Another downtown Milwaukee hotel is facing foreclosure: the Cambria Hotel in the Westown neighborhood.
The 132-room hotel at 503 N. Plankinton Ave. opened in October 2019 just before the COVID-19 pandemic and is now scheduled for a sheriff’s sale on Dec. 19, according to records filed with the Milwaukee County Circuit Court.
A foreclosure suit was filed in July by an Atlanta-based hospitality lender called Access Point Financial LLC, court records show.
The defendant is the hotel’s owner, Integrated Plankinton Milwaukee LLC. The entity is an affiliate of Chicago-based Murphy Development Group, which developed the hotel.
A $17.5 million foreclosure judgement was entered earlier this month, according to court records. The Milwaukee Journal Sentinel was the first to report on this filing.
The downtown Milwaukee Cambria Hotel has continued to operate throughout the foreclosure proceedings under a receivership, court records show. The four-story hotel also has a full-service bar and restaurant.
Murphy Development Group and Access Point Financial LLC did not immediately respond to requests for comment.
This is the third hotel in or near downtown Milwaukee to face financial trouble recently. In August, the Hampton Inn & Suites in the Westown neighborhood was taken back by its lender in a deed in lieu of foreclosure. In September, the locally-owned Iron Horse Hotel in Walker’s Point was sent to auction to resolve its ongoing Chapter 11 bankruptcy.
While all of these hotels have unique circumstances, hotel industry experts attribute the foreclosures to a myriad of financing challenges hotel owners and developers are facing in the post-pandemic era.
The first problem hoteliers are facing, like many industries, is rising interest rates.
Before COVID, many hoteliers signed five to seven-year commercial loans with interest rates closer to 3%; those rates have risen to 8% or even 10%, according to Greg Hanis, hotel industry analyst and president of New Berlin-based Hospitality Marketers International Inc.
“When you start adding on five, six, seven points of interest to a $10 million loan, it is a big hit,” Hanis told BizTimes Milwaukee in August.
For example, if a hotel owner has a $10 million loan that has seen a 5% increase in interest, that’s $500,000 more in interest every year.
The second problem is that many lenders are still hesitant to lend to hoteliers.
“(Lenders are) thinking, ‘Let’s make sure the hotel industry is still viable enough to recover,’ particularly seeing that we’re dealing with inflation, we’re going into an election year next year, there’s a lot of question marks out there,” Hanis said.
Things are trending in the right direction for hotels, though, as tourists and large conventions and events continue to return, but the added financial stress from the pandemic, inflation and labor shortages are causing turbulence for some hotel owners.
Further, business travelers have been slower to return. The Cambria brand focuses on business travelers, according to its franchisor, Maryland-based Choice Hotels International Inc.
“(As a hotel’s finances become more stressed) the options for owners and developers are to walk away or come up with more equity,” said Doug Nysse, hospitality industry advisor and director of project and development services with Colliers.
Given these trends in commercial lending, Hanis and Nysse said in August that some hotels may end up in similar situations to the downtown Milwaukee Hampton Inn, Iron Horse and now the Cambria Hotel.
“There are hotels right now that are operating, they’re doing fine, but they have this cloud in the background,” Hanis said.
“We may never see those issues become public, though, if those owners can resolve refinancing themselves,” Nysse said.
