Join our President & CEO, Stuart Ellis, and the President & CEO of Charter School Property Solutions, Larry Rieder, for an informative webinar focused on facilities financing options available to charter schools. Finding and securing state-of-the-art facilities and financing is a challenge charter school leaders face. Learn about the various options and how to evaluate what is best for your school. You’ll learn: -Funding structure and options available -Pros and cons to various financing -Balancing needs versus wants for your facility -Facing budget realities -Facilities planning best practices Speakers: Larry Rieder, President, Charter School Property Solutions Larry Rieder is President of Charter School Property Solutions (CSPS). He has over 30 years of experience in commercial real estate and has negotiated over $900 million of aggregate lease and equity transactions on behalf of major corporations. He founded CSPS to develop new, long-term academic facilities for charter school institutions. CSPS helps schools by managing the overwhelming tasks of locating, purchasing, financing, constructing and renovating academic facilities throughout the United States. The company has completed projects in Florida, New Mexico, Ohio, Nevada, Texas, and South Carolina. Stuart Ellis, President & CEO, Charter School Capital Stuart is one of the founders of Charter School Capital, the nation’s leading provider of growth capital and facilities financing to charter schools nationwide. The company has provided more than $1.5 billion in funding to 550+ charter schools serving 650,000 students nationwide.

1. Copyright © 2017 Charter School Capital, Inc. All Rights Reserved.
New Year,
New Charter
School
Facilities
Knowledge
Webinar
2/16/2017

2. Copyright © 2015 Charter School Capital, Inc. All Rights Reserved.
Welcome

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Copyright © 2017 Charter School Capital, Inc. All Rights Reserved.
WELCOME
Stuart Ellis, President and CEO
Charter School Capital
Larry Rieder, President
Charter School Property Solutions

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Copyright © 2017 Charter School Capital, Inc. All Rights Reserved.
WHAT WE’LL COVER
• Market overview and impact
• Balancing facilities dreams and budget realities
• Understanding and choosing a funding structure
• Funding approval - keys areas of focus
• Project execution and timing
• Other considerations
Agenda
Presentation will be available to download at
http://charterschoolcapital.org/webinars

5. Copyright © 2015 Charter School Capital, Inc. All Rights Reserved.
Market Overview

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CURRENT MARKET IMPACT
• Lack of facilities access is an obstacle to growth
– With more than 3 million charter students nationwide, there are still 1 million on
waitlists
– 7,000 charters in U.S. yet many have suboptimal facilities hindering growth
– With more financing options available today, charters can expand enrollment
• Charter financing options have expanded, but markets have been recently “disrupted”
– Long term and short term rates have been rising
– Refinancing and locking in long term financing could be beneficial
– Turbulent markets make for uncertainty that should be taken into consideration
• Alternatives for your specific situation vary depending upon
– CMO vs. EMO vs. individual school
– Refinance vs. expansion
– Long-term lease vs. bank financing vs. bond

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Facilities Funding Structures

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CONSIDERATIONS
What can we afford? What is required?
Existing reserves Academic mission
Ongoing % of revenue Growth plan for attendance
Fundraising – public/private Specialty requirements
Funding alternatives Local considerations
Want – need – budget

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FACILITIES BUDGETING
How much can we afford?
$0mm
$2mm
$4mm
$6mm
$8mm
$10mm
$12mm
$14mm
$16mm
$18mm
$20mm
$0mm $2mm $4mm $6mm $8mm $10mm
Potential
Project
Budget
Annual School Revenue
Facilities Budget vs. School Revenues
10% Facilities Cost/Rev 15% Facilities Cost/Rev 20% Facilities Cost/Rev

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AVAILABLE OPTIONS VARY
# of Years of Operation
$ Size of
Financing
Large
Small
0 10+
Developer
Long-term Lease
Bank
Long-term Lease
Bond
Long-term Lease
Bank
Short-term Lease
Long-term Lease
Developer
Alternative capital sources expand with school/network size
and maturity 1st Renewed Charter
~$7 -10mm

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CONSIDERATIONS
• Control versus Ownership
– Control is critical to maintain stability, growth and financial predictability
– Ownership is an investment
• Evaluate total dollars spent not percentage rates
• Cost is not just money, but time and opportunity
– Risk of funding effort failure
– Total elapsed time to complete funding
• Structural constraints and impact on future options
What to consider in a financing structure
How do different options compare
for my particular school?

