FAQs
1. How much space do I need for my school?
A typical charter or private school should plan to allocate approximately 65-75 square feet per student, not including gymnasium or outdoor space. A normal school’s space will be divided into 2/3 classrooms, and 1/3 office and support areas.
2. What percentage of my budget should I be paying for real estate?
Although there are some national guidelines suggesting a school’s occupancy expenses should be about 25% of the total budget, we have found that really well-managed schools spend less — no more than 20% of their total operating budget, including utilities, taxes and other expenses. If a school exceeds this number, it could compromise their ability to operate a successful school program.
3. When is the optimal time to get started on a facility search?
The answer will depend on a combination of factors, but generally if the project is a renovation of an existing building, you should plan to “hit the market” between 9-12 months before you intend to occupy the facility. If you have determined that ground-up construction is the only feasible option, then you should begin the project 15-18 months before occupancy.
4. How do I find out what properties are available?
The best source for what properties are available in your local market is a qualified commercial real estate broker who knows the area. They have access to databases and listings that a non-professional does not have, and can give an objective opinion of value.
5. Should I lease or purchase my facility?
Ultimately your school will be in the strongest financial position by owning your facility. However, if your school is at less than 70% of the enrollment projected at full capacity, leasing a facility with options to expand will probably be more beneficial in the short term. The financial burden of carrying a larger facility before you need it may be uneconomical and dangerous to your school’s survival.
If you are a mature school, the ability to obtain favorable financing will depend on many factors: the credit market, your school’s financial history, your long-term enrollment plans, your waiting list, your academic performance, the political environment in your state, the building’s capital requirements, etc. Initially, a lease with an option to purchase may be the best route for your school until your program reaches full maturity.
6. What sort of financing resources exist to help me lease or purchase a facility?
There are numerous alternatives available to secure facility renovation and acquisition financing assistance. Municipal tax exempt (bond) financing, specialized charter school lenders, conventional banks, specialized development companies such as CSPS, and private fundraising are all options to consider.
7. How important is it to retain an architect?
A highly qualified architect with expertise in local building and land use codes can make the difference between a successful project and a disastrous one. An architect can help identify major issues at the beginning of the process, and design a project that fits within your budget. Architectural fees typically range from $1.50/ft. to $3.00/ft. per square foot (lease or purchase), so you will need to agree on a scope of services and interview several reputable firms to make sure you are getting the best value.
8. Who does the construction if my facility needs work?
The school will need to hire a reputable local general contractor (GC). The GC should be selected based on their reputation, their responsiveness, and their ability to deliver the project at a competitive price. Fees for GC’s will also vary, so multiple GC’s should be interviewed before a final selection is made. Also, recognize that the GC is like any other school employee and will be more successful if properly managed to a tight set of performance parameters.
9. What are the zoning and permitting issues I should be aware of?
This is one of the biggest potential hurdles you will face in obtaining a new facility. Depending on where the building is located, its zoning classification, and the local land use requirements, you will find that the process may be inexpensive and relatively short, or it can be time-consuming and sticker-shock expensive. In order to obtain the necessary permits for your facility, you may be required to obtain a special or conditional use permit, a variance, site plan review approval, historic and/or other approvals. This process could take as long as 3-8 months to complete.
10. Is it a conflict of interest if board members are involved with the real estate project?
Board members are a great resource to the school because of their diverse backgrounds and experience. This wealth of knowledge should be very useful in making key facility decisions during the real estate process. We recommend that board members maintain an independent role, and do not attempt to provide direct professional services to the school. This is also true of other individuals with personal connections to the school. Your school’s reputation is the most important thing you have.
11. I’ve heard a lot about bond financing. Is this an option for my school?
Bond financing has historically been the most cost effective way for a charter or private school to purchase its own facility. In today’s capital market, bond financing is very hard to obtain and rates are not competitive with conventional financing. Financing in general will depend upon the school’s ability to demonstrate sufficient enrollment growth, waiting lists, financial strength, and academic success. A bond broker or underwriter can look at your school’s program to assess whether or not this is a good option for your school.
12. How do I determine how much I can afford to pay for my facility?
When we assist charter and private schools, we start by working backwards. Once we know the school’s current (and projected) operating budget, we create a real estate budget for how much the school can afford to pay. Again, we recommend that schools keep their total real estate expenses below 20% of their budget. Once we have a real estate budget, we can develop a total project budget, which includes the cost of acquisition, construction, financing costs, and a reasonable return. This total project cost must translate back into an affordable rent. Too many schools waste valuable time looking at properties they simply cannot afford.
13. What kind of amenities should my facility have?
Most schools start out with a long wish list, but ultimately the facility needs to be designed and constructed based on what you can realistically afford, given the competing demands of salaries, materials, etc. Classroom and administrative areas are the first priority, followed by any specialized areas which are critical to the unique needs of your program.
14. What sort of code issues should I be aware of in selecting a facility?
Code issues are extremely important, and should be evaluated early in the process with the assistance of a qualified architect. Code issues which need to be addressed are ADA, fire and life safety requirements, asbestos, mechanical, electrical and plumbing systems, adequacy of parking, fire lanes, pick-up and drop-off areas, etc. The costs to bring older facilities “up to code” can be very expensive. These need to be uncovered and quantified before entering into a lease or purchasing a facility.
15. Do I really need help? Why can’t I manage the project on my own?
Most schools drastically underestimate the difficulty in managing a complex facility development project, and many wind up in precarious situations where the school is in danger of closing its doors. A successful real estate project requires navigation through a maze of challenges, including financing, design, permitting, legal contracts, and construction management. There are inevitably surprises, and it takes experience, creativity, and discipline to deliver a successful project. It also takes time. Real estate development is a full-time occupation. By utilizing the services of a real estate development firm, you can focus on doing what you do best: educating children and running a successful school.