This hotel owes $6 million on a loan backed by city of Lexington. It closed. Now what?
The owners of a temporarily shuttered boutique hotel and Lexington officials are trying to work out repayment of a $6 million loan the city guaranteed as part of an incentive package to get the hotel built several years ago.
If the 21c Museum Hotel can’t make payments on that loan, $6 million in federal grant money used for affordable housing projects and other infrastructure projects could be in jeopardy.
The boutique chain announced March 28 it was temporarily shutting its doors at its Lexington and seven other locations due to health and safety concerns related to the COVID-19 pandemic.
In 2012, the city of Lexington agreed to give 21c a nearly $1 million grant and a $6 million loan through a U.S. Department of Housing and Urban Development program called a 108 loan. In addition to the city loans, the project also applied for $15.7 million in state and federal tax credits among other publicly-funded incentives.
The hotel qualified for the HUD 108 loan after it pledged to hire 125 low-income employees. But that loan agreement also said if 21c could not make its loan payments, HUD would take the $6 million from Lexington’s community development block grant money to repay the loan.
Community development block grant money is typically used for low-income housing projects and other infrastructure needs.
On Tuesday, city officials said the 21c had told the city that it will make its next payment— a $23,000 interest payment due April 22. It’s a July payment, which includes a $353,000 principal payment plus interest, that’s in question.
“We are in close contact with LFUCG (the city), and they are in close contact with HUD. We are current on all loan payments and are waiting for further guidance from HUD and LFUCG regarding future payments,” said Stephanie Greene, a spokeswoman for the 21c Museum Hotel.
Charlie Lanter, director of grants and special programs for Lexington, said the city is trying to determine if HUD will allow that July payment to be deferred or converted to an interest-only payment.
Lanter said that $6 million loan was personally guaranteed by the founders of the 21c Museum Hotel, including Craig Greenburg, president and CEO of 21c.
That means if 21c can’t make the loan payments, Greenburg and others would have to repay it before HUD taps the city’s community development block grants to repay the loan.
“In the entire history of the 108 loan, no city has ever had to repay the money,” Lanter said.
“We hope we will be able to get more guidance (from HUD) by July when the next payment is due,” Lanter said.
The hotel chain pays the money directly to the bank. It has never missed a payment since repayment started in 2015, Lanter said. The hotel has also employed the 125 lower-income employees required under the 108 loan, Lanter said.
The $43 million hotel, with 88 rooms, the Lockbox restaurant and bar as well as art exhibit space, opened in the former First National Bank building in February 2016.
It’s not clear when the hotel chain will reopen. 21c Founder Steve Wilson said in a statement in late March, the hotels will reopen “as soon as it is safe to do so.”
This story was originally published April 9, 2020 at 12:40 PM.
