Unlike other larger hotel operators, Milwaukee-based Marcus Corp. will not be returning money to the federal government which was set aside mainly to help smaller businesses deal with the coronavirus pandemic.
The company's Marcus Hotels & Resorts Inc. division owns or manages 20 hotels, totaling 5,400 rooms, in Wisconsin and seven other states. It closed the hotels in March and April as the pandemic devastated the travel industry.
Marcus Hotels received Paycheck Protection Program forgivable loans for nine properties. Those include three upscale downtown Milwaukee hotels: the Hilton Milwaukee City Center, Pfister Hotel and Saint Kate — The Arts Hotel.
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That federal cash, totaling $11 million, is being used to keep 1,400 to 1,500 employees on the company's payroll for up to three months, President and Chief Executive Officer Greg Marcus has told the Journal Sentinel.
The program was meant to mainly help small businesses. But it included a provision allowing larger hotel and restaurant chains to seek loans for individual locations.
That exception allows a company like Marcus Corp., which had around 10,500 employees at the end of 2019, to obtain help.
But larger companies have faced criticism for taking those loans — especially since the program quickly ran out of its first round of $349 billion. Congress and President Donald Trump approved $310 billion in additional funds.
The U.S. Small Business Administration then said the money should be returned unless a company can prove it was truly eligible for a loan.
That process includes exploring private financing sources before turning to PPP.
Marcus Corp. on April 30 announced a new $91 million bank loan to help it deal with the economic effects of the COVID-19 pandemic.
Also, company executives at a May 5 quarterly earnings conference with industry analysts stressed the strength of Marcus Corp.'s balance sheet — despite losing $19.3 million during the first three months of 2020.
That raised questions about whether the company, with annual revenue of over $800 million in 2019, should return the federal cash. Small Business Administration officials say some loans will be audited to make sure they were properly used.
Ashford Hospitality Trust Inc., Red Lion Hotels Corp. and other publicly traded companies have since returned the PPP loans.
Others, like Marcus Corp., have said they are keeping the money.
“Based on guidance published yesterday by the SBA, we are comfortable retaining our PPP loans and using the funds as permitted by the regulations, including an expectation that approximately 90% of our expenditures will be on compensation for our employees," Marcus Hotels said, in a statement issued Thursday.
The SBA initially said companies ineligible for PPP loans should return the cash by May 7, or face possible penalties.
That deadline was then extended to May 14, before being extended again to May 18.
Tom Daykin can be emailed at tdaykin@jrn.com and followed on Instagram, Twitter and Facebook.
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Marcus Corp. won't return $11 million in federal cash from program that mainly targets small businesses - Milwaukee Journal Sentinel
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