Corinthian Colleges, Inc.

Daytona, FL
CresaPartners Capital Markets

 

Client Objectives

Corinthian was operating a technical school in a facility that was obsolete and did not have any more space for the school's growing enrollment. CresaPartners located an ideal land parcel on which to build a brand new, state-of-the-art facility that would allow for future growth. However, Corinthian was hesitant to make the move and sell the existing campus due to the tax liability associated with the market's rising property value and the company's extremely low basis for the existing campus. While ideally located with excellent access and visibility, the new campus was not without its difficulties either. In addition to the entire site being located within a hurricane-prone portion of the state, portions of the land for the new campus also lay within flood plains and/or conservation easements, and there were multiple governmental agencies that had permitting and development authority over the site. As with other transactions, it was crucial that Corinthian's auditors and analysts look favorable upon the financings at each property. Specific client objectives included:

  • Dispose of obsolete existing campus
  • Minimize taxable gain from depreciated asset
  • Identify low-cost financing source for construction of new campus
  • Avoid burdening balance sheet with conventional loans or capital leases
  • Maintain operating control of properties
  • Obtain all necessary permits and approvals in the most time- and cost-efficient means possible
  • Control construction decision-making
  • Secure flexible move dates between properties that were dependent upon construction completion

Result

CresaPartners Capital Markets identified a party to purchase the old campus from Corinthian at the company's book basis and structured a lease that allowed Corinthian to continue occupying the old campus until the move to the new campus had been concluded. Simultaneously, a financing partner was located to provide construction financing of the new campus. Corinthian was given decision-making rights for construction in order to ensure the new campus was built to Corinthian's exact requirements. Corinthian also engaged CresaPartners Project Management to oversee construction and coordinate all of the necessary permitting and approval procedures with the various governmental authorities. Upon construction completion and lease commencement, the financing partner provided a rent concession to Corinthian equal to the difference in the book and market value of the old campus. The CresaPartners team successfully delivered the new campus under budget and on time for Corinthian to move prior to the start of classes, thereby minimizing disruption to the company's business. Both the lease at the old campus and the new campus were successfully structured as operating leases and were approved by Corinthian's auditors.