CW Development Partners

As Told by Bill Utnehmer to the Counselor's of Real Estate Montreal, Canada

Let me tell a little about how this project began. When my daughter was about a year old, my wife overheard some mothers deriding some school that disapproved of watching TV, encouraged recycling, growing your own vegetable garden, eating locally grown foods, packing home-prepared lunches using no pre-packaged foods, avoiding junk food, etc. My wife politely asked them the name of this "ridiculous" school and we discovered the Rudolf Steiner Waldorf education. As a developer committed to environmental sustainability (and a wife who's kind of a hippy), this pedagogy was naturally appealing.

About two years ago we moved from San Francisco to Los Angeles and enrolled in the Santa Monica Waldorf School. It was discovered that I was a real estate lawyer and developer and was therefore nominated to chair their real estate committee. Momentarily flattered, I discovered that the school's lease was expiring at the end of the year and I was now saddled with the responsibility of finding a replacement site.

Finding space suitable and affordable for a school dedicated to serving a diverse socio-economic student population in the booming real estate market of west LA was daunting… make that totally unrealistic. My wife then reminds me we can simply move to Northridge near that Waldorf School… now there's some selfish motivation to find a site in west LA.

Having learned a trick, I flattered another parent (who was an architect) with nomination to this so called real estate committee and commissioned him to analyze how little space with which we could make do. Although we currently only needed approximately 8,000 square feet, we hoped we could satisfactorily occupy much less. As is the nature of architects, he comes back with an analysis that approximately 17,000-square feet on about 1.5 acres of land would be ideal. Classic.

By chance, a vacant, dilapidated motel building on a large property was brought to my attention and I researched the ownership records. The property was part of a 14-acre site owned by the Self Realization Fellowship, a worldwide nonprofit organization dedicated to the world’s religions established 90 years ago by Parmahansa Yogananda (about the same time Rudolf Steiner was establishing the Waldorf education in Stuttgart, Germany).

After reading a little about Yogananda (who introduced yoga to the western world), I recognized that the SRF and Waldorf shared a philosophy focused on critical thought, social harmony and ecological reverence. I contacted their real estate department and basically begged for an immediate meeting insisting that our organizations ironically share some philosophies whose goals could be mutually served by allowing our school on their property. Pretty much against his will, because he was a very polite member of the Fellowship, he courteously agreed to meet and by the end of that same afternoon of discussing education, philosophy, politics (and a little real estate) we shook hands on a well subsidized, below-market long-term ground lease. I didn't even know the square footage of the building yet, so he pulled out the blueprints. We've been talking about a 17,000 square foot building on 1.5 acres.

I went to the Board of Trustees with this miracle and they explained all the rational reasons why the school couldn't possibly afford to undertake a $2 million redevelopment project: non-affluent parent body, non-existent school credit rating, deteriorating enrollment, blah, blah, blah. I thought: compared to finding this miracle site, financing it will be a piece of cake!

I had a strong opinion there was an opportunity for a very feasible financial investment platform for its financing: prime location (on Sunset Boulevard with a view of the Pacific Ocean), highly affluent demographic (Pacific Palisades, Malibu, Brentwood, Santa Monica), Steiner's highly desirable pedagogy (notwithstanding those two birds that unwittingly introduced him to my wife), the shortage of quality schools (this is California) and, of course, a well-subsidized, below market lease.

With environmentalism finally gaining mainstream momentum, especially in west LA, I believed there would be tremendous demand for Steiner's ecologically minded education.

As many of you probably already know, when private schools contemplate a capital improvement project such as this, they conduct a capital campaign where all families are asked to make capital contributions of $5,000 to $25,000. Well here, I thought, for the sake of expediency, rather than asking for an outright donation, we could ask for a loan if we can demonstrate that tuition income from a stabilized enrollment can pay the debt service. You can't get away from the expectation to write that kind of check, but at least here you have a chance of getting your money back.

Another Board member who was a builder was hired to do the work and prepared an itemized construction budget and schedule for the renovation. I prepared land and improvement valuations, a comprehensive analysis of the school’s business model and cash flow projections, historical and future, competing private school market information, equity and financing structure and description of “green design” elements and developer sponsorship. With this information, I crafted an Investment Offering Memorandum for parents to provide the equity in the form of loans to the school and to provide credit enhancements to the bank that would make the construction loan. After one year of stabilized operation, the loans could be refinanced with conventional permanent financing. This Offering Memorandum professionally outlined a financially viable conventional underwriting. At 76 percent of enrollment capacity, the school would generate more than $700,000 in cash flow — a healthy 2.7 debt coverage ratio.

