the future of charter school facilities funding

Copyright © 2012 Charter School Capital

THE FUTURE OF CHARTER

SCHOOL FACILITIES

FUNDING

2012 FL CHARTER SCHOOL CONFERENCE

NOVEMBER 13 ORLANDO, FL


WHO WE ARE

2

Dedicated to charter schools

•  Specialty finance company serving only charter schools •  Began funding charter schools in California in 2007 •  Over $400M of funding provided to date •  Relationships with over 300 charter schools serving

250,000 students •  Expanding nationally


WHAT WE DO

3

Provide charter schools access to funding

•  Working and growth capital o  Accelerate attendance-based funding

•  Facilities financing o  Expansion and new development

•  Resource development o  Matching clients with grant, entitlement and philanthropic

funds


WHAT CLIENTS SAY

4

A partner to charter schools

•  Deep operational experience •  Commitment to the charter school movement •  Reliable, flexible and cost-effective funding solutions •  Significant industry and investor relationships •  Stellar track record with schools and investors


WHAT CLIENTS SAY

5

“Charter School Capital is a trustworthy and reliable financing resource. They are a true friend and ally to charter schools, our

movement and the children we serve.”

- Caprice Young

VP for Education, The Arnold Foundation (Founding CEO, California Charter School Association)


AGENDA

6

What We Will Cover Today

•  Balancing facilities dreams and budget realities •  Funding options •  Project execution •  Other considerations


PERCEPTION VS REALITY

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What to Consider

•  Ownership is an investment •  Control is critical to maintain stability •  Evaluate dollars spent not percentage rates •  Cost is not just money, but time and opportunity


BUDGET VS NEED

8

Your Project

•  Existing reserves

•  Ongoing % of revenue

•  Fundraising – public or private

•  Funding alternatives

•  Academic mission

•  Growth plan

•  Specialty requirements

•  Local considerations

What can we afford? What is required?


PASSING THE TEST

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Securing a Funding Structure

•  Supporting Economics •  Clear need

o  Waiting list o  Market statistics

•  Compelling story o  Academic Success o  History / mission


CRITERIA

10

Security

CASH TRADITIONAL BANK BOND LT LEASE/

OPTION

Growth Options

FUNDING COMPARISON

Underwriting

Annual cost

Cash needed


FUNDING COMPARISON

CRITERIA

11

Cash needed to close (e.g.

$10M Project)

Annual Cost (e.g. $10M

project)

CASH

$10M

BANK BOND

~$200 – 500K $0 –100K $3-4M

$0 $900K – 1.2M $900K – 1M $500K – 900K

Other Reserves?

6-9%

120% of project $

Rating?

9-10%

No amortization

6% – 8% on the debt

10 – 20yr

amortization

TRADITIONAL BANK

LT LEASE/ OPTION

Scenarios are for illustrative purposes only. Actual pricing and terms will vary based on unique credit worthiness of each school, dynamic market conditions and where applicable state law.


CRITERIA

12

Security Interest

CASH

None

BANK BOND

Real estate + all assets None Real estate

+ all assets

School Growth Options cash = build Refinance

(rate risk?) Scalable /

expandable Refinance (rate risk?)

FUNDING COMPARISON

Underwriting / Credit

Worthiness None

Min 3 yrs

Surplus

Rating?

No minimum

Academic success

Flexible

Min 5 yrs

Surplus

Assets + Revenue

LT LEASE/ OPTION

TRADITIONAL BANK

Scenarios are for illustrative purposes only. Actual pricing and terms will vary based on unique credit worthiness of each school, dynamic market conditions and where applicable state law.


CRITERIA

13

Security

CASH BANK BOND

Growth Options

FUNDING COMPARISON

Underwriting

Annual cost

Cash needed

TRADITIONAL BANK

LT LEASE/ OPTION

Comparison for illustrative purposes only. Rankings are based on how hypothetical “School A” might view its options based on unique attributes and objectives.


CRITERIA

14

Security

CASH BANK BOND

Growth Options

AS UNIQUE AS YOUR SCHOOL

Underwriting

Annual cost

Cash needed

TRADITIONAL BANK

LT LEASE/ OPTION

Each school likely has a different view of how options rank; color maps will likely vary by school.


PROJECT FLOW

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Plan Construct Design Acquire

þ  Space þ  Features þ  Budget þ  Timeline þ  Charter

issues

þ  Select firm(s) þ  Design/build

options þ  GC input þ  Timing; big

bang or phased

þ  Locate Site þ  Acquisition þ  Permitting þ  Land prep

þ  Move dirt þ  Raise the

roof þ  Control:

Project manager or owners rep

Fund

þ  Cash þ  Bank þ  Bond þ  Long Term

Lease


PROJECT EXECUTION (BUILD)

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Convert Facility Dreams to Reality ü  Funding strategy / Structure ü Good solid budget •  Time •  Time •  and more Time

Is commercial real estate

part of your mission?


17

Success requires unique expertise •  Design needs •  Space needs/programing •  Value engineering

•  Schedule/timeline management •  Project manager focused on cost containment

Do you have the human capital and risk tolerance to go this process alone?



18


Building is the easy part, getting ready is hard Construction

Begins


EXECUTION / DELIVERY STRATEGIES

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1) Design/Build •  One contract •  Fast delivery •  Early Guaranteed

Maximum Price (GMP)

2) Design/Bid/Build •  Several Contracts •  Slow delivery •  Costs can be reduced but not

capped

3) Construction Manager (CM) at Risk •  Two contracts •  Medium speed delivery •  Late determination of (GMP)

Hybrids and other options


EXECUTION / DELIVERY STRATEGIES

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Design and Trade bid > Construction overlaps

Final GMP

Des

ign

/ B

uild

D

esig

n / B

id /

B

uild

School Opens (9-12 mo.)

Design > Bid > Construction sequential – longest method

Con

trac

t

School Opens (15-18 mo.)

Con

trac

t

Rel

ocat

e /

Ren

ovat

e

Relocate

Con

trac

t

Improvements (3-5 mo.) (4-6 mo.)

Non build options


OPTIONS

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Additional Considerations

•  Access to working capital •  Selecting a full service partner

o  Commercial developer o  Architect o  GC o  Design/build

•  Total cost of ownership


QUESTIONS? Charter School Capital

Stuart Ellis: [email protected]

Jon Dahlberg: [email protected]

877.272.1001 charterschoolcapital.org

All information in this presentation is provided for educational and/or informational purposes. It is not intended to provide legal, accounting, or tax advice and should not be relied on for any such purpose. Please consult an attorney, accountant, or financial advisor to answer any financial or legal questions.

the future of charter school facilities funding

Education

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funding charter schools

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