Long, long ago, almost everyone went to the neighborhood public school. The school had a principal, who was overseen by the superintendent. The superintendent answered to a local school board. Those were not idyllic times, to be sure, but no one ever imagined that there was profit to be found in the public schools, or that the public schools would one day be part of “the education industry.” All that is changed now. There are still neighborhood public schools, but now there is an industry that relies on entrepreneurs and market forces. You don’t have to be an educator to manage or operate or start a charter school (think tennis star Andre Agassi or football hero Deion Sanders). There are tax breaks for investors in charter schools. Charter school properties are bought and sold, like franchises or just ordinary real estate. They have no organic connection to the local community. The profit for entrepreneurs is to be found in the real estate transactions.
A recent real estate deal brought this change into focus. There is a buyer and a seller; there are investors. There is return on investment. The world has changed. The charter industry has profits and losses. They open and close. It is not about education. It is a business.
[more intro]
A $45 million charter deal suggests profits on the horizon
ESJ Capital Partners, based in the Miami area, added the schools to a portfolio that includes a number of more traditional investments, including apartment buildings, medical offices and tourist attractions.
But the firm also owns 28 charter school properties that they say are valued at more than $650 million.
The firm promises to “provide optimum returns for our investors through disciplined procedures, selective investment criteria and structured processes,” according to their website.
Although for-profit investment in charter schools accounts for only a small slice of the movement nationally, there are examples of commercial enterprise within the system.
In some instances, a lender might be able to take advantage of a tax break because of their investment in a school that is located in an economically challenged neighborhood. In other cases, an investor might be interested in the consistent, government-back rent that charters can pay.
There is probably far more invested by a handful of very wealthy patrons of charters, who view the movement has providing a much needed competition to traditional public schools.
Whether driven by profits or politics, the growing availability of financial support for charters is much needed, supporters say.
In comparison to traditional public schools, charters have much more difficulty borrowing money. The banking community has traditionally viewed charters operators has carrying far more risk of insolvency than traditional public schools.
Charters in most states must also pay for school improvements or new construction out of operating budgets.
A number of big philanthropic organizations have stepped in to improve the fiscal landscape for charter facilities.
The Eli and Edythe Broad Foundation has been very active in the Los Angeles area, as has the Gates Foundation in Washington State.
Earlier this year, the Walton Family Foundation—led by the heirs of Walmart founder—announced the creation of two nonprofit entities to help finance the cost of building and maintaining new charter schools. Combined, the investment from the foundation is expected to be close to $300 million.
But there apparently is also money to be made too.
In 2016, ESJ sold five Florida charter schools for $72 million to Charter School Capital, a financial services company specializing in charter schools. The partners did provide the purchase price of the schools.
The partnership’s latest acquisition are schools located in in the Phoenix area, Washington D.C. and Toledo, Ohio.
All of them are operated by Virginia-based, Imagine Schools.
ESJ reportedly has $100 million invested in properties operated by Imagine Schools.
“The Imagine campuses that we just acquired have been open over 13 years and are thriving financially and academically, with consistent high enrollment,” Matthew Fuller, chief investment officer of ESJ, said in a statement.
According to a release from the partnership in announcing the 2016 transaction, ESJ was one of the first investment groups nationally to see the potential in charter schools.
“At the height of the Great Recession, ESJ identified a niche in developing charter schools as an alternative to their traditional commercial investments,” the release said. “The real estate asset management group predicted this asset type would evolve and scale into a mainstream, single tenant investment category, attracting more institutional investors, lenders and bondholders.”
Diane Ravitch's blog 
The US experiment in a Constitutional Republic with elements of democracy is being buried in a moldy dung heap of greed.
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There are many industries with public education. There is a huge, profitable industry in many states for companies who sell bonds to finance school buildings (in some states, bonds salespeople help support the state conferences of school boards and superintendents).
There is a huge industry selling products to schools (books, computers, pencils, paper, etc. etc).
IMHO, The quality of products and services varies enormously. As an urban district public school teacher and administrator, I found many I had no interest in. I found some terrific.