Naturally, the parent lenders and any construction lender would not be thrilled with the business inexperience of the school management/faculty to manage the financial aspects of this loan so I was appointed General Manager of the school's financial affairs. Naturally, the management/faculty was not thrilled with the pedagogical inexperience of myself; such a position carried too much individual power and therefor essentially manages, and perhaps compromises, the faculty and pedagogy as well. So I spent time with the faculty and management and reached agreement that I would be General Manager only in the event of a defined formulaic loan or lease default.

So we signed the lease. We convinced the landlord to waive the expensive deposit and bonding requirements. We convinced a plan checker at the City to temporarily re-characterize our property as "office" and grant us an over the counter tenant improvement permit. We began our $2 million construction project with about $200,000 in bank. About thirty days later, we received a $300,000 bank line of credit. About another ninety days later, we received about $300,000 in parent loans. About another ninety days later we received a $1.3 million short-term bridge loan from Rudolf Steiner Foundation from their socially responsible investment fund.

Shortly thereafter, through another fortuitous personal relationship, Zions Bank courteously agreed to visit the school, review the project and provide us strategic advice on how to obtain permanent financing. Zions would not place this type loan since it was too small and outside their lending parameters, but they were gracious to contribute their expertise to our cause. The lead underwriter from Zions Bank and Jeffrey Graham, the Director of the School, were introduced and touring the school when they slowly realized they had been next-door neighbors and best friends over forty years earlier as children growing up in New York. It was an absolutely unbelievable tearjerker moment. I walked out of that meeting knowing our deal would be done. In October 2006, we retired the debt through tax-exempt bond financing from the state of California’s Infrastructure and Economic Development Bank, underwritten by Zions First National Bank, secured by a letter of credit from California Bank & Trust and personally guaranteed by ten parents.

On January 8, 2007, we opened at our new campus.

Voila.