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FINANCING OPTIONS
Criteria Cash Bank Bond Long Term
Lease
Cash needed to
close
$7M $2.1 – 2.8M ~$200 – 500K $0 – 100K
Annual cost
(example)
$0 $350 – 700K $600 – 800K $630 – 700K
Underwriting None Min 5 yrs
Surplus
Assets + Revenue
Min 3 yrs
Debt coverage
Surplus
Rating?
No minimum
Academic success
Flexible
Security interest None Real estate + all
assets
Real estate + all
assets
None
Growth options Cash = Build Refinance risk
Rate risk
10 yr minimum
Refinance risk
Covenants
Scalable,
expandable
Considerations/chall
enges
Reserves? 20+/- 40% equity
5-20yr term and
amortization
100% financing
Transaction costs
“Road show”
100% financing
No amortization
Buy back
Note: $7 million project example; bank assumptions 6-8% interest on debt,
30-40% equity, 10-20yr amortization; bond assumptions 6-9% interest rate,
18% transaction cost/additional financing, 30yr amortization; lease options
assumptions 100% financing, 9-10% cap rate.

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THE BOND MARKET SOLUTION
• Bond market financing of charters has increased as the charter school market
has grown
• Bonds fit well for larger, more mature charters
• Other alternatives exist today to serve the remaining 88% of the charter
school market
Since 1990s, ~12% of charters nationwide received
bond market funding
Source: 2015 LISC report, School Bond Issuance: A Complete History Vol 3

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EXAMPLE - PROJECT $5MM
Security Interest
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 Bond
Traditional
Bank
Long Term
Lease

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EXAMPLE - PROJECT $20MM
Security Interest
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 Bond
Traditional
Bank
Long Term
Lease

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Funding Approval and Execution

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PASSING THE TEST
• Enrollment
– Stable or increasing enrollment
– Strong demand – waiting list, expanding grades, market growth
• School / Leadership History
– Experienced leadership team with proven track record
– 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
• Governance issues
– Authorizer relationship
– Operational excellence and adherence to internal controls
Funding structure requirements

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FACILITY CONSIDERATIONS
• Plan ahead
– Collaborate with the programmatic side of the organization
– Lock in a stable leadership and management team
– Understand academic performance
– Plan financial performance measures
• Watch the market
– Keep an eye on rates and available products
– Understand the real estate opportunities and challenges
– Have realistic expectations
• Line up internal resources
– Legal, financial and academic
• Prepare for the deal
– Work with a partner
– Charter school experience
– Line up your financing ahead of time
Four key components

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PROJECT EXECUTION
Execution requires significant time
Plan ConstructDesignAcquire
 Space
Programming
 Features
 Budget
 Timeline
 Charter
approvals
 Select team
 Design/build
options
 GC bidding
 Bldg. permit
 Timing; big
bang or
phased
 Locate Site
 Acquisition
 Use Permit
 Land prep
 Move dirt
 Raise the
roof
 Control:
Project
manager or
owners rep
Fund
 Cash
 Bank
 Bond
 Lease

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KEY CONSIDERATIONS
• Full-service resource
–Funding partner / structure
–Commercial developer
–Architect
–General Contractor
• Flexible / Adaptive to your unique project
• Guarantor / Sponsor / Investor
• Access to working / growth capital
• Total cost of ownership (now and later)
Choose a strong partner

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OTHER OPTIONS
• Long-term lease
• State bond
• CDFI
• Private bond
• Cash reserves
• New market tax credits
• EB-5
• USDA (rural development funds)
Options expand as organization matures

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Questions?

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Copyright © 2015 Charter School Capital, Inc. All Rights Reserved.
Thank You
Presentation available at:
Charterschoolcapital.org/Webinars
Stuart Ellis
sellis@charterschoolcapital.org
877-272-1001
Larry Rieder
lrieder@csps.us.com
310-993-1100