Thar’s gold in them thar Charter School buildings

by David Safier

Have you wondered why hedge funds and other big money investors have partnered with corporation-based philanthropies to throw money and publicity behind charter schools and other education privatization ideas? Best answer: profits.

Here's one of the ways it works in the world of charter schools. Private money builds a charter school, then rents it to the charter.

So long as the school doesn't fold, the investor has a guaranteed revenue stream — the government. It's much more stable than renting to a business which could fold if it doesn't make a profit.

Even better, since the school isn't in a position to bargain with the building owner over price — you can't just move a school to another strip mall across town with a better rental rate like you can with a business — the building owner can charge high rent for the property. If the builders are smart and go with well established charter school operators — the national folks with a string of schools — chances are, the rent money, and the profits, will just keep rolling in.

Entertainment Properties, which specializes in megaplex movie houses and entertainment retail centers, was one of the first companies to stake a claim to this government-subsidized gold mine. It partnered with the national charter school chain, Imagine Schools, buying buildings from Imagine, then leasing them back.

David Brain, chief executive of Entertainment Properties, said,

"We're not speculators, we're investors, so I have to invest in property making money for me and my customers today," said Brain, whose trust oversees a $2.6 billion portfolio. "The charter public schools offer lenders/leaseholders a dependable revenue stream backed by a government payer. It's a very desirable equation."

And in other article:

“We are excited to add to our public charter school portfolio and enthusiastic about the prospects of Imagine and this investment category,” Entertainment Properties Trust CEO David Brain said in a release.

I need to draw a distinction here. For private investors to find a profitable niche in charter schools is not unreasonable. For them to pretend to promote charters as educational miracles when the investors' hidden purpose is to create a new money stream is both deceptive and despicable.

All this will put yesterday's LA Times article in perspective: Former tennis star Andre Agassi teams with L.A. bankers to finance charter school construction.

Former tennis star Andre Agassi has joined with Los Angeles bankers to create an unusual for-profit investment fund for construction of as much as $750 million worth of charter schools in urban communities across the country.

[snip]

"We expect to attract investors who realize that making money and making societal change don't have to be mutually exclusive," [investment banker Bobby] Turner said.

When hedge funds and investment bankers get involved, forget about any notion of noble purposes. Follow the money.