CREW Presentation

Innovative Development, LLC

John Hardy and Catherine Harmon

UTAH CHARTER SCHOOL Investment & Development Opportunity

JORDAN SCHOOL DISTRICT HAS A PROBLEM..



= 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



• 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


• 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


ENROLLMENT PROCESS


• 1st year

Open enrollment or Lottery

• Subsequent Years

Kindergarten preference to siblings of current students.

Open enrollment or Lottery

PARENTS WANT CHARTER SCHOOL


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


• 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



• 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



SUSTAINABILITY STRATEGY

PROJECT COSTS


• 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?


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


• 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


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%


Initial Equity Contribution

20% None20% After

Preferred PaidGeneral Partners

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