ann arbor learning community property & facilities assessment summary findings december, 2001...

Ann Arbor Learning Community Property & Facilities Assessment

Summary Findings

December, 2001

• Viola Cheung• Anthony DiNello• Graham Goodrich• Chantel McEldowney• Russ Owen

C O M M U N I T Y C O N S U L T I N G C L U B

R e a l P r o j e c t s , R e a l S e r v i c e

C O M M U N I T Y C O N S U L T I N G C L U B

R e a l P r o j e c t s , R e a l S e r v i c e

Prepared By:

Contents

Review of Project Objectives…………….. 03

Parent Surveys………………..………….. 06

Private & Charter School Comparables….. 19

Lease and Buy Considerations…………… 22

Comparative Financial Analysis…………. 27

Conclusions & Next Steps…….…………. 34

Current Lease Situation The current facility creates several challenges for AALC management and staff

School facility is crowded with current enrollment size

Does not have the capacity to achieve optimal enrollment size of 300-350 students needed to achieve financial flexibility (save student grant money) and to meet the target student enrollment stated in the Charter

Location does not offer several desirable utilities (e.g. kitchen, playground, gymnasium, library, etc.) needed to optimize the learning environment

Current landlord places many unreasonable limitations on AALC

AALC’s current lease is through Dec. 2004 and has paid a non-refundable capital contribution of $60,000 out total payable of $80,000

Project ObjectivesProject Objectives

AALC Property & Facilities Assessment

1) Understand parents’ perceptions and opinions on the caliber of AALC’s facilities in the context of the learning environment

2) Identify AALC staff and parents top priorities for change

3) Benchmark other schools approaches to managing growth and increasing demands on facilities

4) Evaluate the feasibility and expense associated with alternative lease, buy and build options

5) Determine the best possible course of action and identify next steps

Project ObjectivesProject Objectives

Project Objectives:

Contents







Objectives of Parent SurveyOver 50 parents participated in the survey

1) Gauge parents’ satisfaction with the current state of AALC facilities and operations

2) Evaluate need perceptions for a variety of possible changes and/or additions so as to anticipate reaction

3) Develop a prioritized set of issues and goals to enhance the learning environment of AALC

Parent SurveysParent Surveys

Environment, Location & MaintenanceThe vast majority of parents were satisfied with the safety, sanitations, and efficacy of the learning environment

How satisfied are you with the learning environment currently provided by AALC?

Very SatisfiedSomewhat SatisfiedNeutralSomewhat Dissatisfied

Does the location of AALC cause you any concern for your child’s safety?

YesNo

How would you rate the school’s facilities in regards to sanitation and general upkeep?

GoodAverageBelow Average

• The location of AALC on Packard does not cause much concern for parents

• Over 80% of parents are happy with school and classroom maintenance

Very Dissatisfied

• 86% of parents are satisfied with the current learning environment

Excellent


47%36%

17%0%

40%46%

8%4%

2%

19%81%

Curriculum and Class SizeParents express comfort in current class size and express feelings of uniqueness in the curriculum

How satisfied are you with the curriculum currently offered by AALC?

Very SatisfiedSomewhat SatisfiedNeutralSomewhat Dissatisfied

How unique do you consider the curriculum currently offered by AALC to be?

Very UniqueSomewhat Unique

How effective do you feel the learning environment is given the current class size of 17 students?

Somewhat EffectiveNeutralSomewhat Ineffective

• Over 90% of parents consider the curriculum at AALC to hold some uniqueness

• Parents are happy with the class size (17 students per) and its contribution to the learning environment

Very Dissatisfied

• The current curriculum at AALC satisfies over 81% of parents

Very Effective

Not Unique at all

Very Ineffective


32%49%

13%6%

0%

27%65%

8%

58%35%

6%0%0%

Transportation, Lunch and Playground Equip. All three were viewed as positive additions, with playground equipment as an overwhelming favorite

If AALC were to provide daily transportation services, how often would your child use them?

• More than 50% of the parents would utilize transportation services regularly

5 times per week3-4 times per week1-2 times per weekNever

How would the addition of a gymnasium and/or other common playground equipment affect you child’s learning experience?

Greatly ImproveSomewhat ImproveNot AffectSomewhat Diminish

• Over half of the children would use a hot-lunch service at least 1-2 times per week

• The addition of physical equipment for exercise would greatly enhance the students’ learning experiences

If a low-cost hot lunch service were provided, how often would your child utilize this option?

