Charter management firm charging huge rent markups to charter schools

Charters’ 1,000% markup

By YOAV GONEN Education Reporter
Last Updated: 9:20 AM, April 30, 2012
Posted: 12:50 AM, April 30, 2012

Share on email Share on facebook More Sharing ServicesMore Print

EXCLUSIVE
A for-profit education firm is soaking taxpayers by subleasing buildings to the Brooklyn public charter schools it runs at astronomical rates — including one at an incredible 1,000 percent markup, sources said.
While the city Department of Education leases buildings in Brooklyn for between $5 and $25 per square foot, the Michigan-based National Heritage Academies subleases to the charter schools it operates for roughly $38 to $45 per square foot, according to a review of public school leases by The Post.
For example, NHA is leasing a former school building on Parkville Avenue in Kensington from the Brooklyn Diocese for approximately $264,000 per year, according to a church source.

Gregory P. Mango

Yet the firm billed the site, the Brooklyn Dreams Charter School, $2.76 million for rent and related charges there last year — a 1,000 percent markup, financial filings show.
Critics say it’s part of the company’s MO: putting considerable money down to purchase or renovate properties, charging sky-high rents to recoup its investment — and eventually turning a hefty profit.
“The school is great, but I can’t see why they pay such a high rate — it’s ridiculous,’’ griped Les Fontain, the father of two boys, in kindergarten and first grade, at Brooklyn Dreams.
But Cynthia Proctor, a spokeswoman for the State University of New York Charter Schools Institute — which approved charters for the NHA-managed schools in Bushwick and Kensington — countered that the need to use educational funds for such rent highlights the incredible challenge charter schools face in securing space in New York.
Most public charter schools get no funding for facilities, and mortgage lenders are wary of dealing with them because their charters are up for renewal every five years, supporters say.
“The bottom line is that if it wasn’t for NHA’s upfront investment in the real estate, the [Bushwick] school would probably not exist in private space,” Proctor said.
Financial records show that NHA has been charging more than $3 million per year in “occupancy” fees to that school — the academically successful Brooklyn Excelsior Charter School in Bushwick — for a building that the company bought in 2004 for $3.3 million.
Last year’s rental fees represented nearly 30 percent of the school’s $10.8 million in taxpayer funding.
But NHA officials said they’ve plunked down wads of cash to renovate the buildings, including more than $21 million for the Kensington school and $13.1 million at the Bushwick site.
The company also subsidizes the schools in their infancy — when state funding can’t cover both educational services and rent — including nearly $6 million over the past two years.
“Rents are negotiated by NHA and the school boards that choose NHA as its management partner,” said company spokesman Joe DiBenedetto. “NHA assumes all financial risks, makes needed investments to improve academic results, and typically waits up to 10 years to recoup its initial investment in a school it operates.”
The firm is one of the few for-profits in New York that manages all educational aspects of its charter schools, after being grandfathered in when state law abolished the practice in 2010.
Additional reporting by Ikimulisa Livingston
ygonen@nypost.com

Read more: http://www.nypost.com/p/news/local/brooklyn/rent_gouging_j0T0Gx2Q4RA1f9DRPLeuzN#ixzz1tXB83ru2