North by Hotel Covington has secured a mortgage with First Financial Bank in an effort to bring its investment structure more in line with conventional funding models.
Officially, the City of Covington owns the building, although the property has changed hands several times throughout the past five years, and the city takes no part in its operation. It formerly housed the Gateway Technical and Community College bookstore and a branch of the YMCA.
The hotel’s operator, 614 Madison YMCA, LLC, a subsidiary of the Salyers Group, deeded the property to the city so that the city could pursue financing its rehabilitation through the use of industrial revenue bonds, or IRBs, which are common municipal debt instruments. The city then agreed to lease the property to the company during the term of the debt. The company would take ownership of the property once the IRBs were completely paid back.
The city was able to secure about $25 million in IRBs during the pandemic when conventional financing wasn’t available. Following approval during a special vote at the Covington City Commission meeting on Tuesday, the city has consented to allowing the company to take out a mortgage of $19.8 million with the building as collateral. The measure passed unanimously and did not appear on the meeting’s agenda.
The move re-prioritizes the debt payments from the city’s bonds to the mortgage, bringing the debt structure more in line with other developments in the city. If the company defaults, the building would be sold to pay back the mortgage and the bond payments.