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Ann Arbor Learning Community Property & Facilities Assessment
Summary Findings
December, 2001
• Viola Cheung• Anthony DiNello• Graham Goodrich• Chantel McEldowney• Russ Owen
C O M M U N I T Y C O N S U L T I N G C L U B
R e a l P r o j e c t s , R e a l S e r v i c e
C O M M U N I T Y C O N S U L T I N G C L U B
R e a l P r o j e c t s , R e a l S e r v i c e
Prepared By:
Contents
Review of Project Objectives…………….. 03
Parent Surveys………………..………….. 06
Private & Charter School Comparables….. 19
Lease and Buy Considerations…………… 22
Comparative Financial Analysis…………. 27
Conclusions & Next Steps…….…………. 34
Current Lease Situation The current facility creates several challenges for AALC management and staff
School facility is crowded with current enrollment size
Does not have the capacity to achieve optimal enrollment size of 300-350 students needed to achieve financial flexibility (save student grant money) and to meet the target student enrollment stated in the Charter
Location does not offer several desirable utilities (e.g. kitchen, playground, gymnasium, library, etc.) needed to optimize the learning environment
Current landlord places many unreasonable limitations on AALC
AALC’s current lease is through Dec. 2004 and has paid a non-refundable capital contribution of $60,000 out total payable of $80,000
Project ObjectivesProject Objectives
AALC Property & Facilities Assessment
1) Understand parents’ perceptions and opinions on the caliber of AALC’s facilities in the context of the learning environment
2) Identify AALC staff and parents top priorities for change
3) Benchmark other schools approaches to managing growth and increasing demands on facilities
4) Evaluate the feasibility and expense associated with alternative lease, buy and build options
5) Determine the best possible course of action and identify next steps
Project ObjectivesProject Objectives
Project Objectives:
Contents
Review of Project Objectives…………….. 03
Parent Surveys………………..………….. 06
Private & Charter School Comparables….. 19
Lease and Buy Considerations…………… 22
Comparative Financial Analysis…………. 27
Conclusions & Next Steps…….…………. 34
Objectives of Parent SurveyOver 50 parents participated in the survey
1) Gauge parents’ satisfaction with the current state of AALC facilities and operations
2) Evaluate need perceptions for a variety of possible changes and/or additions so as to anticipate reaction
3) Develop a prioritized set of issues and goals to enhance the learning environment of AALC
Parent SurveysParent Surveys
Environment, Location & MaintenanceThe vast majority of parents were satisfied with the safety, sanitations, and efficacy of the learning environment
How satisfied are you with the learning environment currently provided by AALC?
Very SatisfiedSomewhat SatisfiedNeutralSomewhat Dissatisfied
Does the location of AALC cause you any concern for your child’s safety?
YesNo
How would you rate the school’s facilities in regards to sanitation and general upkeep?
GoodAverageBelow Average
• The location of AALC on Packard does not cause much concern for parents
• Over 80% of parents are happy with school and classroom maintenance
Very Dissatisfied
• 86% of parents are satisfied with the current learning environment
Excellent
Parent SurveysParent Surveys
47%36%
17%0%
40%46%
8%4%
2%
19%81%
Curriculum and Class SizeParents express comfort in current class size and express feelings of uniqueness in the curriculum
How satisfied are you with the curriculum currently offered by AALC?
Very SatisfiedSomewhat SatisfiedNeutralSomewhat Dissatisfied
How unique do you consider the curriculum currently offered by AALC to be?
Very UniqueSomewhat Unique
How effective do you feel the learning environment is given the current class size of 17 students?
Somewhat EffectiveNeutralSomewhat Ineffective
• Over 90% of parents consider the curriculum at AALC to hold some uniqueness
• Parents are happy with the class size (17 students per) and its contribution to the learning environment
Very Dissatisfied
• The current curriculum at AALC satisfies over 81% of parents
Very Effective
Not Unique at all
Very Ineffective
Parent SurveysParent Surveys
32%49%
13%6%
0%
27%65%
8%
58%35%
6%0%0%
Transportation, Lunch and Playground Equip. All three were viewed as positive additions, with playground equipment as an overwhelming favorite
If AALC were to provide daily transportation services, how often would your child use them?
• More than 50% of the parents would utilize transportation services regularly
5 times per week3-4 times per week1-2 times per weekNever
How would the addition of a gymnasium and/or other common playground equipment affect you child’s learning experience?
Greatly ImproveSomewhat ImproveNot AffectSomewhat Diminish
• Over half of the children would use a hot-lunch service at least 1-2 times per week
• The addition of physical equipment for exercise would greatly enhance the students’ learning experiences
If a low-cost hot lunch service were provided, how often would your child utilize this option?
