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Andre Agassi, Bobby Turner |
A partnership between Canyon Capital Realty Advisors and Andre Agassi Ventures has rolled out the Canyon-Agassi Charter School Facilities Fund, a fund that aims to build charter schools in urban neighborhoods nationwide. Bobby Turner, ceo of Canyon Capital Realty Advisors, told REFI that charter schools suffer from a supply-demand imbalance. "In Los Angeles alone, there are 35,000 kids on the wait list for charter schools," he said.
The fund anticipates opening its first charter school later this year in North Philadelphia. It includes Citigroup as an investor.
How did you first get interested in charter schools?
I've been involved in charter schools for more than six years. I've been an active board member of Pacific Charter School Development (PCSD) and have worked to address the biggest impediment of charter school growth the lack of space. Before my involvement with PCSD, I wasn't aware of how poorly we are providing education for underserved children in at-risk markets. We are the fourth or fifth leading spender per student [globally], but we test below 30% for performance. In Los Angeles alone, there are 35,000 kids on the wait list for charter schools. For all of these reasons, we need to look at alternatives to public education. Charter schools are a meaningful component to the solution.
How did Andre Agassi get involved?
In Las Vegas, Andre built a K-12 public charter school. He educates 650 students per year, and all students in his first two classes graduated and were accepted to colleges. After reading his book, the folks at Creative Artists Agency helped me reach out to Andre and we talked about our joint passion for education, and the opportunity to do for charter schools what the Canyon-Johnson Urban Funds did for urban housing and retail.
What are the goals of the fund?
This fund is designed to offer traditional investors a return on projects that promote positive societal change and environmental responsibility. It's a double bottom line. We are proud to have the backing of a group of institutional investors, including Citigroup, Intel Capital and the Kaufman Foundation. Our goal is to create 40,000 new seats in the next three to four years.
The charter school industry is growing at 15% per year, which is slow given that there are more than 50 million potential students, and only 1.7 million kids enrolled in charter schools. In order to make this a real success, Andre and I wanted to bring in a charter school expert, and there was no better candidate than Glenn Pierce, who was the president and CEO of PCSD. Glenn is a black belt in regards to developing, financing and designing charter schools. In his career he has helped with over 60 schools.
What do you think is the biggest challenge?
The biggest impediment for charter schools is access to quality facilities. And the marketplace has a huge mismatch between environmentally- and education-friendly learning facilities. The vast majority of our development will be adaptive re-use. Obsolete industrial buildings and former Wal-Mart, K-mart and Best Buy stores are great places to develop charter schools. They are approximately 40,000-square-foot, single-story boxes, which is what we are looking for.
A typical charter school is about 500 students. Additionally, we have to expect that there will be 500 parents in the morning and afternoon, plus we have to accommodate faculty, teachers and administrators.
Can you take us through a transaction from start to finish?
We will focus development where there is a shortage of quality public schools, areas where there is favorable charter school legislation, markets with strong student reimbursement rates and a supply of affordable land or land for adaptive re-use. We also look for a density and diversity of population, successful and proven operators and we are sensitive to sustainability.
While we could pursue a portfolio-wide REIT roll-up, that is not our objective. Our goal is to support sustainability by empowering charter school operators to purchase the facilities once stabilized under the most favorable terms, thus building equity and increasing their financial security. [At the outset] we enter into a long-term lease with the client and in that lease we provide the school with an option to buy between year four and six at a predetermined rate. Once the property is stable, we will work with banks to help the schools float tax-exempt debt to purchase the facility from us.
How will you finance your acquisitions?
A typical charter school is an $8-12 million in capital and there is available debt financing for construction. The vast majority of our schools will qualify for Community Reinvestment Act credits for banks and thus make for attractive loans for the banking industry. In order to acquire the space, we will use a combination of debt and equity. We will use a modest amount of leverage from a number of banks, including Citigroup.
Charter School Facts
* Charter schools are public schools funded by the state
* More than 1.5 million students are enrolled in charter schools
* 40 states have charter school legislation
Source: U.S.CharterSchools.org