Investment groups take advantage of growing demand for charter schools
1/19/2012 | Real Estate Blog
A small number of investment groups are taking advantage of the high demand but low competition in the area of charter school development. One such group, a joint venture of Canyon Capital Realty Advisors LLC and former tennis champion Andre Agassi, has taken on projects in Philadelphia and Milwaukee, and is currently considering similar projects in other cities, including New York and Houston.
According to the National Alliance for Public Charter Schools, a Washington-based advocacy group, over 500 charter schools opened last year, making for a total of roughly 5,600 such schools nationwide. According to sources, there are other investors taking on these projects, but not many.
Companies engaging in these projects may be few now, but it is expected that more will be coming into the market in the near future. According to a spokesman from Entertainment Properties Trust, charter schools will eventually become a substantial portion of the market and there is currently a huge ability to grow.
So how many children are looking to get into charter schools? According to the National Alliance, over 400,000 children nationwide are on waiting lists, and that number is increasing as parents continue looking for alternatives to public schools. Roughly 2 million students were already enrolled in charter schools in the 2011-2012 school year.
Charter schools do not charge tuition, but receive funding from city, state and federal tax dollars. They operate under a charter granted by state or local authorities.
Companies taking on these projects do take on a certain amount of risk. As owners of the properties, they primarily gain income from long-term lease agreements with operating companies. Schools, however, may be shut down for a number of reasons, such as poor student achievement, low enrollment or financial troubles.
It will be interesting to see how these types of projects succeed going forward.
Source: Bloomberg, “Property Investors Bet on Rising Demand for U.S. Charter Schools,” January 10, 2012.