5 times per week3-4 times per week1-2 times per weekNever

Greatly Diminish


38%48%

15%0%

13%25%

46%17%

46%13%17%

24%

0%

Class Optimization Parents value small class sizes and are sensitive to the prospect of increasing average class size

According to parents, optimal class size is:

– Less than 15……27%

– 15 to 17………...56%

– 18 to 20………...15%

– More than 20……2%

85% of parents feel that increasing class size by 3 students would reduce the effectiveness of their children’s education

Optimal Class Size

27%56%

15%

2%

Less than 15 15-17

18-20 More than 20


AALC Facilities & AmenitiesLack of adequate playground facilities cause the most concern for parents

Points of attention

– Playground

– Lunch Services

– Public Transportation

– Before/After School Day Care

Chart illustrates importance placed on various school additions (out of possible 5)

– Playground equipment overwhelming favorite

2.3 2.48

3.82

2.97

Transp

ortat

ion S

ervice

s

Lunch

Serv

ices

Playgr

ound

Equ

ipmen

t

Before/

After S

choo

l Day

Care

.

Average Importance Rating(5 = highest)


Prioritization and Tradeoffs When forced to choose between options, parents expressed interest in playground and lunch service enhancements

Trans 51% Lunch 49%

Gym 49% Plgd 51%

Trans 30% Plgd 70%

Day-Care 40% Lunch 60%

Gymnasium vs. Playground Facilities

Transportation vs. Lunch Services

Transportation vs. Playground Facilities

Day-Care Programs vs. Lunch Services

Transportation Services vs. Day-Care Trans 43% Day-Care 57%

• Parents were given five different choices between two independent options

• Results are illustrated as follows:


• Playground equipment and Gymnasium consistently chosen above other options

• Parents appear to value day-care program as their next best option

Survey Conclusions

Parents are generally satisfied with the school’s maintenance and upkeep, and general safety

Parents expressed interest in the addition of all of the following:

– Transportation & lunch services, playground and/or gym facilities, library, day-care program

When forced to choose, the majority favorite were the playground and gym facilities

Current facilities limit the ability of AALC’s management to address parents’ concerns and desires for change

Contents







Comparable School Characteristics

Eleven private and charter schools were interviewed to understand their current operations, facilities and management characteristics

School ComparablesSchool Comparables

The average enrollment for a school sized K-8 is 300 students

The average school has been in existence for 4.5 years

The student to teacher ratio is 18-22 students per teacher

The common amenities found in over 50% of the 11 schools contacted were playground, gymnasium, and library

10 of 11 schools have a playground

General Characteristics

0

2

4

6

8

10

School Facility Characteristics

Comparable School Characteristics

School ComparablesSchool Comparables

Over 50% of the schools contacted were associated with an Education Management Organization

4 of the 5 schools that owned their facilities were associated with an EMO

Ownership- 5 owned their facilities- 4 leased- 2 were unknown

Funding - 3 were funded with grants

- 3 were funded with loans- 2 were funded by EMO’s- 3 were unknown

Funding and Management Characteristics

Contents







Alternative Lease OpportunityTwo independent commercial real estate agents were engaged to identify all possible properties (min 25K sq.ft.) available for lease in the Ann Arbor and western Ypsilanti region

Lease ConsiderationsLease Considerations

The number of available properties for lease, capable of housing a school, is extremely limited

Lessor typically should budget $10-$15 per sq.ft. expense to renovate building to create a suitable school environment*

Office space is more plentiful; however, more expensive ($15-$20 per sq.ft. vs. $12-$15)*

Swisher Commercial recently worked with another charter school for 6 months, but could not find a suitable property

Most promising lease opportunity: 2333 South State Street – 50,400 total square feet on 4.12 acres of land with abundant parking and easy access to I-94 & US-23* (see next page for details)

Lease Findings

2333 South St. Offers Best Near-Term Opportunity

Lease ConsiderationsLease Considerations

Two-story building; 25K sq.ft. per floor

4.12 acres

Plenty of parking

Fully air-conditioned

Fully sprinkled building

Build to suit possible

Good location - easy access to I-94 & US-23.