5 times per week3-4 times per week1-2 times per weekNever
Greatly Diminish
Parent SurveysParent Surveys
38%48%
15%0%
13%25%
46%17%
46%13%17%
24%
0%
Class Optimization Parents value small class sizes and are sensitive to the prospect of increasing average class size
According to parents, optimal class size is:
– Less than 15……27%
– 15 to 17………...56%
– 18 to 20………...15%
– More than 20……2%
85% of parents feel that increasing class size by 3 students would reduce the effectiveness of their children’s education
Optimal Class Size
27%56%
15%
2%
Less than 15 15-17
18-20 More than 20
Parent SurveysParent Surveys
AALC Facilities & AmenitiesLack of adequate playground facilities cause the most concern for parents
Points of attention
– Playground
– Lunch Services
– Public Transportation
– Before/After School Day Care
Chart illustrates importance placed on various school additions (out of possible 5)
– Playground equipment overwhelming favorite
2.3 2.48
3.82
2.97
Transp
ortat
ion S
ervice
s
Lunch
Serv
ices
Playgr
ound
Equ
ipmen
t
Before/
After S
choo
l Day
Care
.
Average Importance Rating(5 = highest)
Parent SurveysParent Surveys
Prioritization and Tradeoffs When forced to choose between options, parents expressed interest in playground and lunch service enhancements
Trans 51% Lunch 49%
Gym 49% Plgd 51%
Trans 30% Plgd 70%
Day-Care 40% Lunch 60%
Gymnasium vs. Playground Facilities
Transportation vs. Lunch Services
Transportation vs. Playground Facilities
Day-Care Programs vs. Lunch Services
Transportation Services vs. Day-Care Trans 43% Day-Care 57%
• Parents were given five different choices between two independent options
• Results are illustrated as follows:
Parent SurveysParent Surveys
• Playground equipment and Gymnasium consistently chosen above other options
• Parents appear to value day-care program as their next best option
Survey Conclusions
Parents are generally satisfied with the school’s maintenance and upkeep, and general safety
Parents expressed interest in the addition of all of the following:
– Transportation & lunch services, playground and/or gym facilities, library, day-care program
When forced to choose, the majority favorite were the playground and gym facilities
Current facilities limit the ability of AALC’s management to address parents’ concerns and desires for change
Contents
Review of Project Objectives…………….. 03
Parent Surveys………………..………….. 06
Private & Charter School Comparables….. 19
Lease and Buy Considerations…………… 22
Comparative Financial Analysis…………. 27
Conclusions & Next Steps…….…………. 34
Comparable School Characteristics
Eleven private and charter schools were interviewed to understand their current operations, facilities and management characteristics
School ComparablesSchool Comparables
The average enrollment for a school sized K-8 is 300 students
The average school has been in existence for 4.5 years
The student to teacher ratio is 18-22 students per teacher
The common amenities found in over 50% of the 11 schools contacted were playground, gymnasium, and library
10 of 11 schools have a playground
General Characteristics
0
2
4
6
8
10
School Facility Characteristics
Comparable School Characteristics
School ComparablesSchool Comparables
Over 50% of the schools contacted were associated with an Education Management Organization
4 of the 5 schools that owned their facilities were associated with an EMO
Ownership- 5 owned their facilities- 4 leased- 2 were unknown
Funding - 3 were funded with grants
- 3 were funded with loans- 2 were funded by EMO’s- 3 were unknown
Funding and Management Characteristics
Contents
Review of Project Objectives…………….. 03
Parent Surveys………………..………….. 06
Private & Charter School Comparables….. 19
Lease and Buy Considerations…………… 22
Comparative Financial Analysis…………. 27
Conclusions & Next Steps…….…………. 34
Alternative Lease OpportunityTwo independent commercial real estate agents were engaged to identify all possible properties (min 25K sq.ft.) available for lease in the Ann Arbor and western Ypsilanti region
Lease ConsiderationsLease Considerations
The number of available properties for lease, capable of housing a school, is extremely limited
Lessor typically should budget $10-$15 per sq.ft. expense to renovate building to create a suitable school environment*
Office space is more plentiful; however, more expensive ($15-$20 per sq.ft. vs. $12-$15)*
Swisher Commercial recently worked with another charter school for 6 months, but could not find a suitable property
Most promising lease opportunity: 2333 South State Street – 50,400 total square feet on 4.12 acres of land with abundant parking and easy access to I-94 & US-23* (see next page for details)
Lease Findings
2333 South St. Offers Best Near-Term Opportunity
Lease ConsiderationsLease Considerations
Two-story building; 25K sq.ft. per floor
4.12 acres
Plenty of parking
Fully air-conditioned
Fully sprinkled building
Build to suit possible
Good location - easy access to I-94 & US-23.