	How The Westside Waldorf Campus Came To Be As Told by Bill Utnehmer to the Counselor's of Real Estate Montreal, Canada Let me tell a little about how this project began. When my daughter was about a year old, my wife overheard some mothers deriding some school that disapproved of watching TV, encouraged recycling, growing your own vegetable garden, eating locally grown foods, packing home-prepared lunches using no pre-packaged foods, avoiding junk food, etc. My wife politely asked them the name of this "ridiculous" school and we discovered the Rudolf Steiner Waldorf education. As a developer committed to environmental sustainability (and a wife who's kind of a hippy), this pedagogy was naturally appealing. About two years ago we moved from San Francisco to Los Angeles and enrolled in the Santa Monica Waldorf School. It was discovered that I was a real estate lawyer and developer and was therefore nominated to chair their real estate committee. Momentarily flattered, I discovered that the school's lease was expiring at the end of the year and I was now saddled with the responsibility of finding a replacement site. Finding space suitable and affordable for a school dedicated to serving a diverse socio-economic student population in the booming real estate market of west LA was daunting… make that totally unrealistic. My wife then reminds me we can simply move to Northridge near that Waldorf School… now there's some selfish motivation to find a site in west LA. Having learned a trick, I flattered another parent (who was an architect) with nomination to this so called real estate committee and commissioned him to analyze how little space with which we could make do. Although we currently only needed approximately 8,000 square feet, we hoped we could satisfactorily occupy much less. As is the nature of architects, he comes back with an analysis that approximately 17,000-square feet on about 1.5 acres of land would be ideal. Classic. By chance, a vacant, dilapidated motel building on a large property was brought to my attention and I researched the ownership records. The property was part of a 14-acre site owned by the Self Realization Fellowship, a worldwide nonprofit organization dedicated to the world’s religions established 90 years ago by Parmahansa Yogananda (about the same time Rudolf Steiner was establishing the Waldorf education in Stuttgart, Germany). After reading a little about Yogananda (who introduced yoga to the western world), I recognized that the SRF and Waldorf shared a philosophy focused on critical thought, social harmony and ecological reverence. I contacted their real estate department and basically begged for an immediate meeting insisting that our organizations ironically share some philosophies whose goals could be mutually served by allowing our school on their property. Pretty much against his will, because he was a very polite member of the Fellowship, he courteously agreed to meet and by the end of that same afternoon of discussing education, philosophy, politics (and a little real estate) we shook hands on a well subsidized, below-market long-term ground lease. I didn't even know the square footage of the building yet, so he pulled out the blueprints. We've been talking about a 17,000 square foot building on 1.5 acres. I went to the Board of Trustees with this miracle and they explained all the rational reasons why the school couldn't possibly afford to undertake a $2 million redevelopment project: non-affluent parent body, non-existent school credit rating, deteriorating enrollment, blah, blah, blah. I thought: compared to finding this miracle site, financing it will be a piece of cake! I had a strong opinion there was an opportunity for a very feasible financial investment platform for its financing: prime location (on Sunset Boulevard with a view of the Pacific Ocean), highly affluent demographic (Pacific Palisades, Malibu, Brentwood, Santa Monica), Steiner's highly desirable pedagogy (notwithstanding those two birds that unwittingly introduced him to my wife), the shortage of quality schools (this is California) and, of course, a well-subsidized, below market lease. With environmentalism finally gaining mainstream momentum, especially in west LA, I believed there would be tremendous demand for Steiner's ecologically minded education. As many of you probably already know, when private schools contemplate a capital improvement project such as this, they conduct a capital campaign where all families are asked to make capital contributions of $5,000 to $25,000. Well here, I thought, for the sake of expediency, rather than asking for an outright donation, we could ask for a loan if we can demonstrate that tuition income from a stabilized enrollment can pay the debt service. You can't get away from the expectation to write that kind of check, but at least here you have a chance of getting your money back. Another Board member who was a builder was hired to do the work and prepared an itemized construction budget and schedule for the renovation. I prepared land and improvement valuations, a comprehensive analysis of the school’s business model and cash flow projections, historical and future, competing private school market information, equity and financing structure and description of “green design” elements and developer sponsorship. With this information, I crafted an Investment Offering Memorandum for parents to provide the equity in the form of loans to the school and to provide credit enhancements to the bank that would make the construction loan. After one year of stabilized operation, the loans could be refinanced with conventional permanent financing. This Offering Memorandum professionally outlined a financially viable conventional underwriting. At 76 percent of enrollment capacity, the school would generate more than $700,000 in cash flow — a healthy 2.7 debt coverage ratio. Naturally, the parent lenders and any construction lender would not be thrilled with the business inexperience of the school management/faculty to manage the financial aspects of this loan so I was appointed General Manager of the school's financial affairs. Naturally, the management/faculty was not thrilled with the pedagogical inexperience of myself; such a position carried too much individual power and therefor essentially manages, and perhaps compromises, the faculty and pedagogy as well. So I spent time with the faculty and management and reached agreement that I would be General Manager only in the event of a defined formulaic loan or lease default. So we signed the lease. We convinced the landlord to waive the expensive deposit and bonding requirements. We convinced a plan checker at the City to temporarily re-characterize our property as "office" and grant us an over the counter tenant improvement permit. We began our $2 million construction project with about $200,000 in bank. About thirty days later, we received a $300,000 bank line of credit. About another ninety days later, we received about $300,000 in parent loans. About another ninety days later we received a $1.3 million short-term bridge loan from Rudolf Steiner Foundation from their socially responsible investment fund. Shortly thereafter, through another fortuitous personal relationship, Zions Bank courteously agreed to visit the school, review the project and provide us strategic advice on how to obtain permanent financing. Zions would not place this type loan since it was too small and outside their lending parameters, but they were gracious to contribute their expertise to our cause. The lead underwriter from Zions Bank and Jeffrey Graham, the Director of the School, were introduced and touring the school when they slowly realized they had been next-door neighbors and best friends over forty years earlier as children growing up in New York. It was an absolutely unbelievable tearjerker moment. I walked out of that meeting knowing our deal would be done. In October 2006, we retired the debt through tax-exempt bond financing from the state of California’s Infrastructure and Economic Development Bank, underwritten by Zions First National Bank, secured by a letter of credit from California Bank & Trust and personally guaranteed by ten parents. On January 8, 2007, we opened at our new campus. Voila.

How The Westside Waldorf Campus Came To Be

As Told by Bill Utnehmer to the Counselor's of Real Estate Montreal, Canada