Dallas city officials are working to recover millions of dollars tied to a federally backed loan used to renovate the Lorenzo Hotel, a downtown property that has faced financial difficulties in recent years. The loan originated in 2015 when Dallas borrowed $1 million through a U.S. Department of Housing and Urban Development (HUD) program and then lent that money to the hotel’s developers to help revitalize the former Plaza Hotel overlooking Interstate 30.
The city remains responsible for repaying the federal government regardless of the hotel’s financial performance. After nearly a decade, the hotel company has missed a $1.08 million loan payment, and the property is now listed for sale. Efforts to forgive nearly $2 million in outstanding debt were rejected by the Dallas City Council in June. Instead, council members approved the sale while preserving the city’s right to pursue the company and the family trust that guaranteed the loan for any outstanding amounts.
The proposed debt forgiveness would have required the city to give up claims to about $1.98 million, which included $1.2 million in unpaid principal and over $750,000 in interest. Under the rejected deal, the owners would have paid the city $5.7 million plus interest and legal fees from the property's sale in exchange for Dallas releasing legal claims on the hotel and the guarantors.
Council member Cara Mendelsohn called the situation “incredibly shameful,” criticizing the city’s use of federal community development funds to finance a private hotel project. The federal loan is backed by grants intended for community development and programs serving low- and moderate-income residents. Should the city fail to meet its payment obligations to HUD, the federal government could recoup the funds from those grants. In April, the council authorized the use of nearly $935,000 in unused federal grant money to cover potential shortfalls.
Real estate experts note that it is uncommon for cities to use HUD loan programs for hotels, given the high risks associated with the hospitality industry’s cyclical nature and sensitivity to economic and tourism fluctuations. Despite these challenges, the redevelopment, led by Hamilton Properties, succeeded in converting a vacant building into an art-centric hotel with amenities including restaurant and meeting spaces, a pool area, and streetscape improvements connecting the Cedars neighborhood to downtown Dallas. The project reportedly created around 220 full-time jobs, fulfilling federal job creation requirements.
However, the Lorenzo Hotel’s finances have been strained for years, particularly following the COVID-19 pandemic when tourism plummeted. The hotel company informed city officials in 2020 that it could not meet scheduled payments. Between 2021 and 2022, Dallas used $1.73 million in federal pandemic relief funds to continue HUD payments on the loan. A debt restructuring in 2023 was intended to provide additional protection for the city, including financial backing from the Hamilton Family Trust.
The company attributes recent financial difficulties to nearby construction projects, specifically the closure of the Akard Street bridge due to Interstate 30 reconstruction and the shutdown of the adjacent Kay Bailey Hutchison Convention Center for renovations. Ted Hamilton, president and CFO of Hamilton Properties, indicated that the family had injected nearly $7 million since the pandemic to sustain the hotel but could no longer do so.
Industry observers, including the president and CEO of Visit Dallas, acknowledge the short-term impact of the convention center closure on hotel demand but remain optimistic about the property’s prospects once the center reopens, currently scheduled for 2030. Meanwhile, city officials remain focused on recovering the taxpayer-backed funds tied to the loan.