On February 18, 2022, a CUSO funded by investments from twenty credit unions purchased Wescom Central Credit Union’s office building in Pasadena, California. The buyer is CUSO Realty Investors One, LLC (“CRIO”), which is a CUSO solely owned by credit union investors. CU Capital Management, LLC (“CUCM”), which is also a CUSO, managed the fundraising, bidding and purchasing process on behalf of CRIO. Wescom will lease back the entirety of the building for an initial term of fifteen years with options to renew. The lease is triple net with Wescom maintaining full operational control and maintenance of the property, and picking up all building related costs, including structural repairs.
The sale was brokered and submitted to a bidding process involving twenty bidders. CRIO distinguished itself as the only CUSO bidder. The sales price of $59 million consisted of $29 million in equity from the credit union investors and the balance from a loan.
Wescom, founded in 1934, has assets in excess of $5 billion, and over 200,000 members. The credit union has owned and operated the property since 1986. As a result of the transaction, Wescom added approximately $50 million in capital and increased its capital ratio from 7.79% to over 8.5%. Due to an accounting rule change effective in 2022, Wescom can recognize all the capital gain upon the sale. Wescom now has more capital to fuel its growth objectives.
The projected annual returns to the credit union investors from the Wescom transaction over the next fifteen years are between 5% and 7%, payable quarterly beginning in 2023. CRIO has received over $109 million in investment commitments from twenty-five credit unions to fund additional credit union sale/leaseback transactions. CUCM, as Manager of this sale/leaseback CUSO network, is in active negotiations to assist one of the network CUSOs to purchase another large credit union office building. Other seller prospects are in exploratory discussions. Future purchases will also include lending opportunities for credit unions. Loans originated by credit unions will be participated out to multiple credit unions.
Maps Credit Union is a co-owner of CUCM. Maps was the first credit union to use a CUSO as a buyer in a credit union sale/leaseback transaction over ten years ago. Mark Zook, CEO of Maps Credit Union, is on the Board of CU Capital Management. Before Guy Messick’s retirement from the law firm Messick Lauer & Smith, Guy worked with Mitchell to design and implement this collaboration with three goals in mind for credit unions: grow capital, obtain superior investment returns, and source solid commercial real estate loans. Guy is now CEO of NACUSO Business Services, Inc. (“NBS”), a wholly owned subsidiary of NACUSO. NBS works with CUCM to communicate the opportunities to credit unions.
Guy Messick said, “NACUSO Business Services choose CU Capital Management as its first NBS Promotion Partner because the benefits of this collaboration are so compelling. The investment and lending opportunities for credit unions are second to none. As for the selling credit unions, the comfort of a credit union knowing that its long-term landlord is a CUSO controlled by credit union colleagues cannot be underestimated. The collaboration provides a business model that keeps the benefits and revenue within the credit union industry.”
CU Capital Management, LLC and CUSO Realty Investors One, LLC were represented by Fox Rothschild LLP and Messick Lauer & Smith P.C.
For more information on CUCM and the CUCM CUSO Network you are invited to visit www.cucapitalmanagement.com. For more information on NACUSO Business Services you are invited to visit www.nacusobiz.com.