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Yes, there are for-profit suppliers of goods and services.
None seek to put public schools out of business. Only charters.
None so attractive to grifters and frauds as charter schools.
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The bond industry issued warnings against charter schools, because they endanger the financial ratings of school districts and cities.
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The bond industry makes huge profits. IMHO, they deserve much closer scrutiny. Or do you believe that we should ignore their practices and profits?
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When a district’s bond rating collapses because of charter schools, the cost of borrowing goes up as do taxes.
All so a few greedy entrepreneurs can open charter schools and pick the kids they want.
I know you started out with high ideals, Joe, but your dream has been captured by frauds and grifters.
Stop defending them.
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” The profit is often in the real estate.” In Florida Scott signed the heinous HB7069 which forces public schools to share their building fund budgets with charters on a per pupil basis. These charter facilities will not belong to the people of the state. They will belong to the holders of private portfolios. This law is another example of taxation without representation. Why should the tax paying public be forced to enhance private investors’ portfolios while simultaneously disinvesting in their public buildings that are the property of the local communities.http://extracredit.blog.palmbeachpost.com/2017/06/15/fla-educators-are-flipping-out-over-hb-7069-heres-what-it-does/
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Such transactions are a theft from public monies and services.
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Agreed. The whole money following the student concept puts public schools at a disadvantage and leaves them with all the stranded costs of utilities, insurance and other fixed costs over which they have no control. If a school roof leaks, it will cost the public school just as much to repair it if the school is operating at 90% capacity or 75% due to charter drain.
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In most states, state dollars follow students. Recognizing that suburbs vary, have you checked on the number of dollars that follow students into exclusive suburban, mostly white, mostly affluent districts?
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Joe Nathan, of course state dollars follow students. the more students you have to educate, the more dollars the state may contribute. They are also distributed based on need. It is absolutely clear that charter schools divert funding from public schools that can ill afford to lose those funds. We all know that “some” states distribute their state dollars more equitably, just as we know that “many” states have cut their funds for public education significantly to the severe detriment of public education. Charter schools do nothing to improve that situation.
I am neither willing or capable of corralling all the financial data necessary to take the quote marks off “many” and “some.” I suggest that you add them to your unsubstantiated comments as well.
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So it’s ok for affluent families to decide to leave cities and send their children to exclusive suburbs with virtually no low income students?
Where’s the criticism of that? The suburbs are the nation’s single largest public school choice program.
Part of the work some of us have done is to work successfully to increase Minnesota state funding for students who are from low income and/or who don’t speak English.
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Minneapolis has the most racially segregated charters in the nation, although Deep South Mathy be close.
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Actually, Minneapolis has a variety of charters. It’s also true that charters are more likely to be found in low income sections of the city (as well as in several suburbs).
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I keep trying to come up with short simple ways to explain this to people. Especially to counter why it doesn’t work even tho 10% per-pupil cost stays with the district when they lose a student to a charter.
The roof leak example says it well for the physical plant.
Staffing is key, too. Say you lose a steady trickle, never more than a few percent of enrollment. The students are scattered across various grades and classes. Say you have 600 students and 25 teachers. Can you cut staff 3% [3/4 teacher] and rearrange the students like cans of tuna on a smaller section of store shelf?
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Not to mention, you need the same number of [higher-paid] admins for 540 as for 600 students.
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And in NJ, charter aid is supposed to be adjusted regularly to account for the proportion of SpEd, ELL, low-income kids. But here, two recent times that was supposed to happen [a large reduction in aid to charters — due to faster charter enrollment than expected, w/proportionally fewer expensive-to-teach students], it didn’t. Christie just waived, then extended waiver.
Wonder why. [$$]
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Charter folks don’t like neighborhood school because it’s harder to scam. People in a neighborhood talk with one another.
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Agreed that people in neighborhoods often talk with eachother. As a person who sent 3 kids at various times to urban neighborhood public schools.
As a person who also helped create district options with other educators I’m glad that some districts listen to educators and families who want options.
