Owners of Connellsville’s Cobblestone Hotel file for bankruptcy
The company that operates Connellsville’s Cobblestone Hotel filed for Chapter 11 bankruptcy protection this week, on Thursday asking a judge for an expedited hearing to bar utility companies from shutting off service and permission to meet its payroll obligations to employees.
Trailside Lodging, LP owns the hotel at 237 N. First St. Their initial filing listed $626,452 owed to 20 creditors and between $1 million and $10 million in assets. Chapter 11 is a reorganizational bankruptcy that allows a business to remain open while repaying debt.
“It’s unfortunate that the investment group who owns the Cobblestone Hotel had to file Chapter 11,” said Connellsville Mayor Greg Lincoln. “The city is hopeful that they will be able to get their finances together so the hotel continues to operate in the city.”
The city’s only hotel, a $4.5 million investment, opened in February 2017. Court paperwork filed indicated that as of Feb. 10, the company has outstanding funded-debt obligations of about $4.245 million in loans and other costs.
In paperwork filed Wednesday, Trailside Lodging attorney Daniel R. Schimizzi indicated the three-story, 54-room hotel, located steps away from the Great Allegheny Passage bike trail, has a more robust business in the summer and fewer guests during the colder months.
“The Connellsville community benefits from the (hotel’s) operations,” he wrote in motions filed in the case. “Tourists visiting the Laurel Highlands, using the Great Allegheny Passage, or availing themselves of the natural resources that make Connellsville a destination location need hotel accommodations. The hotel is the only property of its kind in the Connellsville area.”
“(The hotel) has spurred other related businesses to open,” said Michael Edwards, the executive director of the Connellsville Redevelopment Authority, adding that it is not closing.
Lincoln said the hotel has been impactful to the city.
“We have new visitors staying in the city on a regular basis, which leads to them spending money at our other local businesses,” Lincoln said.
Edwards said additional development is continuing in the city.
“The designation of Connellsville as an Opportunity Zone as part of the 2017 Tax Act will provide for possible new investments to be made in buildings, businesses or multifamily residential,” Edwards said of the Opportunity Zone, which provides tax benefits to investors.
Court paperwork filed as part of the bankruptcy said it is “imperative to note that the seasonality of the debtor’s operations has inhibited the debtor’s ability to generate steady operational revenue throughout the year.”
Trailside entered into a franchise agreement with Cobblestone Hotels, LCC in 2014, according to court records. It is on the site of the former Connellsville Bottling plant.
On Jan. 31, Cobblestone issued a notice that Trailside was in default of the franchise agreement by $20,595.13 for failing to pay monthly fees, reservation fees and other charges, according to fiilings in the case. Trailside was given 10 days to cure the default or the franchise agreement would be terminated, Schimizzi wrote.
When the notice was issued, the company blocked the hotel’s reservation system, according to a motion in the case. Those who tried to use the online reservation system got a message saying the hotel was fully booked, according to the filing, and calls made to the hotel were redirected to a third-party reservation system where callers were told the hotel did not have any vacancies.
“As a result, fewer visitors have booked rooms at the hotel during its slower months, which has significantly impaired the ability of the hotel to generate the revenue it otherwise could have generated. Coupled with the pending termination of the franchise agreement and its ongoing debt obligations, the debtor has no option but to seek protection under Chapter 11 of the bankruptcy code,” Schimizzi wrote.
The hotel employs nine people on either a full-time or part-time basis, according to filings. All payroll obligations are current, but court paperwork indicated the next paychecks are due to be issued Feb. 20.
The petition lists its biggest creditors as $230,000 owed to Fairchance Construction in Fairchance, $132,000 to Farris Carpet in Uniontown and $51,875 owed to BriMark Builders in Neenah, Wisconsin.
On Thursday, Nathaniel R. Morgan, a general partner of Trailside Lodging, filed a declaration telling the court that it is “essential to the uninterrupted business operations” of the hotel that a judge allow its utilities to remain on and payroll be met.
The filing indicated Trailside officials are “formulating a business solution to enhance revenue and address seasonal fluctuations in occupancy; but in the interim, it needs to secure post-petition financing to ‘bridge the gap’ during the lower volume months.”
Without a financing arrangement, the company “would likely be forced to liquidate its business,” according to the filing.
A hearing on the motions is scheduled for Feb. 20.