In the past few months, stakeholders behind the complicated deal for Colorado to purchase Estes Park’s historic Stanley Hotel of “The Shining” movie fame realized the sale was on the brink of falling apart.

It required all the parties involved to agree to major concessions and ax off some borrowing costs.

And for one of the last steps, the stakeholders had to ask the Colorado Economic Development Commission on Tuesday morning for millions more in funding to help secure the deal, shedding light on the complicated maneuvers investors are taking to secure the final pieces of financing.

Colorado is seeking to buy the Stanley Hotel through the Colorado Education and Cultural Facilities Authority (CECFA), the state issuer of tax-exempt bonds for cultural projects.

The public entity approved $475 million in bonds last year to buy the hotel.

CECFA would own the property, not the state of Colorado, if the deal closes under a new subsidiary company. Though the hotel’s current owner described the deal as a “gift” to the state.

The stakeholders asked the EDC on Tuesday for an extra $2.5 million in grant money and already existing Regional Tourism Act funds to help lure other investors who wanted more financial security.

The bond transaction was on a “razor’s edge of success or failure” after recent financial analysis and required restructuring, according to the EDC resolution about the funding.

“Without these actions, my best judgment is that this transaction likely may not occur,” said Jeff Kraft, the deputy director of Business Funding and Incentives for Colorado’s Office of Economic Development and International Trade, in a special session Tuesday morning.

The EDC approved $1 million in grant money for CECFA on the condition the hotel deal closes.

It also approved $1.5 million in existing Regional Tourism Act funds from the Aurora Urban Renewal Authority, with the potential for $4 million to be unlocked during construction on the hotel and the Stanley Film Center.

And due to the challenges and to make room for future delays, the timeline to upgrade the hotel and finish building the Stanley Film Center was extended to Dec. 31, 2028.

On the advice of the bond underwriter, the Royal Bank of Canada, CECFA Executive Director Mark Heller said they have to make changes to their pro-forma (a financial analysis of future projections) to make the transaction more appealing to other bond investors.

“We are very close to closing on this financing and beginning construction … part of that is adding cash to the deal,” Heller said.

Decade of investments to create a horror f

ilm destination

It’s been an arduous process for state leaders to invest into the Stanley Hotel — the inspiration of Stephen King’s book “The Shining” that was later adapted into a horror film classic by famed director Stanley Kubrick featuring Jack Nicholson — in hopes of attracting more visitors to Colorado.

In 2015, the EDC awarded funding through the Regional Tourism Act to the Stanley Hotel and a coalition of three other projects in northern Colorado that have since dropped out.

The hotel project is qualified for up to $46 million in state sales tax increment financing over 30 years, according to the EDC.

The plan is to build a 60,000-square foot Stanley Film Center to attract cinephiles and filmmakers to Estes Park with a horror museum, amphitheater and events venue. There’s also plans to add more hotel rooms and renovate the main guest lobby.

The hope is for more tourists to beget more tax revenues.

In a separate bid, state leaders are seeking to attract the Sundance Film Festival to Colorado, noting the hotel was used for the Sundance Institute’s 2024 Directors Lab when its usual home in Utah was under construction.

After EDC members verbally detailed the last 10 years of the hotel’s developments, the property’s current owner John Cullen laughed and quipped the plot could be turned into a horror film titled “My last decade in Colorado.”

“The market is tough,” Cullen later said in a more serious tone. Cullen is the president and CEO of Grand Heritage Hotel Group, which will stay on as developers after the sale.

Jon Moellenberg, a managing director at RBC Capital Markets, said the investment firm BlackRock came back with stress tests and wanted more financial security in case the plans to attract visitors dramatically underperformed projections before agreeing to help finance the sale of the Stanley Hotel.

“Blackrock spoke, and we reacted. And their conditions of the deal have improved the likelihood of success,” Cullen said. “But it’s coming out of everybody’s pockets.”

Here’s a breakdown of the concessions:

Grand Heritage Group agreed to convert their equity ownership interest into $52 million into fourth lien junior bonds, that are only paid from residual project revenues each year. They also will subordinate their $5 million development fee.

For construction, Grand Heritage Group, Saunders and Space agreed to reduce construction contracts by $3 million.

Spring Mountain Capital, an equity partner, will take half of their $35 million payment into taxable bonds, though the company preferred the tax-free bonds. It also agreed to buy $5 million more in bonds and will drop about $5 million in fees related to the hotel’s current debt.

RBC reduced their fee by more than $840,000 and agreed to take a rare step to purchase $25 million in series B subordinate lien bonds.

Horror film production company Blumhouse Productions will subordinate its $1 million annual base fee to Series A and B bondholders. CECFA and SPACE will also subordinate up to $18 million in annual fees to bondholders.

“These are all really significant concessions,” Moellenberg said.

Bond underwriters typically don’t purchase unrated finance bonds they underwrite due to carrying costs and interest rate risks.

“RBC’s concession is very unique,” Moellenberg said. “I’ve never seen RBC agree to purchase $25 million of subordinate lien, nonrated bonds subject to construction.”

He said all the concessions, in addition to the EDC-approved funds, will be essential to closing the sale of the Stanley Hotel.

The EDC grant will be considered 100% cash, OEDIT’s Kraft said, to reduce the need for bond proceeds.

Stakeholders also emphasized that the sale is on a time crunch, which is why the EDC met for a special session instead of their monthly meeting on the third Thursday of the month.

“Time is of the essence to make this bond transaction happen,” Kraft said. “Now, the window to issue these bonds is currently open but may close.”