This is one of Valerie Strauss’s best columns, where she reviews a television interview with Dennis Brain, the CEO of Entertainment Properties Trust. Brain is a big investor in charter schools, and he is bullish about the future.
Here is a small snippet of the interview:
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. In this case it’s a combination of relationship with the supervisory authorities and educational quality. Sometimes educational quality is very difficult to change in one, two, or three years. It’s a long-term proposition, so uh, there are some of these that occur, but we’ve structured our affairs so this is not going to impact our rent-roll and in fact we see this as uh maybe even a good experience as the industry thins out some of the less-performing schools and we move on to the best-performing schools.
Anchor: David, there has been somewhat of a public backlash to charter schools in some areas given their use of public money, as you noted. Any risk to the growth of charter schools generally?
DB: I don’t — there’s not a lost of risk, there’s probably risk to everything but the fact is, this has bipartisan support. It’s part of the Republican platform and Arne Duncan, secretary of education in the Obama administration, has been very high on it throughout their work in public education. So we have both political parties very solidly behind it, you have high demand, high growth, you have good performance across the board. Most of the studies have charter schools at even or better than district public education. So, I think it has some risk because it’s new and it’s emerging and it is a high-growth category. But at the same time I think … much more’s going forward so it’s still a safe area for investment.
Diane Ravitch's blog 
That’s an absolute lie. Charters tend to perform at or EELOW the public schools, let alone in “most studies.” But he’s right about the rent being profitable, because that’s what education is all about, right? Rewarding the landlord with steady rent?
*Below, of course. : )
tribucks, when the landlord of the charter school is the same corporation that owns the charter school, and the rent charged the state is exorbitant, you can smell a rat.
from Infotainment to Infeducation …
And this is why they won’t lose the “reform” game. But at least we can protest, and try, and start our own non-profit schools, or something…
This what you get when schools become a business, a detached executive making dispassionate decisions based on the bottom line. There is no mention of doing anything exciting or engaging for students or families. There is no mention of serving the community or families. If the school fails, he will simply pick up his tent and look for another profitable market. Parents must fight to keep their community school where they have a voice, and they can hold schools accountable. They must work to improve neighborhood schools, not settle for a faceless, heartless corporation whose only concern is a positive cash flow. If the ledger shows a deficit, the students will be collateral damage when the corporate interests wane, and they get abandoned.
Ms Ravitch,
When public district schools bond for construction or capital improvement, where do you think the schools get the money for these bonds?
The public has a responsibility to support the construction of public schools, subject to democratic governance. The public should not have any obligation to fatten the wallets of the charter industry, which pays exorbitant salaries to executives (usually non-educators) and to for-profits.
Ms. Ravitch,
You are complaining about Wall Street getting profits off of charter schools, but the same thing happens when district schools issues bonds; Wall Street makes a profit. In essence the public is fattening the wallets of Wall Street investment banks and Wall Street law firms when they support the construction of public schools. This is the nature of investing and financing.
Why do you impugn charter schools for tapping this source of funding?
If you want to complain about the egregious abuse of taxpayer dollars you should rail against district schools like those in California who misuse bonds (capital appreciation bonds) to fund capital projects.
Example…
” Poway Unified School District in San Diego County sold $105 million of the bonds this year that require nearly $1 billion in debt service at their 40-year maturity, without an option to call the bond”
Charter profiteers are not just getting rich off the bonds for charter schools. It has more to do with New Market Tax Credits, egregious buy-leaseback deals with outrageous rent, union busting and under-compensating teachers, various self-dealing contracts, etc. Some of these are illegal, but charter operators rarely get serious penalty for violating such laws. Others are perfectly legal and, in fact, highly encouraged.
Is this construction bond argument a field test for a new charter PR campaign?
Protecting profits Ms. Weiss?
You sound like privately funded money should be protected for schools because both public schools and charters are functioning equally on the ground that both receive the money from the bonds the government invests. Nah-ah. Charters are making money to work against the rights of teachers and students in education, and throw tons of money into national politics that will destroy the principle of democracy. Public schools have moral obligation to enroll students regardless of social class, gender, race, while charters can select students and dump (some or most) for their convenience. Duh?
Are public schools own by private corporations? Governments pay for schools with bonds, but the then I thought the property is owned by the government, correct?
