Affinity FCU Sells Its N.J. Headquarters to CUSO

Michigan State University Federal Credit Union originated a $25.9 million loan last month that helped a CUSO buy a New Jersey credit union’s headquarters building in a $51.7 million leaseback deal.

Michigan State University FCU of East Lansing, Mich. ($6.9 billion, 336,117 members) closed the 10-year loan Dec. 13. Other credit unions bought loan participation interests.

Affinity Federal Credit Union ($4.2 billion, 222,677 members) had owned and occupied the 126,000-square-foot building since 2008 in Basking Ridge, N.J., about 25 miles west of Newark. It will lease back the property for 20 years with an option to extend.

The proceeds will allow Affinity to expand its branch locations, according to a news release Jan. 10 from Affinity and the other participants.

“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,” Affinity President/CEO Kevin Bauer said. Bauer became CEO Jan. 1.

The transaction was arranged by CU Capital Management (CUCM), a Los Angeles-based CUSO that manages a network of credit unions and real estate holdings. CUCM is co-owned by Maps Credit Union of Salem, Ore. ($1.3 billion, 74,436 members) and Mark Zook, president/CEO of Maps, who is on CUCM’s board.

The actual purchaser was CCM Properties Two, LLC, a CUSO within CU Capital Management’s network. CCM Properties Two is wholly-owned by CUSO Realty Investors One, a Los Angeles CUSO that is co-owned by 23 credit unions. The transaction was financed with a combination of the loan and equity from the CUSO owners.

In February 2022, CUSO Realty Investors One paid $59 million to buy the Pasadena, Calif., headquarters of Wescom Central Credit Union, Pasadena, Calif. ($5.7 billion, 215,276 members) using $29 million in equity and a $30 million loan. CU Capital Management arranged the sale and 15-year leaseback.

Mitchell Amsler, CEO of CU Capital Management, said he expects the success of the Affinity and Wescom deals will encourage more credit unions to participate as sellers, investors or lenders.

“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,” Amsler said.

Guy Messick, CEO of NACUSO Business Services, a marketing partner of CU Capital Management, said the deals show the power of credit union collaboration.

“We had an idea that, through collaboration, we could keep the players and benefits in these sale/leaseback transactions within the credit union community,” Messick said.

Chris Pippett of Fox Rothschild LLP served as legal counsel to CU Capital Management and CUSO Realty Investors One 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 on the transaction.

Michigan State FCU ranked 51st among credit unions in its production of commercial loans backed by real estate in the first nine months of 2022. It produced $161.4 million in commercial real estate loans from January through September, up nearly seven fold from $23.5 million in the first nine months of 2021.

Total credit union production rose 41% to $36.7 billion.