Credit unions join forces to finance downtown hotel

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In this still-shaky economy, landing a hotel and construction loan is a rare feat.

Last week, I reported that Perry Sanders and Raphael Sassower, co-owners of The Mining Exchange, A Wyndham Grand Hotel, had inked a financing deal for $11.2 million with Terrix Financial in Denver.

Even more unusual, the loan was financed by a consortium of credit unions — 10, to be precise. All of the credit unions are members of Centennial Lending, a credit union service organization, or CUSO, in Longmont.

Not only that, but the project was financed in media res. “This is the first construction project we’ve taken over midstream,” said Carolyn Chase, VP of commercial lending at Centennial. The organization is owned and operated by credit unions, and specializes in commercial, construction and mortgage loans.

“We finance large projects all the time,” Chase added, “but this is the first big development loan we’ve done in a few years because of the economy.”

A key factor in the deal was that the co-owners had more than 50 percent equity in the deal, she said.

“That speaks to the strength of the project as a whole, as well as the strength of the owners,” Chase said. “The project kept going without financing. That speaks very highly of the owners and how much they believe in it.”

Bellco Credit Union in Denver was the lead lender. Several banks wanted to finance the project, said Dave O’Brien, a principal at Terrix who brokered the deal, but the credit unions offered better rates and terms.

The loan is what’s known in the industry as a “mini-permanent loan.”

It starts as a construction loan that will convert to the mini-permanent form once the owners have a certificate of occupancy.

The construction portion of the financing is for 12 months, beginning Nov. 1.

It’s a 10-year balloon loan, and the interest rate is fixed for the first five years, with a one-time rate adjustment, and then fixed for the remaining five years.

Due diligence on the loan took longer than usual for several reasons — the broader economic conditions, the project was already under construction, and the size and complicated nature of the project.

Centennial looked at the personal financial stability of the borrowers, the project’s pro forma, including projections of revenue, occupancy rates, and room rates at similar hotels in the Colorado Springs area.

“I’ve never seen such I-dotting and T-crossing, every imaginable thing,” said Sanders, who is an attorney. “They did extreme due diligence with this, more than I’ve ever seen.”

Colorado Capital signs consent order

Castle Rock-based Colorado Capital Bank has signed a consent order with the FDIC.

The bank, which has branches in the Denver area and Colorado Springs, has agreed to increase its capital ratios and sell some of its non-performing loans.

In addition, the bank is required to reduce its concentration in commercial real estate loans and to hire a new CEO.

Scott Vencill, the bank’s chief credit officer, has been named interim CEO, replacing John Davis, co-founder of Colorado Capital.

Rebecca Tonn can be reached at rebecca.tonn@csbj.com or 719-329-5229. Friend her on Facebook.