Coral Gables hotel owned by asset management firm gets $1.1 million small business loan

The Hyatt Regency Coral Gables is one of 42 hotels around the country owned by a publicly traded asset management company that received 42 loans totaling about $40 million from a taxpayer-funded federal program designed to aid small businesses affected by the coronavirus pandemic.

The Coral Gables hotel received $1.1 million from the Paycheck Protection Program, a program aimed at keeping workers on the payroll at small businesses affected by the coronavirus that don’t have access to large lines of credit. The $1.1 million loan, made public as part of a filing with the Securities and Exchange Commission, does not have to be paid back if it’s used for keeping people employed.

But Ashford Inc., the Hyatt Regency’s owner, is a Dallas-based asset management firm that controls two real estate investment trusts with a combined revenue of $2 billion in 2019, according to the Dallas Morning News. The firm received its loans through Cleveland-based Key Bank.

Publicly traded companies tend to have a greater ability to raise cash than most small businesses. In March, Ashford announced it had drawn down $10 million on a $35 million credit line with Bank of America.

In an email to the Miami Herald, an Ashford spokesperson said the company applied for the loans because the hotel industry “has been the hardest hit industry in the United States, with revenues dropping by 90%.”

Jordan Jennings, a manager of investor relations for Ashford, said their hotels with fewer than 500 employees per location were eligible for PPP loans. He declined to say if the loan received by the Hyatt Coral Gables is being used to keep employees on payroll.

An automated message at the Coral Gables hotel said, “Our hotel has ceased normal operations until further notice.”

Ashford owns hotels that are operated by a number of well-known brands, including Hilton, Hyatt and Marriott.

Given the current downward direction of markets, the ability of a company like Ashford to access additional financing may now be more uncertain, according to Michael Minnis, a professor at the University of Chicago Booth School of Business.

“Right now, when the market is very volatile, there might be more trouble for small public companies to raise funds,” he said. “So just being a public company doesn’t mean you have easy access to capital.”

As Congress races to pass a new stimulus bill to meet ongoing demand for the PPP loans, debate is raging about eligibility criteria because many small businesses had their loan applications rejected by banks. Minnis said Congress had to make a trade-off between speeding loans out the door as economic collapse loomed and instituting more stringent guidelines. It chose the former.

“If we had put [more guidelines] into place, the program may have been more onerous to execute,” he said.

The Wall Street Journal reported Wednesday that Ashford’s owner, Monty Bennett, and other Ashford preferred shareholders were paid millions in preferred dividends during the pandemic, despite Bennett’s decision to lay off or furlough 95% of the company’s employees last month.

Florida Republican Sen. Marco Rubio, who leads the Senate Small Business Committee and helped develop the PPP program, said the loan program was developed quickly to get money into the hands of business owners during a crisis. But he cautioned that big businesses who used loopholes to get money will “have a big problem.”

“The clear intent of the Paycheck Protection Program has always been to keep workers from losing their job,” Rubio said in a statement in response to questions about publicly traded companies receiving large PPP loans. “Any business that has abused the program to gain eligibility should be held accountable and any borrower that falsely certified they have been harmed by this crisis is going to have a big problem.”

At least one large PPP recipient, the burger chain Shake Shack, said it will return its $10 million PPP loan. The single largest PPP loan — $20 million — was given to Ruth’s Chris Steakhouse, through the same process as the 42 separate loans received by Ashford’s hotels. While Ruth’s Chris Steakhouse is a large company, its individual restaurants employ fewer than 500 people.

A petition urging Ruth’s Chris Steakhouse to return the money garnered 200,000 signatures as of midday Wednesday.

“Many small businesses are now being told there is no money left for them, and they cannot pay their employees, and may have to close forever,” the petition reads in part: “This is a travesty, and a disgusting display of corporate greed during a time of disaster.”

The PPP program is expected to be replenished with $320 billion on Thursday after the House of Representatives passes a bill that passed the U.S. Senate unanimously on Tuesday.

The Small Business Administration is not publishing a comprehensive list of PPP recipients, arguing that the agency is singularly focused on distributing the aid. But loans given to publicly traded companies are showing up on SEC filings.

Treasury Secretary Steven Mnuchin said Wednesday his department is issuing new rules that would tighten PPP eligibility requirements. The new requirements could potentially restrict publicly traded companies from receiving money.

Mnuchin also urged companies to return the money if they don’t meet eligibility requirements.

“If they pay the money back quickly, there will be no liability to Treasury and the S.B.A.,” Mnuchin said to The New York Times. “If they don’t, they could be subject to investigation.”

This story was originally published April 22, 2020 at 7:13 PM.