That explains it. Thanks! I think it makes sense.

It's overcollateralized, but that's okay because you actually want to continue holding the asset to realize appreciation.

To your point about avoiding capital gains tax, at some point you would have to repay the full loan, at which point you'd have to pay capital gains tax anyway. I guess, at best, you could always guarantee that you pay the lower long-term capital gains tax rate rather than the higher short-term capital gains tax rate. What's the repayment schedule?