ATLANTA – Ivy Preparatory Academy, the state’s first single-gender public charter school district, has become a landowner and a landlord to a Pizza Hut, a fitness center, and a Grady health clinic in an innovative bond-financing deal that raised $14 million to purchase a DeKalb County shopping plaza.
Officials with the State Charter Schools Commission said the bond deal is the “first of its kind” for a state charter school. Ivy Prep is the first charter school to buy a building that has a built-in cash stream of existing commercial tenants. The purchase takes a new approach to providing adequate classroom space to charter school students that could revitalize communities and breathe new life into struggling strip malls.
“This is the first instance that I am aware of in which a charter school will also be the landlord,” said Gregg Stevens, counsel for the State Charter Schools Commission. “Ivy Prep will be able to rent out their facilities and use the rent they receive to pay back the bond. Having your own facility really sends a message that you are part of a community and you deserve to be there.”
Ivy Prep partnered with the DeKalb County Development Authority to seek a bond issue to finance the purchase of the 100,000 square-foot strip mall at 1807 Memorial Drive that currently houses Ivy Preparatory Academy Kirkwood School for Girls, Ivy Prep’s Young Men’s Leadership Academy, and three other commercial tenants. The purchase has allowed Ivy Prep Kirkwood to become a permanent fixture in the neighborhood. The K-12 campus, which is at capacity with more than 800 students, will soon expand. Funding for new classroom construction was included in the $14 million raised by the bonds, which were purchased by Hamlin Capital Management.
A groundbreaking ceremony will be held at the Kirkwood campus at 11 a.m. on Nov. 1.
“We have finally closed on the building, and we are excited to announce we own the entire complex,” said Victoria Wiley, executive director of Ivy Preparatory Academy Network Schools. “We have and will continue to invest in this community and the students that we serve. This opportunity provides stability, which ensures we are here for years to come.”
Ivy Prep will receive $650,000 from the bond to develop more than 15,000 square feet of space on campus into classrooms and separate the single-gender schools at Kirkwood, which currently share an entrance, a cafeteria, and a playground. Construction will begin in late January.
“Now we have the ability to control our own destiny,” said Monty Green, vice chair of the governing board that oversees Ivy Prep Academ. “This whole thing is a positive step for the school, for the Ivy Prep brand, and for this community.”
Kendra Shipmon, principal of Ivy Prep Kirkwood’s School for Girls said tenants LIV Fitness, Pizza Hut and Kirkwood Family Medicine, a Grady health care facility will remain in the plaza and forge partnerships with the school. Administrators said they would like to see Pizza Hut deliveries include school enrollment flyers and Ivy Prep parents sending their children to the clinic for physicals. Kirkwood also is in need of a school nurse.
“This purchase gives permanence to Grady,” Shipmon said. “The healthcare clinic is a part of the community as well. We have talked about having nurses and doctors from Grady come in and teach lessons involving STEM (Science Technology Engineering and Mathematics.) We have talked about having a fitness program at the fitness center.”
Ivy Prep parent Elizabeth Marshall said she is intrigued by talk of a partnership with LIV Fitness. As a working mom, fitting exercise into her schedule has been difficult. If Kirkwood parents were offered a discount at the fitness center, Marshall would consider joining the gym. “I would love to be able to work out and pick up my kids and go home,” she said. “I think it’s a wonderful idea.”
DeKalb parents say they are thankful that a charter school moved into Kirkwood and stayed. The portion of the DeKalb County shopping mall that houses Ivy Prep Kirkwood stood vacant and in disrepair for nearly 20 years without a tenant. It was a magnet for crime and illegal drug activity. Ivy Prep took over the lease of the property when another charter school that had moved in a year earlier was shut down by the state in 2011.
“We had police officers who came in and told us, ‘I’m so glad that you are here. This was a very dangerous building,’ ” said Nina Gilbert, lead founder of Ivy Preparatory Academy Network Schools.
“I have to give credit to Victoria Wiley and the board for making this purchase possible,” Gilbert said. ” Now that we are landlords, we have another stream of revenue that can be used to lower our facilities costs and free up the budget so that we may support our instructional program.”
In Georgia, charter schools are the only public schools forced to spend per pupil allocations on facilities costs.
Structuring a bond deal that allows Ivy Prep to be a landowner with tenants gives Ivy Prep more financial stability, said Calvin Smith, chief financial officer of Ivy Preparatory Academy Network Schools. “It’s a smart and innovative idea that I’m sure is going to be modeled in the future.”
The bond issue was approved by the DeKalb Board of Commissioners. Baird was the underwriter for the bonds. Officials with the State Charter Schools Commission also helped with negotiations by explaining what charter schools are to investors, how they are funded, and how they benefit the community.
“There were a lot of hands in this and everyone came together and got it done,” said Barry Herrin, an Atlanta lawyer who represented Ivy Prep in the building purchase. “You had to have a lot of people that believed that the Ivy Preparatory Schools at Kirkwood will be here for awhile, will be successful, will be financially managed well and will perform well. lf the charter didn’t get renewed or there was a shake-up in management, the whole project could have fallen apart.”
The Ivy Prep bond deal sets an important precedent that shows that state charter schools have the same property ownership rights as Georgia school districts, Herrin adds. “School boards own a lot of property, he said. “When they decide to build a school, they don’t tear down the old school. They keep it up and find a tenant. What the State Charter School Commission has been helpful in articulating is that as far as they are concerned, that when an urban charter school or other charter school buys this kind of property and you have tenants in place, the charter school can own and manage that property. That is a tremendously important position for them to take. I see this as the beginning of the way that charter schools are going to take control of their financial destiny.”
More than 75 percent of Georgia’s public charter schools rent their buildings from churches, office parks, or use government facilities. More than half of all charter schools nationally are located in spaces that are too small to allow for their current rate of growth over five years, according to a study released last year by the National Alliance for Public Charter Schools.
The Memorial Drive strip mall purchased by Ivy Prep was facing foreclosure when the bond sale was approved. Ivy Prep had been leasing the school for about $325,000 a year. The school also had to pay property taxes annually in excess of $30,000. The purchase of the building will result in a savings because Ivy Prep will no longer have to pay property taxes. The strip mall moved from commercial to nonprofit status in the sale. Its commercial tenants, however, can still run for-profit businesses in the mall. Their rent, and part of the $8,821 per pupil allocation Ivy Prep receives for the education of public school students, will help Ivy Prep to repay the 30-year bond investment.
“We want to thank the State Charter Schools Commission for being supportive of us in this endeavor as well as the financial institutions that saw this as a viable business opportunity,” said Christopher Kunney, president of the governing board of the Ivy Preparatory Academy Network Schools.
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Frequently Asked Questions
How is the bond deal structured? The building was purchased by Ivy Preparatory Kirkwood School for Girls. The school has 30 years to repay the loan of $14 million plus interest. Ivy Preparatory Young Men’s Leadership Academy, Grady’s Kirkwood Family Medicine, Pizza Hut, and LIV fitness center will remain as tenants and help repay the loan. Ivy Prep Kirkwood boys’ and girl’s schools will expand in the building. The school is contracting with a consultant to provide property management services for the building’s tenants.
What is a bond issue? A bond issue is a strategy often used by schools to raise money for capital projects. School districts can partner with a government agency, which is in this case is the DeKalb Development Authority, or a corporation that issues bonds. The government agency sells the bonds to a buyer who loans the school money that is to be paid back with interest over a certain period of time. When the bond reaches its maturity date, the loan must be repaid.
Can a charter school be a landlord? Yes. According to state law, public charter schools approved by the State Charter Schools Commission have the authority to act as their own local school districts. They can be property owners just as local school districts are property owners. Local school districts rent their facilities to outside entities for public use for meeting and event space. In Ivy Prep’s case, it can rent its building to tenants to use for commercial purposes. Ivy Preparatory Academy Network schools are nonprofit single-gender public charter schools with a mission to prepare students to succeed at the colleges and universities of their choice.
Building Purchase By The Numbers
Enrollment at Ivy Prep Kirkwood for Girls: 410
Enrollment at Ivy Prep YMLA: 410
Number of students each school will accommodate after expansion: 650
Per pupil funding at Kirkwood: $8,821
Commercial Rent Paid in 2013-14 school year: $325,000
Purchase price for land, building and build-out: $13.7 million
Number of tenants in shopping mall: 4
Property Tax Savings: $30,000
Ivy Preparatory Academy Network Schools parents and supporters are excited about the bond deal and expansion. Here is what others had to say:
Cindy Jacoby, governing board secretary: “We are thankful for the support we received from DeKalb County and the State Charter Schools Commission. The purchase of the building shows our commitment to the community.”
Ivy Prep parent Kelly Trotter: “This is a wonderful opportunity for Ivy Prep. We will be able to expand and add the latest technology. We can improve our gym. We will be able to offer children a great education and a great facility.”