One of Largest Childcare Portfolios Sold Intact
The portfolio was purchased by an institutional investor for $57 million and was encumbered by CMBS debt, but selling it intact circumvented defeasance penalties that would have been triggered by carving up.
SAN FRANCISCO—Due to lack of sizable quality childcare portfolios available to the public when compared to quick-service restaurants and other types of triple-net tenants, a portfolio recently generated abundant interest and was sold intact. One disposition bucked that trend.
San Francisco-based Stan Johnson Company completed the sale of a Gateway Academy portfolio. The portfolio consisted of 21 single-tenant net lease childcare assets being operated by one of the largest for-profit childcare organizations in North America. The properties were located in Colorado, North Carolina and South Carolina.
Stan Johnson Company’s team of Milo Spector, Chris Lomuto and Matt Lipson represented the seller, who not only was a developer of the real estate, but a co-founder of Gateway Academy before its operations were sold. The portfolio was purchased by a Texas-based institutional investor last month for $57 million, making it one of the largest childcare portfolio transactions to close in recent years. It was encumbered by CMBS debt and had to be sold intact due to significant defeasance penalties that would have been triggered by carving up the package into smaller pieces.
“It really limits your buyer pool when a portfolio can’t be sold individually. We needed a buyer that could not only purchase a deal of this size but could meet the strict criteria necessary to complete a CMBS debt assumption,” said Milo Spector, associate director. “I’m proud to say we were able to generate multiple offers and ultimately find the right buyer that was able to close on the deal.”
“Without question, the challenge on this deal was the assumption of the securitized debt,” said Chris Lomuto, associate director. “It’s a complex process that takes a real commitment from both the buyer’s and seller’s teams. Add to that some opportunities that the buyer was able to uncover that were accretive to their investment strategy and you have a recipe for a relatively complex transaction that may not have even been possible if it weren’t for the continued efforts of the entire deal team. It was really a case study for both debt assumption and teamwork.”
Stan Johnson Company provides acquisition, disposition, capital markets and advisory services for US institutions, developers, investment funds and private investors. The company has completed more than $30 billion in transactions nationwide.
“This portfolio demonstrates the still very high demand in the net-lease market for quality assets,” Spector tells GlobeSt.com. “Despite the size and complexity of this transaction, we had multiple interested parties from all across the country looking at this deal. I believe part of the reason we got so much interest is the lack of quality childcare portfolios of this size available to the public compared to quick-service restaurants and other types of triple-net tenants.”