But he’ll have to bring back the Castaneda Hotel, once part of the historic Harvey House chain and which first opened for business in 1898, without financial support he sought from the New Mexico Finance Authority.
The Finance Authority has rejected multiple applications by Affeldt for a federal tax credit loan program aimed at supporting commercial, industrial and retail real estate projects in low-income, economically distressed areas.
“It’s extremely frustrating, so I am going to have to go outside New Mexico to raise the tax credits for this iconic New Mexico project,” said Affeldt, a native Californian known for his impressive restoration of another classic Harvey House hotel, La Posada, located off Interstate 40, old Route 66 and the Amtrak railroad tracks in Winslow, Ariz.
Las Vegas Mayor Tonita Gurule-Giron is also frustrated, saying she “can’t imagine the state has a project that’s more worthy” and, if so, she wants to know what it is.
Affeldt’s large ambitions in Las Vegas apparently ran up against program perimeters in his applications for as much as $7.5 million in financing from the Finance Authority.
He also has acquired the classic Plaza Hotel in the center of Las Vegas, another historic, but still fully functioning, gem that dates from 1882. He combined financing for both remodeling the Plaza and rebooting the Castaneda in his applications to the Finance Authority.
Affeldt said the threshold for projects eligible for New Markets Tax Credits is $5 million. “The Castaneda by itself is below the threshold, but that’s why, from day one, when we were negotiating with them to buy the Plaza,” he said. “It was clear we had to combine the two projects. That was the only way to make it work.”
But folding in the Plaza, while meeting the threshold for project size, diluted the prospects for new economic activity from Affeldt’s plans, said Marquita Russel, chief of programs for the Finance Authority.
“His applications were joint Castaneda and Plaza Hotel, where the majority of the funds would be spent on the refinance of the Plaza Hotel and that didn’t have a lot of new economic impact,” she said.
“The Plaza part is the one that really created the complications,” she said.
Russel said Affeldt’s first application met the minimum number of points for consideration and was ranked second of three proposals. But there was no money for second place under a prioritized system in what state officials agree is a complex process in which criteria and personnel on screening committees can change.
“After doing all this work, they gave us less credits on the (subsequent) applications, and they have never explained how we could possibly do all this work and get all this support, and a project that was worth investing in before isn’t worth investing in anymore,” Affeldt said.
The complex program requires a lot of legal oversight and understanding of the financing involved, said the Finance Authority’s Russel.
“I think what happens with some of these applications is that, the more we see them, the more we understand the intricacies of the project,” she said. “We assumed certain things were happening and then, as we drilled down with further applications, we found out our initial assumptions were not correct.”
“I think the economic impacts were somewhat diluted by the project (the Plaza) that was complete,” she added.
Russel said Affeldt’s Las Vegas location for his projects did qualify as “severely distressed” economically.
“There is some subjectivity” in considering applications, she acknowledged. Two committees review applications before they go to the full board. “We have had instances where the project is qualified and has high readiness, but the timing of the project financing or structure needed to make it work has not been able to pass the investor’s criteria or federal guidelines,” Russel said.
Still, “somebody on this committee didn’t want this project,” Affeldt maintains.
But he is moving on after putting about $2 million of his money into the Castaneda. “I don’t want to rag on the finance department because this is not what this is about,” said Affeldt. “I am making progress in spite of them, not because of them, which is part of the problem. They are supposed to be helping these projects, not tying them up. … I can’t explain it.”
Affeldt has qualified for another state-approved tax credit, for historic preservation, that will probably amount to about $400,000.
Las Vegas Mayor Gurule-Giron said, in a voicemail response to questions, that “the Castaneda is not just a historical landmark for Las Vegas, N.M., but the entire Southwest … being situated on the Amtrak line, it has the potential to attract visitors to our community from as far away as Los Angeles.”
The hotel is the “potential anchor for the reinvigoration of our town’s historic Railroad Avenue business district,” Gurule-Giron said.
Part of the story is that the Finance Authority signed off on the sale of the Plaza Hotel to Affeldt. The Finance Authority had an interest because it provided financing for a prior renovation of the Plaza, but that project didn’t work out. The current unpaid balance on the earlier loan is $859,522, Russel said.
The hotel was in foreclosure when Affeldt bought it. Minutes for a Finance Authority board meeting in June 2014 say the board and Valley National Bank, also a participant in the previous financing, agreed to the sale of the Plaza for $3 million.
Russel, asked if the prior project’s history had any effect on consideration of Affeldt’s project, said in an email: “The reviewers evaluate the applications using the criteria contained in the Economic Impact Policies established for the program.”
Affeldt said the Castaneda already is boosting local business on Railroad Avenue.
“Moonlite Welding is now about to be restored and the Rawlins Building is actively being restored … and two other buildings in this block have been purchased for restoration because of this project,” he said.
He also said things have been happening around the Las Vegas Plaza, for which Affeldt’s Plaza Hotel is the anchor. “There are six new businesses around the Plaza because of the Plaza Hotel so, for them (the Finance Authority) to say it is not going to have any impact is stupid,” he said.
‘Totally out of pocket’
Affeldt, raised in Orange County south of Los Angeles, started in real estate and underwriting trust deeds at age 15 and has long had an altruistic streak. In 1987, at age 28, he helped organize a peace march to Moscow as president of International Peace Walk Inc. and staged the first rock concert in Russia, and later got involved in world hunger issues.
Now, he’s rebuilding the Mission Revival-style Castaneda to its former grandeur room by room, board by board. During a recent visit, contractors were pounding hammers in the north wing as he gave instructions to workers trimming dead trees.
Inside the old 25,000-square-foot hotel, he explained that all the permitting and design planning has been approved since his 2014 purchase. “It’s more complicated than new construction because you have to keep this historical feel and have it all be functional,” he said.
All the bathrooms were down the hall when the hotel was designed in the 1800s. Modern bathrooms will now be added to the 20 to 25 reconfigured rooms from the original 40. “These are going to be big, glorious bathrooms,” Affeldt said, as he stepped over construction equipment and chatted with Burt and Kesha Bazan of KB Construction.
“It doesn’t get any better than this, this is what the town needed,” said Burt Bazan. “It’s giving us work and we like doing historical restoration.”
“I am doing this totally out of pocket,” Affeldt said. “This isn’t a business, it’s just me spending money. Every dime we spend goes into the local economy.”