Innovative Development, LLC

John Hardy and Catherine Harmon

UTAH CHARTER SCHOOL Investment & Development Opportunity

JORDAN SCHOOL DISTRICT HAS A PROBLEM..

John Hardy and Catherine Harmon

Innovative Development, LLC

= 1,780 Excess Enrollments123% of Capacity

Sunset Ridge Middle school11 portable classrooms, 120 %

capacity

FUTURE DEMAND FOR SCHOOLS IN COPPER HILLS AREA

West Jordan City

• 16,437 population growth 2013-2020

• 4820 housing units

• 4,676 total new students

Copper Hills Area

• 3,295 K-9 students

• Projected excess enrollments for

grades K-9: 5,016

• Student population will be 168% of

current school capacities

4,301 TOTAL HOME SITESComplete, under construction & entitled

John Hardy and Catherine Harmon

Innovative Development, LLC

• Current Solutions: Portable classrooms –

Over 260 in use District Wide Year-round schedules –

Expanding for 2014-15 school year. Boundary re-alignment/pocket

bussing – Starting 2014-15 school year.

Double sessions -

AM/PM Schools

JORDAN SCHOOL DISTRICT SOLUTIONS

Innovative Development, LLCJohn Hardy and Catherine Harmon

• District plans for student growth:

Proposed $495 million bond to fund more schools rejected by voters.

AN INNOVATIVE SOLUTION:CHARTER SCHOOLS

Innovative Development, LLCJohn Hardy and Catherine Harmon

• Utah Charter Schools are Public Schools

• Open Enrollment, Cannot Discriminate

• Tuition Free

• Oversight provided by Utah State Charter Board.

390 - 54,900 STUDENTS IN 15 YEARS

Innovative Development, LLCJohn Hardy and Catherine Harmon

ENROLLMENT PROCESS

Innovative Development, LLCJohn Hardy and Catherine Harmon

• 1st year

Open enrollment or Lottery

• Subsequent Years

Kindergarten preference to siblings of current students.

Open enrollment or Lottery

PARENTS WANT CHARTER SCHOOL

Innovative Development, LLCJohn Hardy and Catherine Harmon

2014-2015 School Year

• Early Light Academy• Kinder: 35• 1-9: 11• Waiting List: 1,500+

• Hawthorne Academy• Kinder: 40• 1-9: 15• Waiting List: 1,000+

• Providence Hall• Kinder: 45• 1-5: 0• 6-12: Expanded for next year.• Waiting List: 4,059

BUSINESS OVERVIEW

Innovative Development, LLCJohn Hardy and Catherine Harmon

• Build-to-Suit Charter Schools

• Long-Term NNN Lease w/ Purchase Option

• Under-Served Market (Jordan School District)

• Building Size Based on Student/SF

• Low-Cost, Sustainable Facilities that Focus on Providing Better Education

• School Curriculums Focus on Arts/Crafts or Math/Science/Tech

• Leverage for Max Profit

Math, Science, Technology and Engineering

Visual/Creative Arts and Performing Arts

PROJECT OVERVIEW

John Hardy and Catherine Harmon

Innovative Development, LLC

• 7460 South 5600 West, West Jordan, UT

• Grade K-8 Charter School—Build to Suit

• Land Size: 5 acres

• Two-story, 45,500 SF building

• Max Capacity: 700 student

SITE PLAN

Key Spaces

· Administrative Wing: Offices Entrance Foyer Kindergarten Classrooms Kindergarten Yard

· Classroom Wing: 28 Classrooms 6 Shared / Flex spaces

· Festival Wing: Festival Hall / Gym

 

Administrative

Classroom

Festival

FLOOR PLAN

Innovative Development, LLCJohn Hardy and Catherine Harmon

Innovative Development, LLCJohn Hardy and Catherine Harmon

SUSTAINABILITY STRATEGY

PROJECT COSTS

PROJECT COSTS

PROJECT COSTS

Innovative Development, LLCJohn Hardy and Catherine Harmon

• Lease: 20-year NNN w/ Purchase Option

• Lease Rate: % of Cost (Approx. $819,420 in year 1)

• 2% Annual Lease Escalation

• No Operating Expenses (NNN Lease)

• Total Project Cost: $7,804,000

• Debt: $5,853,000 (75% LTC)

• Equity Required: $1,951,000

• Annual Debt Service: $453,882

• Year 5 NOI: $886,967

• 5-year IRR: 37.25%

DEVELOPER PROFORMA

My Child’s Future Is Worthy Investing In. Isn’t Yours?

