School’s out: Portland investors pay $72M for charter school portfolio in Florida

Charter School Capital, an academic investment group based in Portland, just scooped up five charter schools spread throughout Florida for $71.74 million. The sellers were MG3 Development Group and ESJ Capital Partners, a pair of local real estate companies.

The deal illustrates how investing in nontraditional real estate like schools can be lucrative, especially when other markets like residential and commercial properties appear to be cooling down.

According to a news release from Colliers International Education Services Group, which brokered the deal on behalf of the sellers, the portfolio encompasses 295,992 square feet split among five schools in Riverview, Vero Beach, Coral Springs, Davie and Plantation. Colliers’ Todd Noel and Achikam Yogev worked on the sale.

MG3 Principal Hernan Leonoff told The Real Deal that his firm developed the schools in Riverview, Davie and Plantation, plus renovated the facility in Coral Springs while ESJ acted as the lead company in building the portfolio. MG3 had no involvement with the Vero Beach charter school.

The ownership varied between properties: for most of the schools, MG3 had a minority interest while ESJ, led by principals Arnaud Sitbon and Gabriel Amiel, was the majority owner.

The sale breaks down to about $242 square feet, but Leonoff cautioned that a school’s capacity for students is a better gauge of pricing because common areas can skew square footage.

The five schools can house roughly 4,000 students, he said, bringing the price to about $17,935 per enrollee. That’s significantly more expensive than the $16,641 per student that tennis pro Andre Agassi and his partner Bobby Turner sold their Boynton Beach school for in August.

Though they’re publicly funded, charter schools still have to pay rent if they don’t own their facilities — translating to steady income for an investor like Charter School Capital.

Leonoff declined to comment on the schools’ cap rates, citing a non-disclosure agreement that won’t expire for several months. He also would not comment on MG3’s total investment in the portfolio, saying only that traditional financing was used instead of the EB-5 program, which his firm and ESJ have leaned on to fund other projects.

MG3 got its start developing schools in 2008 when the firm was searching for projects amid a crashing real estate industry, Leonoff said. The company’s first gig was helping a charter school expand its space, and it’s since graduated to building academic facilities from the ground up.

“We saw the opportunity for extraordinary land that we are able to acquire for low prices in great locations, because basically we were developing an asset that was counter to the recession,” he said.

Typically, Leonoff said, the developer holds onto a school for the first two years while its classrooms are filled and the charter organization that runs the academics settles in.

Despite their controversial status among educators, charter schools have become hot commodities in the real estate community, with a slew of new speculative projects breaking ground in South Florida over the past year. Notably, the W.P. Carey investment trust bought a Broward County preparatory school for $68.6 million in June as part of a larger $167 million deal to acquire three U.S. private academies.