Florida Education Shakeup Creates Real Estate Opportunity

Developers are racing to build luxury condos, apartments and office towers for the influx of new residents to South Florida, but incoming families face an important question: Where will their kids go to school?

The answer is reshaping the region’s education system and the real estate behind it.

Finding the right school has become increasingly difficult for families in South Florida as demand for private schools has outpaced supply in the region, where affluent newcomers are fueling competition for high-quality schools.

Private school enrollment is up 48 percent since the 2020-2021 academic year, according to a Broward County Public Schools analysis. The increase coincided with a domestic migration boom during the pandemic, followed by a flood of wealthy transplants from blue states, even as counties lost middle-class residents pushed out by congestion, inflation and a housing crisis.

The wealth influx is especially apparent in private schools, where top institutions have waitlists across grade levels, and wait times can stretch as long as two years.

The recent expansion of Florida’s school voucher system allowing all K-12 students in the state to pay for private school tuition using taxpayer-funded programs has contributed to demand and expanded a real estate niche.

The quality of schools has a ripple effect on real estate, from home values to apartment sales, retail success and office leasing. But private and charter schools themselves are increasingly becoming development and investment plays in South Florida as public funding sources for schools flow into the private sector.

Private schools are expanding or building new campuses, and filling the seats at those schools is easy. But finding real estate for them is hard.

Typical K-12 schools need 8 to 10 acres, said Pablo Barreiro, chairman of education developer Fortec. That’s a tall order in South Florida, where school developers compete for scarce land in the same high-stakes market as luxury condo developers, for example.

Charter schools as an investment play

Private schools aren’t the only game in town.

Native Realty founder and CEO Jaime Sturgis said private schools are still the “crown jewel,” but charter school properties have become an increasingly attractive investment for developers.

Like public schools, charter schools provide tuition-free public education. But they often operate in private buildings where they pay rent using their state funds.

Developers view charter school operators as stable tenants because they typically operate under multi-year contracts and receive ongoing public funding, providing landlords with a secure stream of income, Sturgis said.

As charter school supply narrows, financing becomes more available and state lawmakers champion them as public school alternatives, they are becoming a popular option for South Florida investors, The Real Deal previously reported.

Merchant developers “will stabilize these products, turn around, and then sell them to investors,” Sturgis said.

The investment appetite has translated into sizable transactions.

Last year, MG3 Group sold a $172.4 million Florida charter school portfolio to BridgePrep Academy. The developer also sold eight Florida charter schools for $242 million to Educational Growth Fund in 2021. MG3 Group did not respond to a request for comment.

Charter schools receive funding from federal, state and local sources, but acquiring land and buildings remains one of their biggest financial hurdles, according to 22Beacon, a national Community Development Financial Institution previously known as Charter Schools Development Corporation.

A recently expanded Florida law makes financing easier. The Florida Department of Education’s Schools of Hope initiative was implemented in 2017 with the goal of bringing state-approved charter schools to areas with persistently low-performing public schools.

Seven approved “Hope operators” — Mater Academy, Democracy Prep Public Schools, IDEA Public Schools, KIPP New Jersey, Success Academy, RCMA, and Somerset Academy — receive tax breaks, expedited approval and additional funding from the state in exchange for launching in certain areas.

Florida has spent over $300 million on the program, the Bradenton Times reported last year. The state has set aside $100 million for the Schools of Hope Revolving Loan Program, which helps those seven Hope operators pay for construction needs and startup costs, according to the Florida Department of Education.

Last year, the Hope law was significantly expanded to allow charter schools to co-locate in public school facilities with “underused, vacant or surplus space,” often at no cost.

Soon after the law’s expansion, New York-based charter school giant Success Academy announced it would expand to Florida, backed by a $50 million gift from billionaire Citadel CEO Ken Griffin. In April, the charter school operator secured approval from the Miami-Dade County school board to operate classrooms in five district high schools, while the district is closing nine campuses, the Miami Herald reported. Citadel declined an interview.

Public school disinvestment

While developers and billionaires invest in private and charter schools, actual public schools are facing a different reality.

In Broward County, public school enrollment has dropped 17 percent since the 2017-2018 academic year, according to the district’s analysis. The district cited declining birth rates, changes to immigration law, housing affordability and availability of school choice as the primary factors affecting enrollment.

Dennis Mope, president and broker with Schools for Sale Inc., said expanded school choice — funding charter and private schools with state money — means students aren’t confined to their local public school, allowing parents to vote with their feet.

“They can pick and choose where they want their child to be educated,” he said.

For many families, that choice is no longer a traditional public school.

The Broward school district has closed seven campuses over the past two years, and the buildings are being used for other district purposes, the district said. The “Redefining Broward County Public Schools” initiative, which involves selling, leasing or repurposing vacant buildings, is expected to result in 10 more schools closing.

Attendance has dropped significantly in Miami-Dade County Public Schools, and the loss is accelerating. The district expects the number of students using private school vouchers in the next school year to increase by 10,000 and the number of students attending traditional public schools to decrease by about 8,000.

The Miami-Dade County School Board voted last month to close nine public schools across the county. Almost all of them have letters of intent from charter school operators under the Schools of Hope law, the Miami Herald reported. Notices of intent are proposals submitted by the state’s seven Hope operators that essentially call dibs on space inside of public schools. They’re part of a charter school application reviewed by the Charter School Review Commission. Miami-Dade County Public Schools did not respond to requests for comment.

Mope said changes in Florida’s education system have boosted the value of school real estate, a trend expected to continue as districts, developers and school operators rethink how education fits into the state’s rapid growth.