Among the more than 900 federal disaster loans offered because of the 2013 storms in Oklahoma, the largest was to cover damage to a hotel east of downtown Oklahoma City.
The 188-room Bricktown Hotel and Convention Center, located about three miles east of the Bricktown entertainment district, was approved for a $748,500 disaster loan from the U.S. Small Business Administration for damage in the May 31 storms.
Many businesses and residents approved for “Disaster 4117” loans rejected the offers. But the Bricktown Hotel, which court records show faced financial problems stemming from storm damage in 2009, likely would have closed if not for the 2013 disaster loan, said the hotel’s owner Tom Seabrooke.
“If we hadn’t gotten it (the loan), we would be closed, and 40 people would be out of work,” said Seabrooke, who owns the hotel through his firm, Bricktown Capital LLC.
The story of the Bricktown Hotel’s experiences with damage from two storms five years apart points to how damage can vary widely in one area and how it can lead to disputes over the extent of insurance coverage for storm damage.
The Bricktown Hotel is located on the northeast corner of East Reno and Martin Luther King avenues. That area received far less damage than Moore and south Oklahoma City did in the May 20 and May 31 storms. Seabrooke said the May 31 storm, which also spawned tornadoes in El Reno and south Oklahoma City, caused substantial wind, hail and water damage to the hotel.
Nearby businesses were more fortunate. Managers at the nearby Econo Lodge Inn and Motel 6 hotels, and the next-door Petro truck stop, said they received no damage. Frank Barnes, emergency manager for Oklahoma City, said he had no reports of damage or tornado activity in that area east of downtown.
But flash flooding and some roof damage occurred in the heart of downtown, and a homemade YouTube video shows the Bricktown Hotel’s swimming pool spilling over on the night of May 31, with water washing up against the hotel.
The SBA does not discuss or disclose most details of individual loan applications, but said it conducts on-site inspections of properties whose owners are seeking disaster loans. The Bricktown Hotel was the only disaster loan approved for a business in the 73117 zip-code area, SBA data shows.
Seabrooke said the hotel received more than $1 million in storm damage, particularly on the roof from wind and water damage. In June, he applied for the SBA disaster loan, and it was approved in November. Seabrooke said he has received less than half of the $748,500 loan offer because the cost of repairing the damage is being incrementally reimbursed from the loan funds as the work is completed. The loan is secured by a mortgage held by the SBA, which an agency spokesman said is not unusual.
One issue is that the owner asserts the insurance company did not cover all of the costs. Bricktown Capital LLC sued the insurer, Aspen Specialty Insurance Co., in June of this year in Oklahoma County District Court, alleging it failed to pay for legitimate damages caused by the storm, but dropped the suit in July, court records show. Seabrooke said the matter might go to court again.
A spokesman for Aspen Specialty declined to comment.
This was not be the first time the hotel had fought an insurance company to pay for damage suffered in a severe storm.
In 2009, the Bricktown Hotel’s roof was severely damaged by a storm, and some of the hotel’s rooms suffered water damage, according to court documents and news coverage. The hotel had to be evacuated after a downed power pole caused a natural gas leak.
Several contractors were hired to repair or assess that damage, but some did not immediately get paid, according to lawsuits filed afterward. Bricktown Capital sued American Insurance Co. in U.S. District Court, alleging the insurer did not conduct a proper investigation or pay for much of the storm-related damage covered under its policy. The insurance company denied the allegations in court filings. An attorney for the insurance company did not return phone calls. The lawsuit was settled for about $3.8 million in late 2011, court documents show.
By that time, the bank that held the hotel’s mortgage, Quail Creek Bank, had filed a foreclosure suit against Bricktown Capital in Oklahoma County District Court, saying in legal filings that the hotel had fallen behind on its payments. Most of the insurance settlement money went to pay the bank, which then dropped its suit, court documents show. Court records also indicate that at least two contractors were not paid from the settlement. One had sued the hotel, and another was threatening to sue the insurance company for nonpayment.
By 2013, the situation caused by the 2009 storm damage had put the hotel in financial difficulty, according to a letter from Bricktown Capital’s attorney filed in federal court.
Eight days before the May 31 storm, the attorney, Jim Lee, wrote to an attorney for American Insurance Co. that the hotel was again behind on its mortgage payments. Seabrooke was working hard to pay the obligations, according to the letter, but the hotel did not have money to pay attorneys’ fees for the insurer or pay the contractors who worked on the 2009 damage.
Lee also wrote that Seabrooke was working to obtain a standard SBA loan to pay both the bank and the contractors.
“Tom has been working with the Small Business Administration and with private funding agencies to try to obtain funds to pay Quail Creek Bank (and contractors) and get his business back on track,” Lee wrote. “He has not been successful to date.”
Seabrooke was considering selling the property, Lee wrote. It was in everyone’s best interest to refrain from litigation until proceeds from a loan or sale of the property occurred, the attorney wrote.
“Tom Seabrooke is doing his best and all he can do to get everyone paid.”
Then the storm hit.
“There was considerable damage,” Seabrooke said in an interview. “It took part of the roof of the hotel off. There was a lot of rain with the storm, so the hotel got soaked.”
On June 14, Seabrooke applied for an SBA disaster loan to cover physical and economic damage to the hotel, according to a redacted copy of the loan application filed with the SBA.
The owner later sued the insurer, Aspen Specialty, alleging it did not conduct a proper investigation and thus left interior and exterior storm damage costs unpaid, district court records show. The suit was dropped without a settlement about a month later.
Seabrooke declined to speak at length about the issues with the hotel’s insurance company. He said the insurer paid some toward repairs, but declined to say how much.
“There were some funds paid by the insurance company, but nowhere near enough in my estimation,” he said.
Disaster Loans Help Businesses, Homeowners
U.S. Small Business Administration disaster loans are meant to help get people and businesses affected by a disaster back on their feet.
The loans are offered to help recipients make repairs and deal with financial setbacks related to the disaster.
Unlike traditional SBA loans, which are given through private lending institutions and backed by the federal government, disaster loan funds are taxpayer dollars that come directly from the U.S. Treasury. They have lower interest rates and repayment periods that can extend up to 30 years, said Mark Randle, a spokesman for the SBA’s Office of Disaster Assistance.
Disaster loans become available after a presidential disaster declaration, such as for Disaster 4117 covering May 18 through June 2, 2013, in Oklahoma. Loans are extended for owners of homes or businesses only within the declared disaster area and only for damage sustained as a direct result of the disaster, Randle said.
For businesses, SBA disaster loans can be given both for physical damage and economic damage, with a loan limit of $2 million, he said.
The SBA sends inspectors out to verify the physical damage and also collects tax and other financial information from the business to verify economic damage, Randle said.
Among the factors in approving a loan is an applicant’s cash flow and existing obligations. If an applicant was having problems with financial obligations before the disaster, there is a less of a chance that a disaster loan would be approved, he said.
“We’re looking to help those businesses that would have been fine had the disaster not occurred,” Randle said.
Oklahoma Watch is a nonprofit, nonpartisan media service that produces in-depth and investigative journalism on public-policy issues facing the state. For more Oklahoma Watch content, go to www.oklahomawatch.org. The data team for Investigative Reporters and Editors and the Investigative News Network assisted with the project.
The Oklahoma Tornado Project is made possible by a grant from the Corporation for Public Broadcasting.