My investment tip for the DeVos era. Charter school real estate.

Clockwise from top left: the Coral Springs – Imagine School, Imagine At South Vero, Plantation – Renaissance Charter School, Championship Academy of Distinction Davie Campus, and Charter School Capital CEO Stuart Ellis

I'm thinking back to the time when hedge-fund school reformer Whitney Tilson mocked me for suggesting that he and his investment group were profiteering from privately-run charter schools.

"Trying to make a killing in the charter school business"?! Yeah, that's right, the charter school business is so profitable that I'm telling all my friends in the hedge fund business that they're in the wrong business. My message: "If you really want to make a lot of money, start a charter school!" LOL!

Turns out I was spot-on and he was covering up. 

So this is the time of year I like to hand out more free investment advice to my readers. You're welcome. 

With the appointment of Betsy DeVos as Trump's education chief, charter school real estate profiteers and corporate reformers like Tilson are rubbing their hands together with glee. This is a great time to get into that market while stock prices are still relatively low. 

Case in point...The Real Deal: South Florida Real Estate News reports:

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. 

The deal breaks down to $17,935 per enrolled student. Not bad.

More from the Real Deal...

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.

Of course, if profiteering off of the lives of primarily poor, black and Latino students makes you puke or keeps you from facing yourself in the mirror, I would suggest you find another area of investment.  

Adding charter schools to their investment portfolios

There's a couple of good Schooling in Ownership Society pieces in the media today. The first comes from my favorite education writer, Valerie Strauss (The Big Business of Charter Schools) in her Answer Sheet column, in today's Washington Post. 

Valerie Strauss

She has a link to one of my favorite headlines of all time at The Motley Fool investment blog. 

From Waterparks to Charter Schools, EPR Properties Has You Covered

 Are you looking to invest in giant water slides or movie theaters? How about charter schools and wineries? EPR Properties (NYSE: EPR  ) owns properties in all of these businesses and more.

Valerie helps make my case that public education has been a profitable business for the charter profiteers at the expense of students, families, communities and taxpayers.

When I first offered up that notion a decade ago, I was ridiculed by the very profiteers themselves.

"Trying to make a killing in the charter school business"?! Yeah, that's right, the charter school business is so profitable that I'm telling all my friends in the hedge fund business that they're in the wrong business. My message: "If you really want to make a lot of money, start a charter school!" LOL! -- Whitney Tilson 

LOL! indeed. In 2007, hedge-funder Tilson chided me for implying that there was a profit to be made in the charter school market while he and his group DFER were pursuing exactly that course.

Then there's the story of former football great, "Neon Deion" Sanders who tried to make a killing in the charter school business with Prime Prep Charter only to fail, fall into disrepute, and disgrace the once viable brand he worked so hard to create. Prime Prep was recently named by non-profit Children at Risk as the worst academic institution in North Texas. Don't miss this excellent piece (The Miseducation Of Deion Sanders) on his fall from grace, by Caleb Hannan at DeadSpin.

Tilson short-selling K12Inc.

Hedge-funder Tilson

You would think that the online learning company, K12Inc. would find synergy with hedge-funder Whitney Tilson, the money bags behind DFER and a co-founder of TFA and KIPP board member. But no! Tilson would never let ideological unity get in the way of super-profits. So Tilson is having his T2 Fund short-sell the hell out of K12 stock, hoping the company collapases. In fact, he calls the company “a catastrophe for education” in spite of solid financials.

So why is Tilson shorting K12? In addition to his research alleging that conditions and academic performance at each of K12’s online academies have declined significantly since its IPO, Tilson said he believed companies like K12 undermine the charter school movement in which he is deeply entrenched and that he has spent years fighting for.

“I try and separate my emotion from whether it’s a good investment,” Tilson said.

I could have told him and his investors that months ago. In fact, I did just that, last November. But would they listen? NOOOO. Now writes Buzz Feed,

The king of the privatized virtual learning world, K12Inc. has investors checking to see if they're still wearing their shorts. The problem continues to be extravagant costs stemming from huge salaries paid to top execs, plus K12 students scoring behind kids in brick-and-mortar schools.

So on one rare sunny day, Tilson and I will hopefully both be celebrating ( him with champagne and me with 4-buck Chuck) the death of K12Inc.

