Horrors! Colorado bond deal funds purchase of 'The Shining' hotel

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Colorado could become a mecca for horror fans with the help of bond investors. 

A planned bond sale will help fund the purchase and expansion of a historic hotel that inspired Stephen King's book "The Shining" and build an event center with a museum focused on the horror film genre.

Proceeds from an unrated $291.7 million Colorado Educational and Cultural Facilities Authority revenue bond issue targeting only "sophisticated investors" will be used to buy the Stanley Hotel in Estes Park and fund the construction and equipping of a 67,435-square-foot Stanley Event Center estimated to cost nearly $60.8 million.

Multimedia company Blumhouse, the producer of horror films, including "Get Out," will curate the event center's museum and exhibition space. The living room set from that movie and other horror films will be on display, as well as the iconic ax from "The Shining" film. 

There is "a really interesting opportunity" to market the Stanley to horror fans, according to Dean Stambules, chief investment officer at Sage Investments, a subsidiary of Sage Hospitality Group, which will operate and manage the project through a special purpose entity. 

"It obviously has a lot of history with Stephen King and 'The Shining,' but really making it a cultural epicenter for that, I think, is a great opportunity," he said in the bond issue's online investor presentation, pointing to the horror market's strong demographics. 

The bestselling author wrote the book after a 1974 stay at the hotel, which advertises a Stephen King Suite. A 1997 television mini-series based on "The Shining" used the Stanley Hotel, which is situated just outside Rocky Mountain National Park, as a filming location. Timberline Lodge in Oregon stood in for the exterior of the Overlook Hotel in Stanley Kubrick's 1980 movie version, which was mostly filmed in England.

The deal, through sole underwriter RBC Capital Markets, which is also serving as placement agency, is structured with term maturities of 2059 for $210.23 million of Series A-1 senior lien revenue bonds, 2045 for $31.29 million of taxable Series A-2 senior lien revenue bonds, and 2059 for $50.18 million of Series B subordinate lien revenue bonds, according to the preliminary limited offering memorandum. The deal is on next week's negotiated pricing calendar.

An additional $97.3 million of bonds that are not part of the offering will be privately placed. That debt consists of $27.465 million of Series C-1 junior lien bonds, $17.745 million of Series C-2 taxable junior lien bonds, $38 million of Series D-1 subordinate junior lien bonds, and $14.09 million of Series D-2 taxable subordinate junior lien bonds. 

Security for the bonds, which have four tiers of liens, includes a mortgage on the property, as well as hotel and event center net revenue. Incremental state sales tax revenue collected within a regional tourism zone subject to a cap of just under $46.4 million over a 40-year period is dedicated to the Series B bonds. 

The $389 million financing plan, which participants have called "unique," had a rocky history. 

In March 2024, Tucson, Arizona-based nonprofit Community Finance Corp. dropped its plan to purchase the hotel using CECFA as a conduit issuer for up to $475 million of revenue bonds.

The Colorado authority, which was created in 1981 and issues bonds for schools, universities, museums, and other nonprofits, stepped up as a buyer and successfully pursued Colorado legislation allowing it to operate and manage facilities it finances through the issuance of bonds. 

CECFA then created the Stanley Partnership for Art Culture and Education, LLC, or SPACE, as a non-profit subsidiary to serve as the borrower in the bond deal, as well as the project's owner and operator. John Cullen, president of Grand Heritage Hotel Group, the Stanley's current owner, will serve as SPACE's chief executive officer. CECFA Executive Director Mark Heller, who declined an interview request ahead of bond pricing, will be its chief administrative officer.

While the issuance of up to $475 million of bonds won approval from the authority's board in October, pulling a deal together took several months. 

The Colorado Economic Development Commission in February authorized a $1 million grant and will release $1.96 million in incremental state sales tax dedicated revenue upon closing for the Series A and B bonds, according to the PLOM.  

Colorado Educational and Cultural Facilities Authority

The commission's Feb. 11 resolution, included in the PLOM, described a transaction that "stands on a razor's edge of success or failure and requires restructuring and concessions to be successfully executed and sold on the market." It noted that CECFA obtained "substantial" concessions from nearly all the parties in the transaction, including an agreement with Grand Heritage Group to convert its equity ownership interest into Series D bonds.

"Time is of the essence to make this bond transaction happen now as the window to issue these bonds is currently open but may close in short order," said Jeff Kraft, deputy director of the Colorado Office of Economic Development and International Trade, according to the minutes of the meeting.

Spring Mountain Capital, the current preferred equity partner, agreed to take half of its $35 million payment for its stake in the hotel in the form of taxable third-lien Series C bonds, while RBC reduced its underwriting fee by $841,142 and agreed to purchase $25 million in Series B subordinate lien bonds, according to the resolution. Blumhouse will subordinate receipt of its million dollar-plus annual base fee to Series A and B bondholders. The authority and SPACE agreed to subordinate annual fees up to $18 million to bondholders.

The deal comes as the high-yield and unrated municipal bond sector has hit a rough patch with year-to-date total returns on Bloomberg's high-yield index at a negative 1.5% as of Friday. 

The investor presentation for the CECFA issue shows debt service reserve funds totaling $29 million for the Series A and B bonds, $43.8 million in capitalized interest funds, a $4.8 million operating reserve fund, and a $1.15 million deposit account.

"In addition to that, we have various funds that get filled up over time as the construction occurs, given that we are acquiring an existing and operating facility," Michael Persichitte, a director at RBC, said in the presentation. "Some of those funds that get filled up over time include an operating reserve fund that is intended to fill up to $13 million in the first two years and then be maintained at a level which is at a minimum of 90 days cash on hand."

He added that anticipated Series A debt service coverage is about 2.2 times, growing over time to 2.5 times, while coverage for Series B bonds will increase from 1.8 times to 2 times. 

The PLOM lists several risk factors related to construction, operations, and revenue and notes that an Internal Revenue Service private letter ruling was not sought for the Series A and B tax-exempt bonds. Kutak Rock is the deal's bond counsel.

Proceeds will be used to purchase the 196-room hotel that opened in 1909 and is listed on the National Register of Historic Places, a 40-guest-room lodge, and other buildings on a 41.2-acre site. They will also fund a four-story, 65-room hotel expansion, the event center, and a restaurant.

The investor presentation highlighted the hotel's recent relationship with the Sundance Institute, which was founded by actor Robert Redford in 1981, by hosting its directors' lab in 2024 and 2025. In March, the institute announced its film festival will move to Boulder, Colorado, from Park City, Utah, starting in 2027.

Colorado Gov. Jared Polis signed into law a bill on April 8 that makes the festival eligible for up to $34 million in refundable tax credits over a 10-year period.