LAWTON – The Comanche County Industrial Development Authority will waive $1.68 million of its loan to the entity that operates the Hilton Garden Inn and the adjacent convention center.
Lawton Lodging Lenders LLC, which runs the hotel and convention center will still have to pay $740,000 toward its remaining debt of $2.42 million. The payment will reduce the total loan to $1.68 million, and the CCIDA will waive the rest.
The authority voted 6-1 Monday to approve a financial settlement with Lawton Lodging Lenders, which spells out the details of the payment plan. Under the terms of the settlement, Lawton Lodging Lenders will pay CCIDA $500,000 upfront and $20,000 a month for 12 months for a total of $740,000. CCIDA will write off the rest.
The settlement also stipulates that Lawton Lodging Lenders will pay CCIDA some money to pay down the remaining debt if Lawton Lodging Lenders President Sam Kumar sells Hilton Garden Inn and has any money left over after other debts are settled.
CCIDA member Karol Haney, who voted against the settlement, said she did not think the authority should let Kumar off the hook.
“If he walks away from the loan and he doesn’t pay it back, that’s on him. Because of all these circumstances, he’s unable to pay back,” she said. “If we just wipe it off the books and say he doesn’t owe it, then we just gave him that money. That’s on us.”
But CCIDA member George Moses said he understood Haney’s position and thought it was reasonable. But he said he thought the settlement was the best possible deal for CCIDA.
“I wish it could be better, and maybe there’s some things we could do to strengthen the payment propensity of Kumar,” Moses said. “But in my view, the structure of what we have is the best that can be done.”
The loan package
Ten years ago, the CCIDA approved a $4.5 million loan package to help Lawton Lodging Lenders cover the cost of building a convention center next to the Hilton Garden Inn. The authority was not interested in financing construction of the hotel itself since Lawton already had several hotels.
CCIDA loaned $3 million directly to Lawton Lodging Lenders for the convention center and another $1.5 million to the Lawton Economic Development Authority. In turn, LEDA gave the $1.5 million to Lawton Lodging Lenders for the convention center.
LEDA has repaid its share of the loan, plus about $400,000 in interest. Lawton Lodging Lenders has paid about $180,000 in interest during its profitable years, so the CCIDA has collected about $580,000 in interest altogether.
The hotel has encountered some financial setbacks over the past 10 years, said CCIDA member Fred Fitch, who negotiated the settlement with Kumar. Those difficulties included the COVID-19 pandemic, which upended the travel and hospitality industries.
“That was very damaging,” Fitch said. “The occupancy rate went down to 10 percent or below. And of course, when you have 10 percent of 162 rooms, you’ve got 16 rooms rented at $90 a night or whatever, it doesn’t pay the bills.”
Fitch said Lawton Lodging Lenders received pandemic-related financial assistance from the federal government, and the hotel retained all its employees during that period. He noted that Kumar has upgraded the property over the past several years, and the Hilton chain will require about $2.5 million worth of additional improvements in 2024.
“He’s going to have that coming up, and that expense will go ahead of what we are owed because that’s the way the contract was written up,” Fitch said. “So, we are way down the line.”
The way the loan package was written, Kumar and other investors would not personally guarantee the loan if the hotel had two or more unprofitable years in a row. The package also stipulated if the hotel failed to meet certain requirements, CCIDA would not charge interest on the loan for that year – but the interest would accumulate until the following year.
At this point, Lawton Lodging Lenders is essentially in default because it did not repay the loan in full by the deadline. But the settlement would allow the authority to collect a portion of that debt and waive the rest.
Fitch said if the authority rejected the proposed settlement and renegotiated the loan to include job credits – credit toward a debt by guaranteeing a certain number of jobs in a certain period of time – the authority might not get any money.
“What if COVID pops its head up again?” he said. “What if this? What if that? What if they do sell the hotel? We won’t get a dime, not a dime.”
But CCIDA member Karol Haney said she thought the authority should require Kumar to pay his debt in full.
“My point is, this is taxpayer money,” she said. “I think they ought to pay that back.”