Lexington hotel gets break on $6 million city-backed loan. Why taxpayers should care.
A federal agency has given the owners of the 21c Museum Hotel a break on a $6 million loan backed by the city of Lexington, which means the city will not have to tap federal grant money for low-income housing projects to repay the loan.
The U.S. Department of Housing and Urban Development told Lexington city officials and the 21c Museum Hotel in late April that a July $353,000 payment on the principal for the $6 million loan could be delayed for three years.
That means the hotel won’t have to make payments on the principal until 2023. The remaining principal payments for the loan will increase starting in 2023 from $353,000 to $441,000 until 2034. The total remaining principal on the loan is $5,294,000, according to loan documents.
As part of the modification to the loan agreement, 21c Museum agreed to continue paying its quarterly interest payments, said Charlie Lanter, director of grants and special programs for Lexington.
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.
The company made a $23,000 interest-only payment on the loan in April, according to city officials. But hotel officials had asked the city in early April if there was leeway on its much larger principal payment due in July.
Craig Greenburg, president and CEO of 21c Museum Hotels, said in a letter to city officials agreeing to the new repayment terms that 21c was committed to repaying the loan.
“We are committed to reopening 21c Lexington when we are safely able to do so and when business returns and continuing to service remaining” city 21C debt obligations, Greenburg said, adding the hotel company appreciates the city’s continued support.
In 2012, the city of Lexington agreed to give 21c a nearly $1 million grant and a $6 million loan through a HUD 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 payments, HUD would take the $6 million from Lexington’s community development block grant money to repay the loan.
Community development block grants are typically used for low-income housing and other infrastructure projects.
The $6 million loan was personally guaranteed by the founders of the 21c Museum Hotel, including Greenburg, at the time the loan was approved.
That means if 21c can’t make the loan payments in future years, Greenburg and others would have to repay it. If the founders can’t pay, the obligation would fall to the city and its community development block grants, city officials have 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.
This story was originally published May 4, 2020 at 11:35 AM.
