42 



The volume of lending that occurs in the private sector in conces- 

 sion and leasing area annually is indicative that possessory inter- 

 est is not a requirement to attract financing. Typical lending cri- 

 teria and requirements in the private sector have been and con- 

 tinue to be consistent and straightforward. 



Lenders look for a number of characteristics to underwrite a 

 loan, and these include a confidence in the reputation and past 

 business practices of the borrower, a track record in similar types 

 of operations, realistic cash-flow projections based on the stability 

 and historical levels of demand, and a confidence in the reputation 

 and stability of the lessor and the lease, in this case being the U.S. 

 Government. An equity participation and some form of equivalent 

 collateral or guarantee from the borrower is also always required. 



The loan is generally amortized over the life of a contract term, 

 typically between 5 and 20 years, and these lenders typically are 

 not looking to the lessor to provide any guarantees with the excep- 

 tion of a provision possibly for early termination. However, there 

 is not a lender out there who will tell you that possessory interests 

 would not be an acceptable addition to collateral. They would wel- 

 come that with open arms since collateral is really the thing that 

 lenders try to add on to any loan that they do. 



Capital available generally requires a 20 percent to 50 percent 

 equity investment, and the type of firms that handle the larger Na- 

 tional Park Service facilities today are very financeable through a 

 wide variety of lending sources for expansion and renovation and 

 require few, if any, contract concessions. 



The smaller concessioners will have a more difficult time financ- 

 ing expansion and renovations for park facilities, but it is no more 

 onerous than it would be if they were in the private sector. In other 

 words, if they are unable to get financing without significant Park 

 Service contract concessions, they would be an equally bad risk in 

 the private sector. 



Possessory interests in the hospitality real estate industry is vir- 

 tually nonexistent. Loans are made based on the criteria previously 

 outlined, and, in fact, the concept of possessory interests in com- 

 bination with other characteristics of the NPS concession contract 

 appears to create a monopolistic structure instead of a competitive 

 structure, and the resulting rate of return to concessioners could be 

 greater than the return that they would receive in the private sec- 

 tor without taking any of the risk. 



We do not feel preferential rights of renewal or possessory inter- 

 ests reflect private sector characteristics and would not support 

 them in new legislation. 



Mr. Hansen. Thank you, Mr. Wilson. Mr. Comelssen. 



STATEMENT OF CURTIS CORNELSSEN, LANDAUER 

 HOSPITALITY ADVISORY SERVICES 



Mr. CORNELSSEN. Thank you, Mr. Chairman. As Mr. Wilson indi- 

 cated in his opening statement, my expertise is bringing commer- 

 cial sector hospitality operational technology to Federal, State, and 

 local entities, and it is no easy task, I can assure you. 



Perhaps the best example of this work is the work that we do 

 for the Department of Defense where over the past five years we 

 have saved literally hundreds, of millions of dollars through provid- 