Innovative Development, LLCJohn Hardy and Catherine Harmon

• Lease: 20-year NNN w/ Purchase Option

• Lease Rate: % of Cost (Approx. $819,420 in year 1)

• 2% Annual Lease Escalation

• No Operating Expenses (NNN Lease)

• Total Project Cost: $7,804,000

• Debt: $5,853,000 (75% LTC)

• Equity Required: $1,951,000

• Annual Debt Service: $453,882

• Year 5 NOI: $886,967

• 5-year IRR: 37.25%

DEVELOPER PROFORMA

My Child’s Future Is Worthy Investing In. Isn’t Yours?

Innovative Development, LLCJohn Hardy and Catherine Harmon

DEVELOPER PROFORMA

Cash Flow Projections Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6Gross Potential Income

Base Rental Income $0 $819,420 $835,808 $852,525 $869,575 $886,967 $904,706Vacancy $0 $0 $0 $0 $0 $0 $0

Effective Gross Income $0 $819,420 $835,808 $852,525 $869,575 $886,967 $904,706Less: Operating Expenses $0 $0 $0 $0 $0 $0 $0

NOI $0 $819,420 $835,808 $852,525 $869,575 $886,967 $904,706

Acquisition & Site Improv $871,200Construction Costs $6,932,800

$7,804,000Disposition Price $10,230,294Selling Costs ($306,909)Net Selling Price $9,923,385Unlevered Cash Flow ($7,804,000) $819,420 $835,808 $10,775,910Debt Service/Payoff ($453,882) ($453,882) ($6,307,548)Levered Cash Flow ($1,951,000) $365,538 $381,927 $4,468,362

Disposition Price $10,643,598Selling Costs ($319,308)Net Selling Price $10,324,290Unlevered Cash Flow ($7,804,000) $819,420 $835,808 $852,525 $869,575 $11,211,257Debt Service/Payoff ($453,882) ($453,882) ($453,882) ($453,882) ($5,316,561)Levered Cash Flow ($1,951,000) $365,538 $381,927 $398,643 $415,693 $5,894,696

Cash on Cash 18.74% 19.58% 20.43% 21.31%Annual Debt Service at Market Rate $453,882 $453,882 $453,882 $453,882 $453,882DSCR 1.81 1.84 1.88 1.92 1.95

Annual Debt Service at Phantom Rate $523,661 $523,661 $523,661 $523,661 $523,661DS at Phantom Rate 1.56 1.60 1.63 1.66 1.69

PROFORMA

Innovative Development, LLCJohn Hardy and Catherine Harmon

• Public school revenue: $5,883/student (grade K-8)• Monthly rent: $819,421• Facility expense (rent or mortgage) > 25% of total revenue• At full enrollment: 19.90% rent to income ratio• At 80% enrollment: 24.87% rent to income ratio

SCHOOL FACILITY EXPENDITURE

Fully Enrolled 80% EnrolledTotal Students 700 560Average funds per student $5,883 $5,883

Total Gross Revenues $4,118,100 $3,294,480

Rent/Income Ratio 19.90% 24.87%

Sources of RevenueGrades K-8

Innovative Development, LLCJohn Hardy and Catherine Harmon

INVESTMENT OPPORTUNITY

• Seeking 80% equity partner• Waterfall distribution structure• Preferred return: up to 12%

Partnership Type Party Name%

OwnershipPreferred

ReturnDistribution

$220,000 Deferred Dev. Fee

$170,200 Cash

$1,951,000 100%Total Equity

CAPITAL STRUCTURE

80% After Preferred Paid

Limited PartnersOutside Cash

Investors$1,560,800 Cash 80% 12.00%

Innovative Development, LLC

Initial Equity Contribution

20% None20% After

Preferred PaidGeneral Partners

Innovative Development, LLCJohn Hardy and Catherine Harmon

Questions?