The owner of the
Milwaukee Marriott Downtown hotel announced that it has filed for relief under Chapter 11 of the U.S. Bankruptcy Code in order to restructure debt obligations.
The 205-room hotel, located at 625 N. Milwaukee St., opened in 2013. It was developed by Milwaukee-based
Jackson Street Holdings. The hotel is owned by
Wisconsin & Milwaukee Hotel LLC, an affiliate of Jackson Street Holdings.
“The hotel is doing very well operationally,” said
Ed Carow, managing member of Jackson Street Holdings and of Wisconsin & Milwaukee Hotel LLC. “Prospects for continued improvement in operations are strong. However, existing loans have matured, and need to be restructured or refinanced in order to assure the business’s future financial health”
Wisconsin & Milwaukee Hotel LLC said its debt obligations had accumulated in recent years, particularly in an effort to cope with the COVID-19 pandemic.
A Chapter 11 bankruptcy allows a company to stay in business and restructure its finances and operations.
That’s exactly what Wisconsin & Milwaukee Hotel LLC says it wants to do. The hotel will continue to operate with business as usual while the company seeks to reach an agreement with its lenders to restructure its debt.
“The company hopes that it can come to an agreement with its lenders to enable its Chapter 11 case to be concluded quickly,” it said in a news release. “In the meantime, Chapter 11 will allow the hotel to continue to operate its business as usual as a debtor-in-possession, and the restructuring is expected to have minimal impact on the hotel’s employees, vendors, partners and customers.”
The 9-story hotel building has an assessed value of $33.4 million, according to city records. The hotel cost $54 million to build.
The hotel received a $40.5 million New Markets Tax Credit allocation including $30.5 million from the Wisconsin Housing and Economic Development Authority (
WHEDA) and the
Wisconsin Community Development Legacy Fund and $10.5 million from the
Wisconsin Business Growth Fund, according to Milwaukee-based
FirstPathway Partners, which played the role of leverage lender.
U.S. Bank was the investor in credits, according to FirstPathway, which said that Jackson Street Holdings needed the New Market Tax Credits to complete its capital stack and make the project economically feasible.
FirstPathway Partners helped Jackson Street Holdings obtain funding for the Milwaukee Marriott Downtown hotel project through the federal EB-5 program which provides green cards for foreign investors that make an investment that creates jobs in the United States.
The Milwaukee Marriott Downtown hotel is just the latest of a growing number of downtown Milwaukee hotels that have financial troubles recently.
In August, the 138-room
Hampton Inn & Suites in the Westown neighborhood of downtown was taken back by its lender in a deed in lieu of foreclosure action. Then in October the hotel was
sold to a new owner/operator, Lisle, Illinois-based
E.M.A. Hospitality. The hotel closed in May and reopened in February.
In September, the 102-room
Iron Horse Hotel in Walker’s Point was sent to auction to resolve its Chapter 11 bankruptcy. In December, the hotel
reached a deal with its lender to resolve its Chapter 11 bankruptcy and foreclosure.
In July, a foreclosure lawsuit was filed by Atlanta-based hospitality lender Access Point Financial LLC against the owner of the
Cambria Hotel in downtown Milwaukee, an affiliate of Chicago-based Murphy Development Group. A $17.5 million foreclosure judgement was entered in November. In January, the hotel
was acquired by its lender in a transaction valued at $11.1 million.
The Federal Reserve’s moves to raise interest rates to combat inflation have caused problems for hotel owners, hotel industry analyst
Greg Hanis told BizTimes last year. 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%, Hanis said.
“When you start adding on five, six, seven points of interest to a $10 million loan, it is a big hit,” Hanis said.
In August, Hanis and
Doug Nysse, hospitality industry advisor and director of project and development services with
Colliers International | Wisconsin told BizTimes that more hotels in Milwaukee could be facing financial problems.
“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 added.
