facilities financing for north carolina charter schools
DESCRIPTION
Charter school facilities financing options presented at the 2013 North Carolina Alliance for Charter Schools Conference.TRANSCRIPT
Copyright © 2013 Charter School Capital, Inc.
Capital Financing
Options
NC Alliance for Charter Schools
Conference
March 22, 2013
Copyright © 2013 Charter School Capital, Inc.
Welcome.
3Copyright © 2013 Charter School Capital, Inc.
WELCOME
Charter School Capital• Stuart Ellis – Founder and CEO• Jon Dahlberg – VP of Business Development and Facilities
Panelists
4Copyright © 2013 Charter School Capital, Inc.
FACILITES PROJECT
• Understanding and choosing a funding structure• Balancing facilities dreams and budget realities• Funding Approval - keys areas of focus • Project execution and timing• Other considerations
What We Will Cover Today
Copyright © 2013 Charter School Capital, Inc.
Focused on Charter Schools.
6Copyright © 2013 Charter School Capital, Inc.
WHAT WE DO
Provide charter schools access to funding
• Working and growth capital– Accelerate attendance-based funding
oReceivables Purchase ModeloSecured LoanoSecured LOC
• Facilities financing– Expansion and new development– Relocation and refinancing
• Resource development– Matching clients with grant, entitlement and philanthropic funds
7Copyright © 2013 Charter School Capital, Inc.
WHO WE ARE
100% Dedicated to charter schools
• Specialty finance company serving only charter schools• Headquartered in Portland, OR• Began funding charter schools in California in 2007• Over $500M of funding provided to date• Team of 25 professionals dedicated to delivering timely and flexible solutions • Relationships with over 300 charter schools serving 250,000 students• Stellar track record with schools and investors
8Copyright © 2013 Charter School Capital, Inc.
WHERE WE ARE
412,000983
135,000524
40,000147
188,000280
179,000 520
122,000259
126,000360
103,000164
CSC
StudentsSchools
82,000179
64,000184
56,000104
45,000109
49,00048
45,00081
43,00099
41,000235
32,00053
31,00072
26,00080
26,00063
23,000116`
21,00041
19,00047
19,00043
17,00084
17,00033
18,00050
11,00031
10,00022
9,00031
10,000407,000
20
4,00018
6,00017
1,00011
3604
3006
3284
6,00027
5,00016
??
9Copyright © 2013 Charter School Capital, Inc.
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
Copyright © 2013 Charter School Capital, Inc.
Facilities Funding Structures.
11Copyright © 2013 Charter School Capital, Inc.
PERCEPTION vs. REALITY
• Ownership is an investment• Control is critical to maintain stability or growth• Evaluate dollars spent not percentage rates• Cost is not just money, but time and opportunity
What to Consider in a Financing Structure
12Copyright © 2013 Charter School Capital, Inc.
WANT vs. NEED vs. BUDGET
Your Project
• Existing reserves
• Ongoing % of revenue
• Fundraising – public / private
• Funding alternatives
• Academic mission
• Growth plan for attendance
• Specialty requirements
• Local considerations
What can we afford? What is required?
13Copyright © 2013 Charter School Capital, Inc.
FUNDING COMPARISON
Security
Growth Options
Underwriting
Annual cost
Cash needed
Criteria BANK BondTraditional
BankLT Lease /
OptionCash
14Copyright © 2013 Charter School Capital, Inc.
Criteria
FUNDING COMPARISON
Cash needed to close (e.g. $7M Project)
Annual Cost (e.g. $7M project)
Cash
$7M
BANK Bond
~$200 – 500K $0 –100K$2.1-2.8M
$0 $600K – 800K $630K – 700K$350K – 700K
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.
15Copyright © 2013 Charter School Capital, Inc.
FUNDING COMPARISON
Security Interest NoneReal estate + all assets
NoneReal estate+ all assets
School Growth Options
cash = buildRefinance(rate risk?)Covenants?
Scalable / expandable
Refinance(rate risk?)
Underwriting / Credit Worthiness
None
Min 3 yrs
Surplus
Rating?
No minimum
Academic success
Flexible
Min 5 yrs
Surplus
Assets + Revenue
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.
Criteria Cash BondTraditional
BankLT Lease /
Option
16Copyright © 2013 Charter School Capital, Inc.
FUNDING COMPARISON
Security
Growth Options
Underwriting
Annual cost
Cash needed
Comparison for illustrative purposes only. Rankings are based on how hypothetical “School A” might view its options based on unique attributes and objectives.
Criteria Cash BondTraditional
BankLT Lease /
Option
17Copyright © 2013 Charter School Capital, Inc.
ASSIGNMENT: YOUR COLORS
Security
Growth Options
Underwriting
Annual cost
Cash needed
Color map for your school will be unique!
Criteria Cash BondTraditional
BankLT Lease /
Option
Copyright © 2013 Charter School Capital, Inc.
Funding Approval and Execution.
19Copyright © 2013 Charter School Capital, Inc.
PASSING THE TEST
Funding Structure Requirements
Attendance• Stable or increasing enrollment• Strong demand – waiting list, expanding grades, market growth
School / Leadership History• Experienced leadership team with successfully history• Market leading academic performance(local peers, district, state)
Numbers have to “pencil”• Sound financial performance and pro forma• Debt service / lease payment target <20% of total revenue• Valuation of target property(land)
Intangibles• Compelling or differentiated story
20Copyright © 2013 Charter School Capital, Inc.
DREAMS INTO REALITY
• Design needs• Space needs/programing• Value engineering• Schedule/timeline management• Project management focused on cost containment
Success requires unique expertise
21Copyright © 2013 Charter School Capital, Inc.
PROJECT EXECTION - BUILD
Execution requires significant time
Plan Construct Design Acquire
Space Features Budget Timeline Charter
issues
Select firm(s) Design/build
options GC input Timing; big
bang or phased
Locate Site Acquisition Permitting Land prep
Move dirt Raise the
roof Control:
Project manager or owners rep
Fund
Cash Bank Bond LT Lease /
Option
22Copyright © 2013 Charter School Capital, Inc.
PROJECT EXECTION - BUILD
Building is almost the easy part
23Copyright © 2013 Charter School Capital, Inc.
Final Guaranteed Maximum Price
School Opens(15-18 mo.)
School Opens(9-12 mo.)
EXECUTION / DELIVERY
23
Design and Trade bid > Construction overlaps
Des
ign
/ B
uild
Des
ign
/ Bid
/ B
uild
Design > Bid > Construction sequential – longest method
Con
trac
tC
ontr
act
Rel
ocat
e /
Ren
ovat
e
Relocate
Con
trac
t
Improvements
(3-5 mo.) (4-6 mo.)
Non build options
24Copyright © 2013 Charter School Capital, Inc.
OTHER CONSIDERATIONS
Choose a strong Partner
• Full-Service resource– Selecting the right funding partner / structure
o Bondo Loano Lease
– Commercial developer– Architect– General Contractor– Design/build
• Flexible / Adaptive to your unique project• Guarantor / Sponsor / Investor• Provide access to working / growth capital• Calculate total cost of ownership (now and later)
25Copyright © 2013 Charter School Capital, Inc.
Questions
26Copyright © 2013 Charter School Capital, Inc.
Stuart Ellis: [email protected]
Jon Dahlberg: [email protected]
877.272.1001 charterschoolcapital.org
27Copyright © 2013 Charter School Capital, Inc.
Thank You
Presentation available at:
SlideShare.net/CharterSchoolCapital