Real Estate Investors Find Market in Charter Schools

Sarah Gonzalez / StateImpact Florida

The Academy of Arts and Minds in Coconut Grove used to be a shopping mall. But no one was buying space, so the owner of the property founded a charter school and now rents his property to his school. The campus still looks like a shopping mall. There are wrap-around balconies on every floor and the classrooms have floor-to-ceiling windows very much like a store front.

Real estate investment firms have spied a new market in charter schools and are snatching up properties anticipating growth, according to Bloomberg.

Among the industry leaders is a fund founded by former tennis star and charter school advocate Andre Agassi. Perhaps the most interesting nugget from the piece is this: Leasing charter schools property is more lucrative than commercial property:

For Entertainment Properties, the charter-school investment yield is 9 percent to 10 percent, according to Keith Bokota, an analyst at Principal Global Investors. That compares with November’s 7 percent average capitalization rate for commercial- property deals of more than $5 million, according to Real Capital Analytics Inc., a New York-based property research company.

The Canyon-Agassi Charter School’s Facilities Fund appeals to investors seeking a good return on their money while doing something positive for education, said Glenn Pierce, its chief executive officer. Investors in the Los Angeles-based fund — which lists Citigroup Inc., Intel Corp. (INTC), the Ewing Marion Kauffman Foundation and the University of Michigan among its backers — can expect yields in the “low teens after fees,” he said.

Land and property are typically one of the highest costs for charter schools, which are funded with public money but run by a private board.

As charter schools grow more popular — and more public money is spent on their operations — more scrutiny is focusing on the schools’ business deals, particularly for real estate.

A Miami charter school founder came under fire for leasing property he owned to the school.

A Miami Herald investigation documented the tangled business ties between charter boards and management companies that are often for-profit. One management company, Academica, collected almost $19 million in lease payments from schools they operate.

And Frank Biden, brother of the vice president, admitted to the Miami New Times that “We remain sustainable as a result of our accurate and predictable location and our buildings.”

Biden works for Mavericks in Education, which charges $350,000 a year in rent no matter how much the building cost.

What do you think? Is there more profiteering in real estate for charter schools than for district schools?