Charter School Facilities and Finance

Published October 1, 2001

Charter school founders have many business decisions to make in the process of developing a school, most of which they will make themselves.

However, without the appropriate expertise, a do-it-yourself approach to facilities and finance can lead to mistakes that can cause substantial cost increases and delay the opening of the school. These are areas where contracting for sound professional services is required.

Time and money can be saved in the startup operation by utilizing professionals who have expertise in areas where the founders need assistance, such as identifying facilities locations, negotiating leases or purchase contracts, and obtaining financing for renovation or development. Here, the founders should look to real estate brokers, mortgage brokers, architects, and engineers for assistance.

Real Estate Brokers

Real estate brokers should be contacted early in the development process. When the charter school developer begins work on the application process, a decision should be made as to what geographical area the school wants to serve. Once that decision has been made, the founders should speak to several commercial real estate brokers in the area and evaluate which of these professionals should be added to the development team.

The real estate broker is a professional who knows the real estate market and the values within that market. He or she will know rental rates, occupancy costs, existing vacancies, and, in many cases, the landlords operating in the target area.

Having this professional negotiate for space will ensure that the charter school founders make a market deal for the space they rent or the property they purchase. In most cases, the landlord pays the commission of the real estate broker even though the broker represents the tenant.

Mortgage Brokers

Most charter schools are unable to finance all of their needs from the initial start-up monies they are able to raise. The ability to finance their improvements in many cases will make the difference between starting a school or shelving the idea for a future date.

A competent mortgage broker can help search for appropriate financing in the mortgage market, where the charter school industry now is receiving substantial attention from lenders and underwriters in the private sector.

Finding a mortgage broker who understands the revenue streams of a charter school and who can create a financing package for potential lenders is an important asset. The names of recommended brokers may be obtained from existing charter school operators and from charter school trade groups.

Mortgage brokers specialize in the types of loans they are able to place. In many instances, private-sector mortgage brokers will require a minimum size loan that may exceed the amount needed by a small charter school. Even if a mortgage broker cannot service the size of loan needed by the founders, the broker usually will be able to recommend a mortgage broker or lender making loans in the range and size requested.

Finding money takes time and effort, and contracting with a mortgage broker ensures that an individual with the required knowledge and experience in the financial markets will devote the necessary effort to find a loan to fit the founders’ requirements.

Architects and Engineers

Finding existing space that is built for educational purposes is difficult, since existing public school systems rarely have an inventory of school facilities sitting vacant. Once the real estate broker has identified a location for the charter school, the founders should quickly bring in an architect and engineer to assess the site and its potential for conversion to an educational facility.

These professionals will know the local rules and regulations regarding educational facilities, and they will be familiar with the life, health, safety, and accessibility issues required in any conversion space. The founders should secure the recommendations of these professionals before making any decision regarding a facility.

Mark Howard has specialized in the development of commercial properties since 1980. He owns and operates M.H. Realty Associates, Inc. in Tamarac, Florida. Readers with questions on facilities and finances are encouraged to contact him directly at [email protected]. The most frequent questions about common problems will be included in future columns