Also opportunity to to buy at $2,000,000 (low Scio Township taxes but Ann Arbor address)

Details

Buy Opportunity

Buy ConsiderationsBuy Considerations

Similar to the lease market, properties available for purchase in the Ann Arbor and western Ypsilanti area are extremely scarce

AALC’s budget would be in the $1.5 - $3.0 million range due to fund restrictions associated with grants

Purchase would likely require two mortgages (primary and secondary for renovations requirements)

Near-term buying opportunity is only realistic if AALC leverage EMO capital and management resources

Most promising buy opportunity: 6200 Jackson Road – Class A office space 20,000 square feet on 8.7 acres of land

Purchase Findings

6200 Jackson Road Is Best Near-Term Buy Option

Buy ConsiderationsBuy Considerations

20K sq.ft. on 8.7 acres of land

Quiet location

Abundance of green space around the building

Cafeteria

Convenient I-94 access

Room for building expansion

New security system

Details

Would require renovation investment of office space to classroom environment

Contents







Three Scenarios Were Considered

Financial AnalysisFinancial Analysis

Option 1: Analyzed the optimization of the current lease situation (10 year NPV analysis)

Option 2: Analyzed a lease for a much larger facility - a little more than twice as big as the current facility (10 year NPV analysis)

Option 3: Analyzed mortgage for much larger facility - also a little more than twice as big as the current facility (10 year NPV analysis)

Financial Analysis

Option #1: Optimize Current Lease Situation

Option #2: Lease a larger facility (25K sq.ft.)

Option #3: Mortgage Larger Facility

Results of AnalysisBuying a larger facility (option 3) represents the best long-term solution for AALC

Financial AnalysisFinancial Analysis

Option #3 (future mortgage) achieves the highest NPV at a little over $1.30 million and requiring capital of about $1.35 million

Option #2 (future lease) and it achieves a positive NPV at $0.18 million and requires capital of about $1.41 million

Option #1 (current lease) but achieves a negative NPV at -$0.22 million and requires capital of about $0.341 million over an extended period (losses over several years)

-$400,000

-$200,000

$0

$200,000

$400,000

$600,000

$800,000

$1,000,000

$1,200,000

$1,400,000

$1,600,000

Option :Current Lease

Option 2:New Lease

Option 3:Mortgage

NPV

Capital Required

Contents







Conclusions & Recommendations

AALC’s mission, goals and service cannot be fully realized in the current facility In addition, the constraint on enrollment imposed by the current facility limits the

school’s funding from the State

Move out of current facility ASAP

Develop plan to purchase a facility in order to capture long-term financial benefits and achieve AALC’s growth and development goals From financial analysis, owning offers much greater benefit for same capital

requirement as leasing, and enables school to achieve growth objectives Complete control of facility will give administration and staff flexibility needed to

optimize the learning environment

Engage “flexible” EMO to access capital without compromising curriculum

EMOs allow AALC to immediately own premises without incurring high upfront capital investment

While parents expressed reservation towards partnering with an EMO, some of these organizations such as Helicon Associates offer flexible service arrangements and do NOT interfere into curriculum (see appendix)

A flexible EMO will allow provide management and administrative expertise and allow AALC to focus on curriculum, enrollment and teaching

Next Steps

Within next 2 months

1) Build consensus for option 3 or 2 among key stakeholders

2) Conduct risk assessment for the option chosen (e.g. legal and financial ramifications of breaking current lease)

3) Evaluate appropriate financing options, given strategic direction

4) Communicate decision to parents and build support and enthusiasm for new venture

Appendix

Education Management CompaniesWhile it is easy to make generalizations about EMOs, the opinions and experience of different schools interviewed varies considerably

Advantages

1) EMOs provide expertise in management and administrative support functions

2) EMOs become accountable for keeping the school out of financial trouble

3) Provide immediate access to capital for purchasing/renovating school facilities

4) Allow educators the time and flexibility to do what they do best - TEACH

Disadvantages

1) Some require the school to give up control of all employment, and business functions and responsibilities

2) Most exert influence and/or total control of curriculum

3) Many EMOs control deed and facilities expansion / renovation decisions

4) Many schools lose “uniqueness” in favor of cookie cutter approach

Helicon AssociatesProfile of a flexible EMO

Helicon does not dictate any curriculum requirements

Helicon gives their clients the ability to choose only the services that they need including:

-Accounts Payable/Receivable

-Fiscal Reporting/Compliance

-Grant Writing

-Budget Development/Management

-Board Meeting Development/Direction

-Student Data Processing

-Consultation on all educational issues

Helicon found financing for 5 new school buildings this year with the requirement of a 1% payment (Each individual school holds the deed to their building)

ann arbor learning community property & facilities assessment summary findings december, 2001...

Documents

location of aalc

aalc aalcs current lease

parents perceptions

aalc staff

current facility

current enrollment size

aalc management

current class size