what independent schools need to know about using their campuses to increase revenue, whether from fee-based facility rentals to land sales to partnering on building new facilities. The rental opportunities may include the use of classrooms, fields, gymnasiums, and other areas.

1. Facilities Revenue 101:
Considerations for
Generating Non-Tuition
Revenue fromYour
Campus Assets
January 21, 2015
Patrick L. O’Neil
Paul E. Alpuche, Jr.
Lerch, Early & Brewer, Chtd.
www.lerchearly.com

2. © Lerch, Early & Brewer, Chtd. 2014 www.lerchearly.com
 Introductions
 Know Your Use Options and Limitations
 Facility Space Use/Lease
 3rd
Party Investments
 Sale or Long-Term Lease
 Next Steps
Overview
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3. © Lerch, Early & Brewer, Chtd. 2014 www.lerchearly.com
Know Your Use Options and
Limitations
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4. © Lerch, Early & Brewer, Chtd. 2015 www.lerchearly.com
Underlying Zoning
 Each zone has list of permitted uses
 Most schools located in residential
zones with special exceptions
 In Montgomery County, religious
exemption from SE requirements
 Exemption for government-owned
property
 Accessory uses
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5. © Lerch, Early & Brewer, Chtd. 2015 www.lerchearly.com
Lease orDeed Restrictions
 Deeds (e.g., closed or surplus
school sites)
 Easements
 Covenants
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6. © Lerch, Early & Brewer, Chtd. 2015 www.lerchearly.com
Special Licensing
 Daycare/aftercare
 Liquor licenses
 Gambling licenses
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7. © Lerch, Early & Brewer, Chtd. 2015 www.lerchearly.com
Neighborhood Relations
 It pays to be a good neighbor
 Tree trimming, snow removal,
etc.
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8. © Lerch, Early & Brewer, Chtd. 2015 www.lerchearly.com
Nonprofit Status and Exempt
Function Income
 Unrelated Business Taxable
Income
 Modifications
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9. © Lerch, Early & Brewer, Chtd. 2014 www.lerchearly.com
Use/Lease of Facility Space
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10. © Lerch, Early & Brewer, Chtd. 2015 www.lerchearly.com
Mitigating School Exposure
 Contractual liability
 Indemnification
 Insurance
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11. © Lerch, Early & Brewer, Chtd. 2015 www.lerchearly.com
Who is Sponsoring?
 School-sponsored event (e.g.,
fundraiser, class, camp, etc.)
 Lease to outside party
 Accommodating parental usage
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12. © Lerch, Early & Brewer, Chtd. 2015 www.lerchearly.com
What is the Use and Who is
Attending?
 Classroom space or camps
 Enrolled students only or open to
outside students
 School coach camps
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13. © Lerch, Early & Brewer, Chtd. 2014 www.lerchearly.com
3rd
Party Investment in Enhancing
Campus Facilities
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14. © Lerch, Early & Brewer, Chtd. 2015 www.lerchearly.com
3rd
Party Investment
 3rd
party may pay for some/all costs
in exchange for exclusive use rights
– e.g., tennis bubble, turf field,
gymnasium, ropes course, etc.
 Use analysis – permitted use vs.
accessory use
 Understanding partnerships with for-
profits
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15. © Lerch, Early & Brewer, Chtd. 2014 www.lerchearly.com
Sale or Long-Term Lease Options
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16. © Lerch, Early & Brewer, Chtd. 2015 www.lerchearly.com
Value Proposition
 Use analysis
 Appraisal
 Ongoing rental income (vs. one-
time windfall)
 Partnership with developer
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17. © Lerch, Early & Brewer, Chtd. 2015 www.lerchearly.com
Mechanics and Costs
i.e., How easilycanportionof campus besoldorleveraged?
 ID the available property with
particularity (survey)
 Obtain approvals for proposed
development
 Subdivision, stormwater management,
forest conservation, traffic
 Lease/condo option
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18. © Lerch, Early & Brewer, Chtd. 2015 www.lerchearly.com
Mechanics con’t
 Subtract costs (including
development timeframe) from the
value proposition
 Tip: participate in Master Plan
processes to increase
investment opportunities
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19. © Lerch, Early & Brewer, Chtd. 2014 www.lerchearly.com
Next Steps
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20. © Lerch, Early & Brewer, Chtd. 2015 www.lerchearly.com
Now What?
 Review and understand your
existing contracts; update as
needed
 Review and understand your
existing insurance coverage;
update as needed
 Explore new uses
 Contact us with questions20

21. © Lerch, Early & Brewer, Chtd. 2015 www.lerchearly.com
Contact Us
PatrickO’Neil is an
attorney at Lerch, Early
& Brewer who serves
as outside general
counsel for
independent schools
throughout Maryland
and DC.
(301) 657-0738
ploneil@lerchearly.com
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22. © Lerch, Early & Brewer, Chtd. 2015 www.lerchearly.com
Contact Us
Paul Alpuche is a corporate
attorney at Lerch, Early &
Brewer who provides business
counsel, tax planning and tax
controversy guidance to
businesses, nonprofit
organizations and individuals
throughout Montgomery County
and the Washington
metropolitan area.
(301) 657-0183
pealpuche@lerchearly.com
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23. © Lerch, Early & Brewer, Chtd. 2015 www.lerchearly.com
Formore information
Lerch, Early & Brewer, Chtd.
3 Bethesda Metro Center, Suite 460
Bethesda, MD 20814
(301) 986-1300
www.lerchearly.com
Thank yo u fo r yo ur participatio n
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