On GPAC and the Community Foundation


When I worked at Merrill Lynch, I started selling loans, lines of credit and mortgages.

Had a client with about $300,000 who wanted to cash in to buy a house.

Was making about 1% on the money, and if he took it out I wouldn't.

1% of $300,000 is $3,000 per year.

I was taught, and it was in my best interests, to pitch my client a mortgage instead of liquidating the account, plus I made another $1,500 or so on the loan sale.

I have told this story in my financial ethics classes for years.
From what I understand, the Community Foundation intends to bring in $30 million and use a line of credit from an unknown bank to pay for GPAC construction etc...

1% of $30 million is about $300,000 per year, which means if the Community Foundation keeps the money to manage in risk assets while using a credit line for GPAC construction and borrows for 25 years;

About $300,000 x 25 years = $7,500,000 to the CFGG if the assets don't change in value, if they are charging 1%.

Don't know if there is a compensation agreement on the line of credit.

If the line of credit is based upon the securities as collateral, and the collateral falls in value, the bank could/should/will make a margin call, meaning the CFGG would have to put up other monies to pledge to the bank.

Where would the money for a collateral call come from?

So to say "guarantee" for the GPAC money may be a bit less than truthful, if how I think the deal is being structured is correct.

Why not just pay for it?

One reason the Community Foundation might not want to is what could be about $7,500,000.

No comments: