the future of charter school facilities funding

Copyright © 2013 Charter School Capital, Inc.

The Future of Charter School

Facilities Funding

Wednesday, March 13 2013 California Charter

Schools Conference San Diego, CA


Welcome.

3 Copyright © 2013 Charter School Capital, Inc.

WELCOME

Charter School Capital •  Stuart Ellis – Founder and CEO •  Jon Dahlberg – VP of Business Development and Facilities

Panelists


FACILITES PROJECT

• Understanding and choosing a funding structure • Balancing facilities dreams and budget realities • Funding Approval - keys areas of focus • Project execution and timing • Other considerations

What We Will Cover Today


Focused on Charter Schools.


WHAT WE DO

Provide charter schools access to funding •  Working and growth capital

– Accelerate attendance-based funding o Receivables Purchase Model o Secured Loan o Secured LOC

•  Facilities financing – Expansion and new development – Relocation and refinancing

•  Resource development – Matching clients with grant, entitlement and philanthropic funds


WHO WE ARE

100% Dedicated to charter schools •  Specialty finance company serving only charter schools •  Headquartered in Portland, OR •  Began funding charter schools in California in 2007 •  Over $500M of funding provided to date •  Team of 30 professionals dedicated to delivering timely and flexible solutions •  Relationships with over 300 charter schools serving 250,000 students •  Stellar track record with schools and investors


WHERE WE ARE

412,000 983

135,000 524

40,000 147

188,000 280

179,000 520

122,000 259

126,000 360

103,000 164

CSC

Students Schools

82,000 179

64,000 184

56,000 104

45,000 109

49,000 48

45,000 81

43,000 99

41,000 235

32,000 53

31,000 72

26,000 80

26,000 63

23,000 116`

21,000 41

19,000 47

19,000 43

17,000 84

17,000 33

18,000 50

11,000 31

10,000 22

9,000 31

10,000 40 7,000

20

4,000 18

6,000 17

1,000 11

360 4

300 6

328 4

6,000 27

5,000 16

? ?


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


Facilities Funding Structures.


PERCEPTION vs. REALITY

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

What to Consider in a Financing Structure


WANT vs. NEED vs. BUDGET

Your Project

•  Existing reserves

•  Ongoing % of revenue

•  Fundraising – public / private

•  Funding alternatives

•  Academic mission

•  Growth plan for attendance

•  Specialty requirements

•  Local considerations

What can we afford? What is required?


FUNDING COMPARISON

Security

Growth Options

Underwriting

Annual cost

Cash needed

Criteria BANK Bond Traditional Bank

LT Lease / Option Cash


Criteria

FUNDING COMPARISON

Cash needed to close (e.g. $7M Project)

Annual Cost (e.g. $7M project)

Cash

$7M

BANK Bond

~$200 – 500K $0 –100K $2.1-2.8M

$0 $600K – 800K $630K – 700K $350K – 700K

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.


FUNDING COMPARISON

Security Interest None Real estate + all assets None Real estate

+ all assets

School Growth Options cash = build

Refinance (rate risk?)

Covenants?

Scalable / expandable

Refinance (rate risk?)

Underwriting / Credit Worthiness None

Min 3 yrs

Surplus

Rating?

No minimum Academic success Flexible

Min 5 yrs Surplus Assets + Revenue

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 Cash Bond Traditional Bank

LT Lease / Option


FUNDING COMPARISON

Security

Growth Options

Underwriting

Annual cost

Cash needed

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


LT Lease / Option


ASSIGNMENT: YOUR COLORS

Security

Growth Options

Underwriting

Annual cost

Cash needed

Color map for your school will be unique!


LT Lease / Option


Funding Approval and Execution.


PASSING THE TEST

Funding Structure Requirements Attendance •  Stable or increasing enrollment •  Strong demand – waiting list, expanding grades, market growth

School / Leadership History •  Experienced leadership team with successfully history •  Market leading academic performance(local peers, district, state)

Numbers have to “pencil” •  Sound financial performance and pro forma •  Debt service / lease payment target <20% of total revenue •  Valuation of target property(land)

Intangibles •  Compelling or differentiated story


DREAMS INTO REALITY

•  Design needs •  Space needs/programing •  Value engineering •  Schedule/timeline management •  Project management focused on cost containment

Success requires unique expertise


PROJECT EXECTION - BUILD

Execution requires significant time

Plan Construct Design Acquire

  Space   Features   Budget   Timeline   Charter

issues

  Select firm(s)   Design/build

options   GC input   Timing; big

bang or phased

  Locate Site   Acquisition   Permitting   Land prep

  Move dirt   Raise the

roof   Control:

Project manager or owners rep

Fund

  Cash   Bank   Bond   LT Lease /

Option


PROJECT EXECTION - BUILD

Building is almost the easy part


Final Guaranteed Maximum Price

School Opens (15-18 mo.)

School Opens (9-12 mo.)

EXECUTION / DELIVERY

23

Design and Trade bid > Construction overlaps

Des

ign

/ B

uild

D

esig

n / B

id /

B

uild

Design > Bid > Construction sequential – longest method

Con

tract

C

ontra

ct

Rel

ocat

e /

Ren

ovat

e

Relocate

Con

tract

Improvements

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

Non build options


OTHER CONSIDERATIONS

Choose a strong Partner •  Full-Service resource

– Selecting the right funding partner / structure o  Bond o  Loan o  Lease

– Commercial developer – Architect – General Contractor – Design/build

•  Flexible / Adaptive to your unique project •  Guarantor / Sponsor / Investor •  Provide access to working / growth capital •  Calculate total cost of ownership (now and later)


Questions


Stuart Ellis: [email protected] Jon Dahlberg: [email protected] 877.272.1001 charterschoolcapital.org


Thank You Presentation available at: SlideShare.net/CharterSchoolCapital