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News: Big REIT (Real Estate Investment Trust) Exits the Charter Real Estate Sector

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Carol Burris writes about the latest news from the charter industry. This is the same company that Valerie Strauss wrote about, called “Entertainment Properties Trust.” It’s CEO, Dennis Brain, told an interviewer that charter schools were a sound investment, had long waiting lists, and were guaranteed government revenues.

But that rosy picture has dimmed. The long waiting lists are fictional. Charters are likely to close down suddenly. In some states, charter enrollment is declining. The REIT lost confidence in the future of charter schools and liquidated its charter school holdings.

Burris writes:

EPR Properties (NYSE:EPR) is a  triple net lease real estate investment trust (REIT). What that means is that it buys properties and then rents them with the tenant picking up costs like insurance, improvements, and all utilities. Therefore, every dollar EPR makes off the lease is profit. 


EPR had a special relationship with Imagine Charter Schools. School House Finance, Imagine’s related organization, would buy the property. It would sell it to EPR. EPR would lease it back to School House, which would then lease it to one of Imagine’s charter schools at very high rates. 


EPR also had a special relationship with the for-profit charter management firm CSMI. It would buy their charter school’s buildings and then lease them to the schools. 

One of the CSMI schools wasCamden Community Charter School.  CSMI paid $300,000 to buy the land from the Camden Redevelopment Agency—the agency responsible for redevelopment efforts in the city. On April 9, 2013 CSMI sold the property to Education Capital Solutions LLC for $500,000, netting CSMI a two-week $200,000 profit.

Education Capital Solutions is the wholly owned subsidiary of Entertainment Properties Trust (EPR).  

In 2016 the school’s “operating lease” was $1,711,368. The next year it jumped to $1,871,506, which represents 17 percent of all school revenues. 

The school folded. But another charter came into the building for which the company could collect rent. 

Now EPR is getting out of the charter school business. It realized it was just too unstable. They have sold off their buildings to Rosemawr Management, LLC.

“Management cited competitive financing alternatives, which induced increasing earnings volatility of the charter school portfolio as the primary reason to sell it.  Additionally, the sell-off will improve overall rent coverage from 1.89x to 1.94x. ” 

Where is EPR going? It is going to start buying up casinos instead. 

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