever our
clients do business
HOSPITALITY
practice overview
Hospitality Practice Overview

Structuring ownership entities and offshore vehicles, and negotiating acquisition
and equity investments in major hotel and resort projects

Structuring and negotiating all types of financing arrangements (public and
private debt, portfolio credit facilities, mezzanine financing and property level
financing)

Working with key authorities on approvals and registrations

Acquisition and development of hotel and resort projects, including development
and construction agreements, resort integration agreements, amenity
agreements (spa, golf course) and similar understandings

Structuring and negotiating management and operational agreements with major
hospitality brands, including Marriott and Ritz-Carlton, Four Seasons, Hyatt,
Starwood, Mandarin, Hilton, Wyndham and others

Private equity formation on behalf of sponsors and investors in major hotel and
resort projects

Tax, governance, operational, interdisciplinary and general business
representation with respect to all facets of the hospitality and lodging industry
OVERVIEW
Overview
 Key Regulatory Authorities
 Trends in Hotel Investment
 Hotel Management Companies
 Land System in China
KEY REGULATORY
authorities
Key Regulatory Authorities

National Tourism Administration (“NTA”)

National Development and Reform Commission
(“NDRC”)

Ministry of Commerce (“MOFCOM”)

State Council
TRENDS IN
hotel investment
Trends in Hotel Investment
 WTO Commitments
 Restrictions
 Choice of Entities and Offshore Vehicles for Hotel
Investment
– WFOE (and governing laws)
– EJV (and governing laws)
– CJV (and government laws)
– Offshore Vehicles
Trends in Hotel Investment
(contd.)
 Approval Procedures
– Documents Needed
– Timeframes
– Post-approval Registrations
 Operation Duration of Hotels
Trends in Hotel Investment
(contd.)
 Taxation
– Income Tax
– VAT
– Business Tax
 Governance and Operational Issues
– Board
– Management
– Employment
– Labor Costs
Trends in Hotel Investment
(contd.)
 Exit Strategies
– Listing
• Domestic Stock Exchanges
• Domestic Listing Requirements
• Approval Procedures for Domestic Listing
• Offshore Listing
– Sale to Strategic Investors
• Capital Gain Tax
• Land VAT
• Approval Requirement
• Mandatory Consent by JV Partners
• Mandatory Right of First Refusal
• Benefit of Having an Offshore Holdco
HOTEL
management companies
Hotel Management
Companies
 Qualifications of Hotel Management Companies
 Business Scope of Hotel Management Companies
 Measures of Operations
 Franchising
 Intellectual Property
LAND SYSTEM
in China
Land System in China
 Two Types of Land
– State-Owned Land
– Collective-Owned Land
 Land Use Rights v. Fee Simple
 Obtaining Land Use Rights
 Zoning and Land Uses
Land System in China
(contd.)
 Land Use and Real Estate Related Taxes
 Easement
 Land Grant and Construction-Related Authorities
 Transfer of Land Use Rights
Washington, DC
Thank You
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