By Marice Richter
Three publicly trade companies connected with wealthy Dallas businessman Monty Bennett will not return millions of dollars it received from a federal low-interest loan program intended as a lifeline for small businesses faltering during the COVID-19 outbreak.
Bennett, who runs Ashford Inc. and two real estate investment trusts it advises, Ashford Hospitality Trust and Braemar Hotels & Resorts Inc. have applied for $126 million in loans. It has received $69 million, according to calculations by the Associated Press.
Ashford has been identified as the nation’s largest recipient of loans from the U.S. Small Business Administration’s Paycheck Protection Program, which was designed to help struggling smaller businesses through the health care crisis. Two Fort Worth hotels, The Ashton Hotel and Fort Worth Hilton, are among the 130 hotels under the Ashford umbrella.
In a lengthy statement, the company defended it decision to keep the loan money.
“The COVID-19 epidemic has been devastating to our company and employees,” the statement said. We have been in the hospitality business for decades and have never experienced anything as destructive to our industry.
“The impact is larger than 9/11 and the 2008 financial crisis combined,” which took the hotel industry five years to recover.
The company further stated that it has closed 32 of its hotels and laid off or furloughed more than 90 percent of its 14,000 employees since mid-March when shelter-in-place and travel restrictions have eliminated most business travel.
The hotels continuing to operate are doing so with cash flow shortfalls, but the company is trying to its part to house first responders, doctors and other health care workers, the homeless and some patients “in every way we can in the communities where we operate.
Public companies that have other access to capital have been criticized for taking loans from the U.S. Small Business Administration’s Paycheck Protection Program that could have helped struggling smaller businesses. Some of those public companies, including Shake Shack and Ruth Chris, have returned the money.
In the first round of funding, $349 billion was available through the PPP. That money ran out after two weeks so Congress approved an additional $310 billion last week.
The second round of funding is also expected to be short-lived. The application period opened on Monday.
“We plan to keep all funds received under the PPP, which were provided as a result of the application process and other specific requirements established for our industry by Congress,” the company stated. “Total PPP funding for the hotel industry accounts for less than 3 percent of the PPP fund’s initial budget and roughly 1.5 percent of the fund’s total budget.
“Our companies have not crowded out smaller businesses from receiving funds, as some media reports have suggested. The PPP program was specifically intended for companies like ours.”
The company also defended itself against criticism regarding stock dividends.
Both REITS stopped paying dividends on common shares for the first quarter but did pay preferred stock dividends for that period.
“At the time the first quarter preferred stock dividends were declared, it was unclear how bad things were going to get in the hotel industry,” according to the statement. “We also believed it was important to stay current on our REIT preferred stock dividends to support the future success of our previously announced non-traded preferred stock securities so we can raise fresh capital.”
Ashford also stated that all senior executives and board members have taken “significant pay reductions.” Operating expenses have been reduced by 25 percent across all three companies.
Bennett’s name is also familiar in Fort Worth for his prolonged battle against the Tarrant Regional Water District over placement of the IPL water pipeline on his East Texas ranch.
Bennett sued the TRWD as it was attempted to use its power of eminent domain to seize a piece of his ranch for the underground pipeline to transport water from Lake Palestine to the Dallas-Fort Worth area.
Bennett argued that pipeline construction would disrupt a wildlife sanctuary on his property.
The suit was eventually settled and the pipeline was re-routed around Bennett’s land but not before Bennett bankrolled several candidates for the TRWD board of directors who supported his desire for greater transparency in water district dealings and decision-making.
Bennett had sued after his attempts to present his reasons for re-routing the pipeline fell on deaf ears.
Ashford Hospitality Trust become a public company in 2013, nearly 40 years at it was started by Bennett’s father as a family business focused on acquiring struggling hotels.