Sunday, April 25, 2010

How to Make Money in the Charter Game


Imagine typically buys or leases buildings through a real estate arm, SchoolhouseFinance, and uses those properties to attract groups wanting to open charter schools that then pay to rent them.

Last year, Imagine sold 27 of its school buildings to Entertainment Properties Trust, a real estate investment trust that is the country’s largest owner of movie theaters, as part of a deal that won the company $206 million. The buildings that were sold were leased back by Imagine, which then subleased them to the schools that occupy them.

In February, the company sold seven more schools to Inland American Real Estate Trust for $61 million in a similar arrangement.

Mrs. Bakke said a portion of the proceeds from the sale of those buildings was used to pay off bank debt and construction costs, with the remainder going to buy or construct new buildings and into the operations of existing schools. But board members of eight schools said they were never consulted about the sales or the decision by Imagine to commit them to leases. In at least some cases, Imagine makes money on the subleases. Bronx Academy, for example, paid Imagine $10,000 a month more in rent than the company paid the owner of its building.

The rents the company charges schools it manages now are one of the things threatening to scuttle its agreements with the two schools it manages in Nevada, the 100 Academy of Excellence and Imagine School in the Valle.

Real estate. Also, selling "consulting" and other services. Both are easier if the school's board is your sock puppet. I tend to think this sort of corruption puts a hard cap on the size of the charter sector. Schools aren't prisons, people know and care about what happens there. There's only so much looting you can get away with before the exposes get rolling.

I guess the wild card is whether the conservative cranks that gripe over every line in the town education budget will suddenly not care when their tax money is stolen by an "entrepreneur" instead of a neighbor with a union card. I have a sick feeling many will be ok with that...

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