Unlocking Educational Achievement in Tennessee
In recent years, more and more charter schools have sprung up across Tennessee in a continuing effort to improve academic results for students of color and/or from low-income families, notably in cities like Nashville and Memphis. Today, students are going to class in modular buildings and refurbished furniture retailers, home-improvement stores, and churches.
But as the schools seek to develop and grow, their facilities development often hits financing roadblocks.
For example, in Tennessee, local bank mortgages rarely exceed 80 percent of a property’s value, while charter schools often need financing at 100 percent or more to cover development costs, and they tend to be in neighborhoods with low property values. In Memphis and Nashville, charter schools are multiplying but many are still start-ups with limited assets. They are public schools but don’t get public funding for facilities and most lack access to free facilities, so many have to compete in the private real-estate market.
Tennessee charter schools have increasingly turned to NFF and Boston Community Capital (BCC) for flexible financing to cover property acquisition, construction, and leasehold improvements. NFF and BCC have more loan-to-value flexibility than banks, often lend up to 90 percent of a property’s appraised value, and can go to 100 percent or even higher by using charter school credit enhancement grant funds from the US Department of Education. They have more flexibility to tailor terms to a nonprofit borrower’s needs by, for example, deferring principal repayment for a few years while a school adds grades and increases revenue.
“Community Development Financing Institutions like NFF and BCC can be great financing partners for charter schools, community health centers, and other nonprofits when traditional lending isn't the right fit for their facilities projects,” said Norah McVeigh, NFF’s Managing Director, Financing.
“Such partnerships help students get a high-quality education and provide new school jobs that contribute to the long-term economic viability of communities,” said Elyse Cherry, CEO of BCC.
NFF has supported more than 70 charter schools with $135 million in financing to date, including loans to Green Dot in California. To date, NFF and BCC have partnered with additional lenders to provide financing to six Tennessee charter schools:
In Nashville, Valor Collegiate Academies bought a defunct home-improvement store in 2016 but could only afford to renovate enough space for a middle school. Today, a $1.95-million loan is helping Valor ready space for nearly 800 high school students. The two schools will ultimately include 39 classrooms, six science labs, two art rooms, a gymnasium, cafeteria, and administrative offices.
And Purpose Preparatory Academy, which opened in 2013 with 90 Kindergarteners, today serves 380 K-4 students in a building the school purchased with help from a $1-million loan.
In Memphis, Gestalt Community Schools plans to utilize a $5.2 million loan to refinance a bank loan and buy a strip mall that houses its high school. Soon, Gestalt’s elementary school will move there too; they also plan to rent space in the mall to mission-oriented tenants.
Aspire East Academy used a $4.6-million loan to buy and renovate a former furniture store and its 7.5 acres of land. By 2020, Aspire plans to serve 450 K-5 students in 18 classrooms, a library, art room, technology room, science room, cafeteria, and playground.
Bluff City High School, part of the Green Dot Public Schools national network, plans to utilize a $3-million loan to help develop its site, former home of the Solid Rock Christian Church, toward its goal of enrolling 640 students in Grades 9-12 by 2021. The school opened last fall with 154 ninth-graders and plans to add a grade each year.
And Freedom Preparatory Academy put a $1.2 million loan toward the 2017 acquisition and renovation of a permanent home for one of its two elementary schools, which grew from 62 students to 504.
Click here to learn more about NFF's charter school financing options and here to apply for a loan today.