Gold in them thar Charter School Properties

by David Safier

Presented without comment, from Bloomberg news [excerpts]

Property Investors Bet on Rising Demand for U.S. Charter School Campuses

Entertainment Properties Trust (EPR) and Inland Public Properties Development Inc. . . . are among companies that are investing in buildings for charter schools as demand for campuses grows. More than 500 of the schools opened last year, bringing the U.S. total to about 5,600, according to the National Alliance for Public Charter Schools, a Washington-based advocacy group. The investors buy or develop properties and get income from renting to companies that operate the schools.

“We don’t find a lot of competition right now, and we like that,” David Brain, chief executive officer of Entertainment Properties, said in an interview. “We’ll be ahead of the curve when other people finally wake up to the idea and come to the party.”

The real estate investment trust, primarily a movie theater landlord, owned 34 charter-school properties as of Sept. 30, accounting for $280.3 million of its $2.9 billion portfolio. Entertainment Properties spent $36.4 million on charter schools last year through the third quarter, the Kansas City, Missouri- based company said in a regulatory filing.

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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 [Note: That's tennis star Andre 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.

[snip]

Even large operators can run into trouble. Last month, the charter for one of Imagine’s schools in St. Louis was revoked and four other schools were placed on probation partly because of poor academic performance. Entertainment Properties is the landlord for those schools’ campuses.

Entertainment Properties has a master lease “that covers all the Imagine properties in our portfolio and ensures payment should a school close,” Brain, the CEO, said in an e-mailed statement. “We have a variety of options with the facility to continue to serve the education market in St. Louis.”

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