1 Hilton Head company’s address received 4 coronavirus loans worth $2.8M. Why?
Four companies that obtained at least $2.8 million in federal COVID-19 relief loans meant for small businesses share something in common: They all have the same address on Hilton Head Island.
A few blocks from Coligny Beach, the entities operate out of 35 Deallyon Ave., the headquarters for Spinnaker Resorts, a company that runs 11 timeshare resorts in Florida, Missouri and Hilton Head.
The loans, which are forgivable, were approved in April and ranged from at least $150,000 to $2 million each, according to data released by the Small Business Administration and U.S. Department of the Treasury.
How did Spinnaker secure so much money?
The companies received loans through the federal government’s $660 billion Paycheck Protection Program, which was established in late March to help small business owners weather the financial fallout of COVID-19.
Millions of dollars in PPP funding, though, flowed to large businesses that applied for multiple loans through limited liability companies or other entities, concerning advocacy groups after some small businesses lost out during the crucial first phase of the program.
Several entities in one corporate group — like Spinnaker’s — were able to individually apply for loans if the group’s total number of employees was fewer than 500, subject to other program provisions.
Restaurants and hotels were exempt from that aggregate cap, along with franchises recognized by the SBA.
“For companies that are larger and more sophisticated, and have the legal expertise needed to secure the funds, it’s unfair that they should be able to get to the front of the line, and not only eat first, but eat first, eat second, eat third and leave crumbs for everyone else,” said Amanda Fischer, policy director at the Washington Center for Equitable Growth, a nonprofit that conducts and supports research on economic inequality.
A Spinnaker spokesperson declined to comment for this story.
For its part, the company closed 11 resorts from mid-March to late May as the coronavirus devastated leisure and travel industries.
It’s unclear how many employees work for Spinnaker — a LinkedIn page says 201 to 500 — and how its PPP loans were spent, but the company in a March 26 news release wrote that it gave workers “additional paid time off.”
“We know our employee’s lives will be financially, psychologically and possibly physically impacted by the pandemic, and have therefore strived to take care of them,” the release read. “Employees were furloughed, not laid off so that they could continue to take advantage of our company sponsored health benefit plans.”
PPP loans were calculated based on payroll needs. Sixty percent of each loan was supposed to be used for employee pay or related costs, at least to qualify for full forgiveness.
A maze of entities
The loans tied to 35 Deallyon Ave. were all approved by Coastal States Bank on either April 15 or April 16, federal data show. The PPP’s first round of funding ran out April 16.
Two of the companies, Resort Sales by Spinnaker Inc. and Resort Sales Missouri Inc., both received loans of $350,000 to $1 million, data show.
Those entities are described in court filings as wholly-owned subsidiaries of Spinnaker Resorts, Inc., a parent company.
The subsidiaries market and sell timeshares, court records show. They also conduct “telemarketing activities.”
A New Jersey woman filed a federal lawsuit against the two subsidiaries earlier this year, claiming they violated the Telephone Consumer Protection Act, which restricts the use of telemarketing calls.
Both companies have denied her allegations.
Basil Matthews, the comptroller for another Spinnaker-related company, Southwind Management Corp., in 2018 said Resort Sales by Spinnaker and Resort Sales Missouri “maintain separate corporate and financial identities from their parent,” court records show.
A third company, Resort Sales Florida Inc., received a PPP loan of $150,000 to $350,000, data show. Resort Sales Florida also sells timeshares, according to Spinnaker’s website.
SDC Properties Inc., the fourth company, obtained a $2 million to $5 million loan. An entity by that name owns roughly 1.8 acres of land around Spinnaker’s Southwind resort in Hilton Head, property records show.
Three of the four loan recipients — Resort Sales Florida, Resort Sales Missouri and SDC Properties — all had the same president in recent years, according to state business records: Kenneth Taylor, Spinnaker’s founder.
Taylor started to develop local timeshare properties in the early 1980s, according to his company’s website. Those island locations now include Bluewater Resort & Marina, the Carolina Club, Egret Point, Southwind, The Cottages and Waterside.
Resort Sales by Spinnaker, meanwhile, was incorporated by Matthews, state business records show.
Aside from Hilton Head, Spinnaker has resorts in Ormond Beach, Florida and Branson, Missouri.
‘All of the money’s gone’
Money ran out for the PPP’s first round of funding 13 days after the program launched. Just under $350 billion in loans were made.
Fischer, of the Washington Center for Equitable Growth, said larger businesses were able to quickly take advantage of the program.
As the first round ended, “almost three-quarters of the businesses with more than 100 workers that would eventually receive funding had received it,” according to a paper published by the Brookings Institution.
Meanwhile, less than 25% of entities with four or fewer employees had obtained loans, the paper said.
“Small businesses that don’t have traditional lending relationships, who don’t have accountants, the HR folks to do all the paperwork … if it’s a mom-and-pop shop or something, they’re trying to navigate this and all of the money’s gone,” said Awesta Sarkash, the government affairs manager for Small Business Majority, an advocacy group with an office in Washington, D.C.
The owner of Beaufort’s Common Ground coffee shop, Ramona Fantini, faced that challenge.
She sought a PPP loan in early April through Coastal States Bank, the same lender that approved Spinnaker’s applications, data show.
Fantini, though, lost out during the PPP’s first round.
“We had a lot of folks that didn’t get through because we hit our capacity limitation,” Stephen Stone, president and CEO of Coastal States Bank, previously told The Island Packet and Beaufort Gazette. “With a limited amount of funds and everybody trying to get it at once, it put institutions in a very difficult position.”
A second round of PPP funding opened in late April, with $310 billion available. Smaller firms fared better this time, according to Brookings. Common Ground received a loan in mid-May to help support three full-time and two part-time employees, Fantini said.
The SBA on April 30 also issued a rule limiting the total amount a single corporate group could receive, capping it at $20 million.
But the damage was already done, Fischer said, as some small businesses struggled during the first few months of “total lockdown.”
For its part, Spinnaker’s loans totaled far less than other groups.
ProPublica found a chain of hospitals and therapy centers that had received up to $97 million in loans through various LLCs.
The Tampa Bay Times in late August reported that 10 hotel companies with a shared managing partner obtained about $19 million.
“In a world where there was unlimited funding and everybody who was eligible for PPP received PPP, I would be less concerned,” Fischer said. “Where it starts to not sit well with me is, because we capped the amount of funding, because we channeled it through banks, all the other layers of the inequity there make it seem unfair.”
What’s next?
All businesses — both big and small — are eyeing Capitol Hill.
House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin are trying to reach a deal on another coronavirus aid package before the 2020 election.
Senate Democrats, meanwhile, blocked a $500 billion Republican bill Wednesday that included more PPP funding, among other things.
Democrats have proposed a $2 trillion economic relief plan.
