the future of charter school facilities funding
TRANSCRIPT
Copyright © 2012 Charter School Capital
THE FUTURE OF CHARTER
SCHOOL FACILITIES
FUNDING
2012 FL CHARTER SCHOOL CONFERENCE
NOVEMBER 13 ORLANDO, FL
Copyright © 2012 Charter School Capital
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
Copyright © 2012 Charter School Capital
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
Copyright © 2012 Charter School Capital
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
Copyright © 2012 Charter School Capital
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)
Copyright © 2012 Charter School Capital
AGENDA
6
What We Will Cover Today
• Balancing facilities dreams and budget realities • Funding options • Project execution • Other considerations
Copyright © 2012 Charter School Capital
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
Copyright © 2012 Charter School Capital
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?
Copyright © 2012 Charter School Capital
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
Copyright © 2012 Charter School Capital
CRITERIA
10
Security
CASH TRADITIONAL BANK BOND LT LEASE/
OPTION
Growth Options
FUNDING COMPARISON
Underwriting
Annual cost
Cash needed
Copyright © 2012 Charter School Capital
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.
Copyright © 2012 Charter School Capital
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.
Copyright © 2012 Charter School Capital
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.
Copyright © 2012 Charter School Capital
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.
Copyright © 2012 Charter School Capital
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
Copyright © 2012 Charter School Capital
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?
Copyright © 2012 Charter School Capital
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?
PROJECT EXECUTION (BUILD)
Copyright © 2012 Charter School Capital
18
PROJECT EXECUTION (BUILD)
Building is the easy part, getting ready is hard Construction
Begins
Copyright © 2012 Charter School Capital
EXECUTION / DELIVERY STRATEGIES
19
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
Copyright © 2012 Charter School Capital
EXECUTION / DELIVERY STRATEGIES
20
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
Copyright © 2012 Charter School Capital
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
Copyright © 2012 Charter School Capital
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.