By Erin Hudson, Bloomberg
A private school in Hillsborough is borrowing $26 million in muni bonds to modernize the historic mansion that stands as the picturesque centerpiece of the campus.
The Crystal Springs Uplands School about 20 miles south of San Francisco charges $66,450 a year and serves almost 570 students. It plans to use proceeds from the sale to help pay for the nearly $50 million makeover of the opulent mansion its called home for almost 70 years.
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A rush of private schools opted to borrow in the muni market last year after the 2023 bank crisis claimed the niche sector’s most devoted lenders, altering their well-trod path for tapping capital markets.
Crystal, a non-for-profit independent school, plans to borrow through the California Enterprise Development Authority in a sale expected on Sept. 30. The debt carries an A rating from S&P Global Ratings and will supplement fundraising for the project.
The deal is likely to be met with solid demand, particularly from investors with a mandate to invest most of their portfolio in California, according to Jeffery Timlin, managing partner and lead portfolio manager for Sage Advisory Services’ municipal strategies.
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“It’s just a unique deal in terms of its rarity of the name coming to market, which I think in munis typically that bodes well,” Timlin said. “This is going to provide diversification.”
Known as the Uplands Mansion, the palatial home was built in 1917 for the grandson for railroad magnate Charles Crocker. Designed by renowned local architect Willis Polk, its interior is outfitted with handmade marble fixtures from a 16th century Italian castle.
Crystal — originally founded as a girls’ school — acquired the mansion in 1956 to become its first permanent location, according to bond documents. The school became co-ed in 1977. It has since built a number of facilities, including a gymnasium, theater and artificial turf field, on the 10-acre plot surrounding the mansion. The school also expanded its footprint to include a second campus for its middle school.
The mansion is now the focal point of its upper school campus housing many of its classrooms, offices, a library and meeting spaces. The planned renovation includes adding a modernized robotics workshop, physics lab and elevator to the structure, as well as structural improvements like a new HVAC system to withstand extreme heat.
“Classes were being taught in rooms that were formerly bedrooms, and we had offices in rooms that were clearly formerly bathrooms, including multiple spaces where bathtubs were still in the person’s office,” Talbott said. “So it was still very much a house.”
The mansion project accounts for the biggest use of funds from Crystal’s ongoing $50 million capital campaign. The school will have the option of repaying $18 million of the bonds in 2030 with fundraising receipts. Otherwise, the bonds mature in 2040, according to bond documents. After the sale, Crystal will have $53 million in debt, Talbott said.
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S&P cited the school’s track record of strong donor support and student demand, which is based on admitting about 20% of applicants and 85% of its graduating class going to a top 50-ranked college.
Previously, Crystal turned to private bank financing to borrow funds to construct its second location in Belmont.
“We have a loan with First Citizens Bank, formerly Silicon Valley Bank, on our middle school campus here,” said Talbott. “As we started looking at our financing needs for the project at our upper school on the mansion, we explored essentially another loan with First Citizens as well as a debt offering.”
This time borrowing from a different pool of lenders was a priority for Crystal after seeing SVB collapse during the 2023 bank crisis. “That did give pause, not just to us, but I imagine to many independent schools just because the market changed,” Talbott said. “Having different options made a lot of sense then and still makes sense to my mind.”
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