Are you opposed to Montessori, or language immersion, or options like those created by Deborah Meier and other outstanding educators?
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“Are you opposed to Montessori, or language immersion, or options like those created by Deborah Meier and other outstanding educators?”
That is a really stupid question. I can see the value in a concept and still dispute the way it should be funded or governed. I place too much value on a democratically controlled, publicly funded public school system that is open to all to support watering it down by diverting funds to private schools. There is no reason why these programs cannot be provided through the public school system with public oversight. Please don’t repeat your magnet school rant.
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Deborah Meier has never opened a charter school. She supports only public schools.
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Glad to hear we agree there should be public school options. Sometimes districts listen to and empower educators who want to create such options – and families that want them. Sometimes districts don’t listen because the people in charge believe in the “one best system” approach.
Here in St. Paul, parents were frustrated for years because the district offered Montessori at the elementary, but not middle school level. Finally, after pleading with the board and district for years, parents and educators worked together to create a junior-senior high school Montessori charter.
Within two years, the district decided to create a Montessori middle school.
Things don’t always work like that.
Sometimes yes, sometimes no.
Both the families and educators who created the Montessori Junior Senior High School charter were pleased by the district’s action to create its own Montessori middle school.
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Ka-Ching! Ka-Ching! Ka-Ching!
There are teacher union leaders that still talk about ‘good charters,’ ignoring the fact that the existence of all charter company schools allows this kind of grift to happen legally. Can anybody tell us how much public money and public real estate are now owned by these shysters? How much money do the teacher unions spend ‘organizing’ charter company scabs?
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Also don’t forget that California makes available more than $50 million in grants each year for charter companies’ capital improvements.
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And of course, the writers of ESSA loved to write up some grant funding for charter school facilities.
ESSA law: PART C–EXPANDING OPPORTUNITY THROUGH QUALITY CHARTER SCHOOLS
(5) “encourage States to provide support to charter schools for facilities financing in an amount more nearly commensurate to the amount States typically provide for traditional public schools.” ( You might need to read that twice to comprehend the implications).
ESSA ALSO provides grants for states to set up per-pupil allocations for charter school facilities. The convoluted language might well have been written by the legal team of Eva Moskowitz. https://www.congress.gov/bill/114th-congress/senate-bill/1177/text
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“The convoluted language might well have been written by the legal team of Eva Moskowitz. ”
It probably was written by the legal team of Eva Moskowitz. She’s invited to Congress often.
Sadly, there’s very little interest or enthusiasm in Congress or the Trump Administration for public schools.
Public schools are unfashionable in Congress. They’re the dead-last priority. If our out of touch and oblivious lawmakers mention our schools at all it’s only to compare them unfavorably to charters or private schools. There’s no actual interest in our kids or our schools-they’re much more interested in charter financing schemes and voucher funding schemes.
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More chartermania! Meanwhile the tens of thousands of people you’re all paying in government can’t be bothered to lift a finger on behalf of public schools.
They all spent the last year lobbying for private school vouchers. Meanwhile, the vast, vast majority of US students who attend the unfashionable public sector schools are completely ignored.
We should hire some people who return some actual value to our kids and our schools. Ed reformers are a lousy investment.
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“…no one ever imagined that there was profit to be found in the public schools, or that the public schools would one day be part of “the education industry.”
Someone DID imagine there was profit to be found… and that someone was Milton Friedman who in 1983 wrote that public schools were a “socialist monopoly” (https://www.edchoice.org/who-we-are/our-founders/the-friedmans-on-school-choice/article/milton-friedman-on-busting-the-school-monopoly/#)
Twelve years later Mr Friedman wrote that the best way to break up the monopoly was to offer for-profit schools as competition.
https://www.washingtonpost.com/archive/opinions/1995/02/19/public-schools-make-them-private/5d5c9c9b-675e-451b-b106-6d9ba6dad2d1/?utm_term=.d79ac4536179
When it comes to market worship all roads lead to Milton Friedman….
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