The "Big Enchilada"

"Trying to make a killing in the charter school business"?! Yeah, that's right, the charter school business is so profitable that I'm telling all my friends in the hedge fund business that they're in the wrong business. My message: "If you really want to make a lot of money, start a charter school!" LOL! -- Whitney Tilson

LOL! indeed. In 2007, hedgefunder and charter school maven, Whitney Tilson chided me for implying that there was a profit to be made in the charter school market and that he and his group DFER were pursuing exactly that course, under the banner of school reform. It was Tilson himself, a couple of years later however, who let the cat out of the bag in a New York Times article by Joe Nocera:

Charter schools, explained Whitney Tilson, the founder of T2 Partners and one of their most ardent supporters, are the perfect philanthropy for results-oriented business executives. For one thing, they can change lives permanently, not just help people get by from day to day. For another, he said, “hedge funds are always looking for ways to turn a small amount of capital into a large amount of capital.”

A wealthy hedge fund manager can spend more than $1 million financing a charter school start-up. But once it is up and running, it qualifies for state funding, just like a public school. 

The profitability of school reform, was also pointed to by Jonathan Kozol back in 2007, when he cited a NationsBanc Montgomery Securities prospectus in his column published byHarpers, writing:

“The education industry represents, in our opinion, the final frontier of a number of sectors once under public control that have either voluntarily opened” or “been forced” to open up to private enterprise.

The education industry, the bank concludes, represents the largest market opportunity since health care services were privatized during the 1970s. While college education can offer “attractive investment returns, the larger developing opportunity is in the K-12 EMO [Education Management Organization] market,” it observed. “The K-12 market is the Big Enchilada.”

Tilson would later refer to the ed reform business as a diamond in the rough, a business the market has left for dead, "but a savvy investor could turn for a profit." A big inner-city school system, said Tilson, "is kind of like that — the General Motors of the education world. "

How Zuckerberg's money is being spent

According to this story in the Newark Star-Ledger, records obtained by the Education Law Center in Newark show that of the first $13 million spent out of the total $148 million donated, about a third has been been spent since September 2010 to pay political and educational consultants and contractors.

There's plenty to go around, especially if you're friends with Mayor Booker or Ed Commissioner Chris Cerf. The pass-through is called the Foundation for Newark's Future. Here's who's on the board (don't laugh).

Getting a return on their "investment" in public education [Archived]

Thursday, June 7, 2007

June 2nd

We see a school...they see a Toyota

If you want greater insight into how the Ownership Society entrepreneurs use their money to drive public school policy, look no further that the May 31st New York Sun where where reporter Elizabeth Green takes us into the world of big-time ed investing.

A money manager recently sent an e-mail to some partners, congratulating them on an investment of $1 million that yielded an estimated $400 million. The reasoning was that $1 million spent on trying to lift a cap on the number of charter schools in New York State yielded a change in the law that will bring $400 million a year in funding to new charter schools.

Wow! How would you like to get a return of 400% annually on your investments? You could, if you had a name like Ravenel Boykin Curry IV.

The money managers who were among the main investors in this law — three Harvard MBAs and a Wharton graduate named Whitney Tilson, Ravenel Boykin Curry IV, Charles Ledley, and John Petry — are moving education-oriented volunteerism beyond championing a single school. They want to shift the political debate by getting the Democratic Party to back innovations such as merit pay for teachers, a longer school day, and charter schools.

I just like saying, "Ravenel Boykin Curry IV." Friends call him "Boykin." Here a story about his wedding , if you're interested. My invitation must have gotten lost in the mail.



However, I couldn't find anything in his background that would make him a legitimate educator or policy expert. But Boykin's wife, Celerie Kemble (left), seems knowledgeable about lots of stuff.

From SFGate :

Palm Beach bred and Harvard educated, Kemble can declaim with Clintonian stamina on topics like charter schools, the foibles of her class and decorating theory. "Decorating styles right now are like politics," she said, noting that they both cleave to the middle.

More metaphors...

Why do money-manager types get to bring their own metaphors and similes to the education table? I mean decorating styles? cleavage? And what are the foibles of her class anyway?

Wait! How about this one--Toyotas?

From Sun story:

As investors, the group's leaders spend their days searching for hidden diamonds in the rough: businesses the market has left for dead, but a savvy investor could turn for a profit. A big inner-city school system, Mr. Tilson explained, is kind of like that — the General Motors of the education world. "I see very, very similar dynamics: very large bureaucratic organizations that have become increasingly disconnected from their customers; that are producing an inferior product and losing customers; that are heavily unionized," he said. A successful charter school, on the other hand, is like "Toyota 20 years ago."

Hear that kids and teachers? Your charter school is like a 20-year-old Toyota. If I were you, I'd find out where that beater is headed and who's driving?

Posted by Mike Klonsky at 2:27 PM