1 Predevelopment Suzanne Keech Corporate Managing Director, Studley, Inc. June 2010

2 Facilities Process Overview

3  Real estate—second highest expense for schools  Financial viability — dependent on “smart” decisions  Quality of space — linked to student performance  Error/misstep — significantly impacts space quality and cost Why Is Predevelopment So Important? 3

4 Thurgood Marshall Academy’s First School

5 Blue Castle/Thurgood Marshall Academy Facilities

6 Predevelopment Topics  The process  The team  Site selection Qualitative and quantitative evaluation  Ownership vs. lease  Feasibility analysis Sources and uses document Pro forma  Due diligence

7 The Predevelopment Process  Step 1: Build the team.  Step 2: Review and refine the educational facilities plan.  Step 3: Identify all feasible real estate alternatives.  Step 4: Evaluate each alternative.

8 The Predevelopment Process  Step 5: Rank alternatives.  Step 6: Recommend site to Board of Directors.  Step 7: Negotiate terms and finalize documentation.

9 “School” Charter School Board of Directors Parents/Students School Designated Representative Legal Counsel Owner’s Representative and Construction/ Project Manager Government Relations Advisor Real Estate Broker Architect Engineer General Contractor Environmental Consultant Other Consultants The Team

10 Selection Criteria for Team Members  Qualifications/experience on similar projects  Professionals dedicated to project  Fee structure  References

11 Advice for Building a Successful Team  Hire based on qualifications/experience, team, references, and fee.  Outline scope of services, method of payment, and time frame for completion in each contract.  Exercise right of termination if performance is unsatisfactory.

12  Property’s conformance to education specifications  Location  Condition of property and physical features of site Site Selection: Qualitative Evaluation Criteria

13  Lease terms Length of term Sublease and assignment Renewal rights  Legal and timing issues  Other risk factors Site Selection: Qualitative Evaluation Criteria

14 Site Selection: Quantitative Evaluation Criteria  Lease or own Economic terms—purchase price or lease rate  Budget Operating—cost of utilities, repairs and maintenance, taxes (if applicable) Capital—cost to improve the space, renovate the existing structure, or build a new one

15 Ownership or Lease: Economic Terms 15 OwnLease Purchase price—equity and debt required Rent and rent escalations Cost of operating expenses and real estate taxes (if applicable) Cost of capital improvements Cost of tenant improvements and landlord’s contribution

16 Ownership: Advantages and Disadvantages 16 AdvantagesDisadvantages Long-term control of property Amount of money required upfront Asset appreciationOngoing capital and maintenance responsibilities Control of operating costs by elimination of rent escalation Potential savings in real estate tax exemption

17 AdvantagesDisadvantages Less capital required up front Expend capital on a building you don’t own Limited time commitment to property Term is limited Flexibility May have less responsibility for capital maintenance of property Lease: Advantages and Disadvantages

18 Feasibility Analysis  Process of combining the economic terms of each alternative with the economic resources of the school  Key documents Sources and uses Pro forma

19 Sources and Uses

20 Pro Forma

21 Due Diligence 21  Conduct environmental survey.  Conduct title search and review.  Ensure conformance with zoning.  Identify the “unknowns” and ensure that both the risk and associated monetary obligations are accounted for in the program.

22  Ensure team synergy.  “Am I responsible for that?” Outline scope of work in every contract.  Feasibility analysis demonstrates school’s long- term economic viability.  Who created that budget anyway? Refining and updating the budget at every stage is critical. Predevelopment: Key Take-Aways

23 Q & A

24 Thurgood Marshall Academy’s Home

25 Suzanne Keech Corporate Managing Director, Studley, Inc. P: > F: National Charter School Resource Center th Street NW, Suite 500 Washington, DC Phone: Fax: