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Old 09-14-2020, 05:12 PM
Ronaldo9 Ronaldo9 is offline
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UW DU Offers Bond Sale to Keep House

I'm a University of Washington alumnus of a house other than Delta Upsilon. However, a friend who is a DU tells me this sordid story of their chapter. Has anyone else heard of a fraternity self-financing property through bond sales instead of pursuing a bank loan? (This may be a common practice and I'm just not familiar with it.)

The story is that DU had been at the UW for 100+ years until it was closed by their national in 2018 (https://www.seattletimes.com/seattle...er-for-hazing/).

When it was closed, their house was paid-off but in need of updating. The situation was exacerbated by the last class of actives who apparently used their final 72 hours in the house to inflict significant interior damage in revenge for what they saw as a conspiracy by their national to trump-up charges to lead to their shut down. DU attempted to sue the members for the damage but it was apparently like getting blood from a stone.

Their alumni planned for recolonization in 2021. Even though the house was paid-off they needed money for a complete interior renovation plus property taxes in the interim and ongoing security of the property to prevent squatters.

They arranged to rent the house to a sorority (I won't mention the name) whose own property was going to undergo a one-year renovation. The idea was that this would fund the needed repairs, taxes, etc., plus it would be better for DU to have some one occupying the house instead of it sitting empty. Ultimately, a contract was signed with this sorority. With the onset of the pandemic the sorority broke the contract. A lawsuit was going nowhere due to Force majeure clauses.

The property is appraised at $4 million and they need $1.1 million. They were unable to secure a $1.1 million donation so their current plan is to sell $50,000 bonds to alumni which will be repayable over 20 years with 5.5% interest with the property used as collateral and the repayment coming from housing fees once recolonization occurs. Apparently this will give them more favorable terms than they'd be able to get going to a bank.

Last edited by Ronaldo9; 09-14-2020 at 05:24 PM.
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Old 09-14-2020, 05:50 PM
Titchou Titchou is offline
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Bond financing for Greek housing was a very common thing back in the day...like early 1900s. And bonds were sold only to members of the organization in question. When I was on a task force to look at new ways of funding Greek housing in the 2000s, this was one item we investigated - along with REITs. I remember we had one house that had been a local before we took it over (started in the 1930s) that built their house this thru financing instrument. It's really an excellent idea in some cases.
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Old 09-14-2020, 07:05 PM
Ronaldo9 Ronaldo9 is offline
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Quote:
Originally Posted by Titchou View Post
Bond financing for Greek housing was a very common thing back in the day...like early 1900s. And bonds were sold only to members of the organization in question. When I was on a task force to look at new ways of funding Greek housing in the 2000s, this was one item we investigated - along with REITs. I remember we had one house that had been a local before we took it over (started in the 1930s) that built their house this thru financing instrument. It's really an excellent idea in some cases.
That's interesting, it's the first I'd heard of it. Thanks for this background. (And, honestly, I may have communicated this story incorrectly and it was a REIT and not a bond sale.)
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