Also opportunity to to buy at $2,000,000 (low Scio Township taxes but Ann Arbor address)
Details
Buy Opportunity
Buy ConsiderationsBuy Considerations
Similar to the lease market, properties available for purchase in the Ann Arbor and western Ypsilanti area are extremely scarce
AALC’s budget would be in the $1.5 - $3.0 million range due to fund restrictions associated with grants
Purchase would likely require two mortgages (primary and secondary for renovations requirements)
Near-term buying opportunity is only realistic if AALC leverage EMO capital and management resources
Most promising buy opportunity: 6200 Jackson Road – Class A office space 20,000 square feet on 8.7 acres of land
Purchase Findings
6200 Jackson Road Is Best Near-Term Buy Option
Buy ConsiderationsBuy Considerations
20K sq.ft. on 8.7 acres of land
Quiet location
Abundance of green space around the building
Cafeteria
Convenient I-94 access
Room for building expansion
New security system
Details
Would require renovation investment of office space to classroom environment
Contents
Review of Project Objectives…………….. 03
Parent Surveys………………..………….. 06
Private & Charter School Comparables….. 19
Lease and Buy Considerations…………… 22
Comparative Financial Analysis…………. 27
Conclusions & Next Steps…….…………. 34
Three Scenarios Were Considered
Financial AnalysisFinancial Analysis
Option 1: Analyzed the optimization of the current lease situation (10 year NPV analysis)
Option 2: Analyzed a lease for a much larger facility - a little more than twice as big as the current facility (10 year NPV analysis)
Option 3: Analyzed mortgage for much larger facility - also a little more than twice as big as the current facility (10 year NPV analysis)
Financial Analysis
Option #1: Optimize Current Lease Situation
Option #2: Lease a larger facility (25K sq.ft.)
Option #3: Mortgage Larger Facility
Results of AnalysisBuying a larger facility (option 3) represents the best long-term solution for AALC
Financial AnalysisFinancial Analysis
Option #3 (future mortgage) achieves the highest NPV at a little over $1.30 million and requiring capital of about $1.35 million
Option #2 (future lease) and it achieves a positive NPV at $0.18 million and requires capital of about $1.41 million
Option #1 (current lease) but achieves a negative NPV at -$0.22 million and requires capital of about $0.341 million over an extended period (losses over several years)
-$400,000
-$200,000
$0
$200,000
$400,000
$600,000
$800,000
$1,000,000
$1,200,000
$1,400,000
$1,600,000
Option :Current Lease
Option 2:New Lease
Option 3:Mortgage
NPV
Capital Required
Contents
Review of Project Objectives…………….. 03
Parent Surveys………………..………….. 06
Private & Charter School Comparables….. 19
Lease and Buy Considerations…………… 22
Comparative Financial Analysis…………. 27
Conclusions & Next Steps…….…………. 34
Conclusions & Recommendations
AALC’s mission, goals and service cannot be fully realized in the current facility In addition, the constraint on enrollment imposed by the current facility limits the
school’s funding from the State
Move out of current facility ASAP
Develop plan to purchase a facility in order to capture long-term financial benefits and achieve AALC’s growth and development goals From financial analysis, owning offers much greater benefit for same capital
requirement as leasing, and enables school to achieve growth objectives Complete control of facility will give administration and staff flexibility needed to
optimize the learning environment
Engage “flexible” EMO to access capital without compromising curriculum
EMOs allow AALC to immediately own premises without incurring high upfront capital investment
While parents expressed reservation towards partnering with an EMO, some of these organizations such as Helicon Associates offer flexible service arrangements and do NOT interfere into curriculum (see appendix)
A flexible EMO will allow provide management and administrative expertise and allow AALC to focus on curriculum, enrollment and teaching
Next Steps
Within next 2 months
1) Build consensus for option 3 or 2 among key stakeholders
2) Conduct risk assessment for the option chosen (e.g. legal and financial ramifications of breaking current lease)
3) Evaluate appropriate financing options, given strategic direction
4) Communicate decision to parents and build support and enthusiasm for new venture
Appendix
Education Management CompaniesWhile it is easy to make generalizations about EMOs, the opinions and experience of different schools interviewed varies considerably
Advantages
1) EMOs provide expertise in management and administrative support functions
2) EMOs become accountable for keeping the school out of financial trouble
3) Provide immediate access to capital for purchasing/renovating school facilities
4) Allow educators the time and flexibility to do what they do best - TEACH
Disadvantages
1) Some require the school to give up control of all employment, and business functions and responsibilities
2) Most exert influence and/or total control of curriculum
3) Many EMOs control deed and facilities expansion / renovation decisions
4) Many schools lose “uniqueness” in favor of cookie cutter approach
Helicon AssociatesProfile of a flexible EMO
Helicon does not dictate any curriculum requirements
Helicon gives their clients the ability to choose only the services that they need including:
-Accounts Payable/Receivable
-Fiscal Reporting/Compliance
-Grant Writing
-Budget Development/Management
-Board Meeting Development/Direction
-Student Data Processing
-Consultation on all educational issues
Helicon found financing for 5 new school buildings this year with the requirement of a 1% payment (Each individual school holds the deed to their building)