How to Earn Gigabucks Through Charter Schools

A very interesting article in Alternet on how hedge fund managers and other millionaires and billionaires are making enormously profitable investments in the charter-school bubble.

Here are two paragraphs from a long article:

…David Brain, head of large real-estate investment firm Entertainment Properties Trust, […] appeared on CNBC in 2012 to tell audiences just how profitable charter school investment has become. He explained, “Well I think it’s a very stable business, very recession-resistant. It’s a very high-demand product.” Asked about the most profitable sector in real estate investment, Brain said, “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.”

Real-estate developers have a particularly interesting stake in the business of charter school development. Yes, they receive the standard huge tax breaks. But they can also help charter schools acquire properties in large cities like Philadelphia, Chicago or New York, where prices are high and there isn’t much room for new buildings. In places where acquiring space can involve fierce bidding wars and eminent domain conflicts, well-off real-estate developers profit from charter school growth since they will help new schools get established for a price. Eminent Properties Trust boasts, “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.” When real estate developers acquire these charter school properties, they charge charter schools for rent payments, which are not price-capped.

Here is some more:

Even though most of the details remain hidden, we do know that privatization in education is a lucrative business. In January, a firm called Capital Roundtable – which touts itself as “America’s leading conference company for the middle-market private equity community” – held a Master Class called “Private Equity Investing in For-Profit Education Companies.” The conference website noted, “For-profit education is one of the largest U.S. investment markets, currently topping $1.3 trillion in value.” The event was hosted by Harold Levy, a former chancellor of the New York City Schools System who promoted charter proliferation during his tenure. Now he manages Connecticut investment company Palm Ventures. One of the major focuses of the firm involves funneling individual investments into for-profit charter-school related companies.  As a former finance lawyer for Citigroup, Kaplan and Saloman Brothers, Levy is quite the expert on getting rich this way.

Published in: on May 15, 2013 at 9:20 pm  Comments (5)  
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5 CommentsLeave a comment

  1. The trouble with a bubble
    On a pyramid top
    Is the point
    When it
    Pop

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  2. That is how the game works and they brag about it. It is all about the big bucks and how much can you steal. Hedge funds brag that they can double their money in 7 years instead of 12 by investing in education and part of that is the property as a result of the tax breaks and other percentages which add up. Nice for them bad for us.

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  3. Hedge funds brag about how much they can make from education. They say they can double their money in 7 years instead of 12. Property is a part of the game as there are great tax breaks. Nice gig at our expense.

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  4. The result? “The schools’ purchases from their own officials,” Ryman writes, “range from curriculum and business consulting to land leases and transportation services. A handful of non-profit schools outsource most of their operations to a board member’s for-profit company.” A nonprofit called Great Hearts Academies runs 15 Arizona charter schools. Since 2009, according to Ryman, the schools have purchased $987,995 in books from Educational Sales Co., whose chairman, Daniel Sauer, is a Great Hearts officer. And that doesn’t count additional book purchases made directly by parents. Six of the Great Hearts schools have links on their Web sites for parents who wish to make such purchases. The links are, of course, to Educational Sales Co. Since 2007 Sauer has donated $50,400 to Great Hearts. You can call that philanthropy, or you can call that an investment on which Sauer’s company received a return of more than 1800 percent. I’m not sure even Russian oligarchs typically get that much on the back end.

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