I may be off here, but it seems as though making money off the real estate of charter schools is similar to how McDonald’s used to make money (it seems as though McD isn’t making $ these days)
http://money.howstuffworks.com/mcdonalds2.htm
“Sonneborn’s idea was to have the McDonald’s company lease a plot of land and the building for each restaurant. The company would then sublease to the franchisee who would run the restaurant. Sonneborn further developed the plan to eventually take out mortgages to own both the building and the land. . Kroc soon established the Franchise Realty Corp. to find willing landowners.”
concerned–I wouldn’t worry too much about McD’s profits–as w/everything else (the horror of the duh-duh-duhhhh!–pension CRISIS!!),being “reported”–one must ? Is McD’s no longer profitable because the workers are asking for c.o.l. increases? We, in ILL-Annoy, have been hearing about “fixed” bond ratings by no other than S & P.
Perhaps Ray Kroc wasn’t, but it’s my belief that the present “reporting” (more like “shock & awe”–& read Naomi Klein) is, quite simply, a “crock.”
Surprised Joe Williams hasn’t posted here yet in defense of the extreme greed and profits-before-pupils ethos of the charter school industry.
Exponential, minimally regulated growth based on dubious claims and ultimately backed by the public?
Hmm. Seems to ring a bell, but I can’t put my finger on it.
Where have we seen this before?
2008 and Eli Broad’s AIG come to mind, but it’s somewhat hazy.
What are mortgage backed securities?
You hit the Daily Double. I’ll go with $700 billion, Alex
What industry will grow at 12% – 14% per year, very stable, recession resistant, and has bipartisan support ?
That’s the cold dead heart of the privatization monster. An excerpt from an article about privatizers/”reformers”- “their agenda is to transfer assets and financial authority from the public to the private sector” from “Privatization & Plunder – Chile’s Privatization Experience”- we are not doomed to repeat this stuff! Chile is still trying to dig their way out…
http://www.multinationalmonitor.org/hyper/issues/1991/05/collins.html
Chile had to learn the hard way from privatization schemes. The United States should take heed, instead of running into the fire. These investors have no understanding of any community responsibility or even a notion of patriotism. They consider their education portfolio equal to that of other profitable investments.
Hooray for Nuclear Charcoal Reactors in American education. They don’t have to face any accountability for public transparency(financial disclosure), monthly stress test assessment (VAM, standardized test scores) or the impact of radiation leak(high-stake testing on students and teachers)–even in the case of Level-7 accident like Fukushima meltdown(e.g., entire PEARSON computer system crash, all test data/student profiles leaked to the public, nationwide test-cheating scandal). No wonder Moody gives them a substantially low credit(C or lower) in mutual funds and futures investments.
This is pretty disgusting–read Valerie’s article about the businesses which comprise Entertainment Properties Trust–strip mall places, movie theatres. This brings to mind the post that the FL psychologist had on your blog, Diane, several years ago. The “school” was located in one such strip mall–between a gun store &, I believe, a massage parlor. The “receptionist” also wore many other hats at the school (I’d have to read the post again–in fact, if you could re-post it, I think we could use it for an argument against the misuse of charter schools), all of which she was unqualified for. The “playground” was the space behind the strip mall–no swings, slides or even grass.
I don’t cry often, but I certainly did when I read this.
Yes, it’s fitting that a corporation named “Entertainment Properties Trust” would invest in profit-making charter schools–it makes “other people’s children” THEIR source of “entertainment.” Also–in reading Strauss, the guy’s name is not Dennis–it’s David.
I would’ve called him (in lieu of Dennis) Dense Brain (pun lover that I am).
Actually, I’ll just call him NO Brain. And, worse, NO heart,soul or any shred of humanity..
This is an excerpt from an article about a charter school the city manager wants to build across the street from a retirement community and would take part of a city park.
“The most telling moment of the night was when a resident asked Commissioner Diane Glasser if she had any compassion for her constituents. She became angry and yelled, “There is no compassion in this, it’s all business.””
http://tamaractalk.com/mayor-says-he-cannot-legally-comment-on-proposed-charter-school-15360
Thank you for consistently fighting the fight on testing and Charter Schools. I am starting the fight on our outdated structure at: http://principalresidencymark.wordpress.com
Reblogged this on education pathways and commented:
Charter schools are big business. There are, of course, exceptions where charter schools are a grass roots effort to provide an alternative. If you ever doubted the motives behind most charter schools, give this a read; it is disgusting.