Previous Section: Planning for a Future Charter School Facility

Site Acquisition

Usually one of the earliest details to shake out in facility planning is where the building is going to actually be located.  To the extent that you have not identified a site yet and you have some flexibility in location, there is some thought among charter school facility experts that the economic impact of COVID-19 may actually drive the cost of land and property down and present an opportunity for charter schools to acquire land at some discount.[1]  The theory is there may be owners with new, pressing cash needs that motivate them to sell land and property at a discount relative to pricing pre-COVID-19. 

Certainly, the timeline of your project is going to drive when you must acquire your site, so you may have limited ability to take advantage of fluctuations in the real estate market. But, to the extent that your project is a couple years out, there could be some value in exploring a site acquisition sooner than later.  Taking advantage of a post-COVID real estate market can mean a more affordable price and an ability to make the purchase without needing to borrow for it.

Keep in mind that the sale of the property, as well other comparable sales in the local market, inform a property appraisal.  While there may be a buyer’s benefit of participating in the post-COVID real estate market, one scenario that poses a risk for a charter school is acquiring a site too early and having a significant decrease in its market value between acquisition and closing on overall project financing.  There may be an unforeseen loan-to-value gap created if the land value decreases significantly after acquisition but before construction and financing is in place. For example, let’s say you acquire a piece of land for $1 million.  It’s subsequently appraised at $950,000.  The $50,000 decrease in value means that when you go to finance your facility project, the new gap could reduce the amount of debt available for construction activities by as much as $50,000 depending on overall project size.

SchoolPrint is a free service to charter schools who need assistance in identifying and working with quality construction service providers, or general assistance in navigating the facilities process. We provide the blueprint schools need to successfully complete their facility projects. If your current facility situation has been further exacerbated by COVID-19 and you need expert advice, please feel free to email us at SchoolPrint@lisc.org.