crew presentation
TRANSCRIPT
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Innovative Development, LLC
John Hardy and Catherine Harmon
UTAH CHARTER SCHOOL Investment & Development Opportunity
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JORDAN SCHOOL DISTRICT HAS A PROBLEM..
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John Hardy and Catherine Harmon
Innovative Development, LLC
= 1,780 Excess Enrollments123% of Capacity
Sunset Ridge Middle school11 portable classrooms, 120 %
capacity
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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
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4,301 TOTAL HOME SITESComplete, under construction & entitled
John Hardy and Catherine Harmon
Innovative Development, LLC
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• 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.
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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.
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390 - 54,900 STUDENTS IN 15 YEARS
Innovative Development, LLCJohn Hardy and Catherine Harmon
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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
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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
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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
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Math, Science, Technology and Engineering
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Visual/Creative Arts and Performing Arts
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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
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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
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FLOOR PLAN
Innovative Development, LLCJohn Hardy and Catherine Harmon
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Innovative Development, LLCJohn Hardy and Catherine Harmon
SUSTAINABILITY STRATEGY
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PROJECT COSTS
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PROJECT COSTS
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PROJECT COSTS
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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?
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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?
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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
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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
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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
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Innovative Development, LLCJohn Hardy and Catherine Harmon
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Questions?