Foundation will sell bonds to buy California charter school buildings
The California Infrastructure and Economic Development Bank has agreed to serve as conduit issuer for $100 million of revenue bonds to support an Oregon nonprofit’s purchase of several charter school buildings in California.
The IBank board approved on Oct. 28 the request from Wonderful Foundations.
The unrated tax-exempt and taxable deal will be the foundation's second bond sale through the IBank. IBank was also the conduit issuer on $185 million in revenue bonds sold July 30.
Citi is lead manager. The bonds will be sold as a limited offering to qualified institutional buyers in minimum denominations of $100,000. The bonds, which are expected to close on Dec. 22, would have maturities up to Dec. 1, 2061.
The bond proceeds, according to the IBank staff report, would be used to acquire facilities housing John Henry High School in Richmond, Desert Sands Public Charter & Antelope Valley Learning Academy in Lancaster and Hardy Brown College Prep in San Bernardino from American Education Properties, LLC, a for-profit company with a national portfolio of charter schools. The facilities have a total value of $88.2 million, according to the staff report.
The borrower’s goal is to purchase the facilities and charge a more stable rental fee, eliminating escalating rental increases, so the schools can focus on their primary education missions, according to the staff report.
The rental rate would be equal to annual debt service on the bonds, according to the staff report. The nonprofit would gift the facilities to the schools once the bonds are repaid, so long as the schools remain occupied, are current on their rent, and meet certain covenants necessary for the gift to occur, according to the report.
Wonderful will also establish a maintenance reserve fund that will help the schools with maintenance costs, to reduce some of the schools’ burdens associated with holding property, allowing them to focus on their educational mission.
The bond proceeds would also be used to finance improvements to some of the facilities, fund a debt service reserve and pay costs of issuing the bonds.
The coupon rates are expected to range between 4% and 8% depending on maturity and lien position.
The sale proposed in two tranches would include senior revenue bonds, sold as current interest bonds, and subordinate bonds, sold as capital appreciation bonds.
The Wonderful Foundations was founded in October 2018 by financiers Stuart Ellis and Troy Snyder to encourage the growth of charter schools, which they believe provide a solid alternative to public schools, according to the foundation’s website.
Co-founder Troy Snyder said in a statement at the Foundation's launch that they "want to ensure unfettered growth for charter schools."
Ellis, a University of California-Berkeley alumnus and Portland resident, has run Charter School Capital since 2004, a company that says it has provided more than $1.6 billion to charter schools across the country.
The founders could not be reached for comment about the deal.