BASKING RIDGE, N.J.–A CUSO that is funded by 23 credit unions has bought the headquarters of Affinity Federal Credit Union here, which in turn is leasing the facility back.
The deal was arranged by Los Angeles-based CU Capital Management, LLC, a CUSO that manages a network of credit unions and real estate holdings, including the CUSO within its network, CCM Properties Two, LLC, which purchased the property. The deal closed in late 2022.
The126,000-square-foot building has been owned and occupied by Affinity since 2008. The transaction agreement will lease the entirety of the property to Affinity for an initial term of 20 years with an option to extend.
The $51.7-million purchase offers Affinity additional liquidity to be able to expand its branch locations with the raised capital and pursue its member-focused mission of improving financial wellbeing, according to CU Capital Management.
Amplifying Members’ Well-Being
“Affinity’s mission remains centered on improving our members’ financial wellbeing, and the transaction facilitated by CU Capital Management positions us to immediately amplify this impact,” said Kevin Bauer, CEO of Affinity FCU in a statement. “We have been approached by private investors interested in a sale/leaseback transaction with the credit union in the past, but this opportunity stood out, allowing us to partner with credit unions who share our long-term vision.”
The deal follows others overseen by CU Capital Management. As CUToday.info reported, in February of 2022 the CUSO funded the $59 million purchase of a headquarters building owned by Wescom Central Credit Union in Pasadena, Calif., in the amount of $59 million. Wescom, which had owned and occupied the property since 1985, was able to “recognize a significant increase in net worth and is leasing back the full property for an initial period of 15 years with options to extend,” according to the organization.
In Position to ‘Benefit’
“In the rapidly changing economy we believe that many credit unions are in position to benefit from the immediate increase in net worth that a sale/leaseback can provide,” said Mitchell Amsler, CEO of CU Capital Management. “We expect to see growing credit union interest in all three components of our credit union sale/leaseback network now that the merits have been proven by large, respected, and well-capitalized credit union sellers, like Affinity, along with 23 credit union CUSO investors.”
How Deal Was Structured
CCM Properties Two, LLC is wholly owned by CUSO Realty Investors One, LLC, a CUSO that is co-owned by 23 credit unions. The transaction was financed with a combination of equity from the CUSO owners, and a loan originated by Michigan State University Federal Credit Union, with other credit unions buying loan participation interests, according to the CUSO.
CU Capital Management said the CUSO owners and other lenders benefit by receiving attractive risk-adjusted returns over the full life of the lease.
“CU Capital Management and its network of credit unions and CUSOs have demonstrated the power of credit union collaboration,” said Guy Messick, CEO of NACUSO Business Services, a marketing partner of CU Capital Management. “We had an idea that, through collaboration, we could keep the players and benefits in these sale/leaseback transactions within the credit union community.”
Other Parties in Transaction
Chris Pippett of Fox Rothschild LLP served as legal counsel to CU Capital Management, LLC and CUSO Realty Investors One, LLC on the transaction, with additional legal services for the CUSO network provided by Messick Lauer & Smith P.C. Eugene Huang of Wiley Malehorn Sirota & Raynes served as legal counsel to Affinity Federal Credit Union on the transaction.