The developer of the new Renaissance Hotel in Wauwatosa says it expects to lose roughly $1.2 million in the hotel's first year of operation due to the COVID-19 pandemic, and is seeking financial assistance from the city to cover the shortfall and keep workers employed.
The 196-room, 12-story
Renaissance Milwaukee West Hotel is
slated to open in August at the northeast corner of North Avenue and Highway 100. It is located in a former office tower on the Mayfair Mall property.
But the hotel's opening comes at a difficult time for the hospitality industry. Hotels have suffered from government-mandated restrictions and closures, coupled with significant declines in business and leisure travel.
Milwaukee-based
HKS Holdings LLC and Mayfair Hotel Holdings LLC, the developer of the Renaissance Hotel, is requesting $305,000 from Wauwatosa's Community Development Authority. The CDA will consider the request
Wednesday evening. The forgivable loan would come from federal CARES Act funding to the Community Development Block Grant program, or CDBG-CV.
The loan would help create or retain around 50 jobs, with more than half of those to be held by low- or moderate-income workers, according to city records. Supporting those types of jobs is a requirement for CDBG-CV funding.
Wauwatosa and other "entitlement communities" received CDBG-CV funding directly from the U.S. Department of Housing and Urban Development, Paulette Enders, Wauwatosa development director, wrote in an email.
"The City of Wauwatosa (is) utilizing its allocation to assist not-for-profits and businesses impacted by COVID," Enders wrote. "The funds must benefit low or moderate-income individuals. HKS Holdings committed to hiring at least 50 full-time equivalent employees or 51% of its employees who are low or moderate-income."
In a letter to the city, HKS principal Kyle Strigenz wrote the firm initially anticipated the hotel to make more than $690,000 in its first year. Now, it's expected to lose $1.2 million. What's more, the Eldr + Rime restaurant in the hotel will be limited to approximately 50% occupancy when it opens in order to comply with state and local social-distancing guidelines, he added.
"The majority of business travel has ceased for the remainder of the year, as well as most meetings and large social events," Strigenz wrote. "This has dramatically impacted the hotel and its ability to book rooms and host events."
To make up for the projected losses, HKS is drawing from a number of sources. They include:
- Roughly $59,000 from the federal Payment Protection Program
- $149,000 in interest savings on a tax incremental financing loan
- $204,000 in management company cost savings
- More than $205,000 in interest savings on a mezzanine loan
- $600,000 from the CDBG-CV loan and other city funds
Strigenz added HKS is willing to redirect up to $650,000 of its developer fee to pay down the mezzanine loan and/or restructure some of the project's mortgage. The paydown will "allow Mayfair Hotel Holdings to renegotiate with the mezzanine lender a reduction in interest rate on the overall loan, saving the project on interest expense," he wrote.
Further complicating the Renaissance Hotel's situation is that it was not qualified for financial assistance through other government programs.
Strigenz wrote the hotel was not open for business earlier in the year and therefore not eligible for the first round of PPP funding. The hotel then received only $59,000 in the second round of PPP funding because only three full-time employees were working there in January and February.
This compares to another HKS hotel, the Kimpton Journeyman in Milwaukee, which received $1.3 million in PPP funds and a $150,000 Economic Injury Disaster (EIDL) loan. The Kimpton has fewer employees and makes several million dollars less in annual revenue than what's expected from the Renaissance, wrote Strigenz.
