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Sunday, August 19, 2012

Answering the "For-Profit" Charter Question

I always get this question (and seemingly by people who are smart and savvy):

How could anyone make money off charter schools?  

Below is just one explanation of the tip of this iceberg but it's a good one.

This column from the Washington Post's Valerie Strauss and her blog, The Answer Sheet, really says it all.  She posts an interview with the head of Entertainment Properties Trust which is:

“a specialty real estate investment trust (REIT) that invests in properties in select categories which require unique industry knowledge, and offer stable and attractive returns.”


And the website also says this: “Our investment portfolio of nearly $3 billion includes megaplex movie theatres and adjacent retail, public charter schools, and other destination recreational and specialty investments. This portfolio includes over 160 locations spread across 34 states with over 200 tenants.
The head of Entertainment Properties Trust, David Brain, did an jaw-dropping interview with CNBC.  The video and transcript are in the blog thread.  
Well let’s ask David Brain, president and CEO of Entertainment Properties Trust. ....Why would I want to add charter schools into my portfolio?
DB: Well I think it’s a very stable business, very recession-resistant. It’s a very high-demand product. There’s 400,000 kids on waiting lists for charter schools ... the industry’s growing about 12-14% a year. So it’s a high-growth, very stable, recession-resistant business. It’s a public payer, the state is the payer on this, uh, category, and uh, if you do business with states with solid treasuries. then it’s a very solid business
Anchor: Well let me ask you about potential risks, here, to your charter school portfolio, because I understand that three of your nine “Imagine” schools are scheduled to actually lose their charters for the next school year. Does this pose a risk to investors?
DB: Well, occasionally — we have Imagine arrangements on a master lease, so there’s no loss of rents to the company, although occasionally there are losses of charters in certain areas and they’re used to peculiar, ug, particular circumstances. 



Anchor: You’ve invested in retail centers, ski parks, you’ve got charter schools, you’ve got movie theaters.... If you could buy one thing right now, David, one type of asset in real estate, what would it be?
DB: Well, probably the charter school business. We said it’s our highest growth and most appealing sector right now of the portfolio. It’s the most high in demand, it’s the most recession-resistant. And a great opportunity set with 500 schools starting every year. It’s a two and a half billion dollar opportunity set in rough measure annually.
Mr. Brain also said this:
Most of the studies have charter schools at even or better than district public education.
To which Ms. Strauss says:
By the way, it isn’t true that “most of the studies have charter schools at even or better than district public education.”
But why let facts get in the way?

4 comments:

Anonymous said...

Oh good grief. Nearly everyone in Arizona and Utah could answer that question.
First the charter school people donated to the campaigns of the GOP legislators they knew could be easily bought. Then they gave them the charter school legislation they wanted passed. The legislators passed it in return for more donations/kickbacks. The legislators awarded charter school charters to their buddies, who then 1) bought/sold/rented land for their new charter school from another buddy/family member (profit!), 2) hired a buddy's/family's construction company to build the school (profit!) or rent a building at high prices (profit!) 3) hired all the buddies/family members to work in the schools as administrators/office managers, etc. and paid them considerably more than the teachers (profit!), 4) gave contracts to buddies and family members for school contracts (technology, curriculum, etc) unless they dug it out of a district's dumpster and used 30-year-old materials while claiming they purchased curriculum with public funds (that last part is solely Utah)- but the result is (profit!).
There are other variations on the 4 items listed above, but the result is the same: public monies become private profit.
-CT

Anonymous said...

I heard someone on the radio talking about Goldman Sachs investments in a larger percentage of Texas schools. Couldn't find it in a quick search but did find several sites supporting their involvement in several social enterprises looking for big profits. November 10, 2010
GOLDMAN SACHS SEES GOLD IN CHARTER SCHOOLS


Goldman to Invest in City Jail Program, Profiting if Recidivism Falls Sharply

Re the latter article, if recidivism does decline, good for them. I think the tale will be in the process of measuring failure or success. They are pretty good at gaming the system. Money just seems to have a way . . .

n...

Anonymous said...

http://articles.philly.com/2012-07-25/news/32828937_1_charter-school-planet-abacus-ad-prima

Public School Parent

seattle citizen said...

This explains everything, from Milton Friedman in 1962 to the present, in an easy to understand graphic novel form by Dan Archer and Adam Bessie.