Here’s the setup. CNBC is interviewing David Brain, head of a major investment trust, about why charter schools are such phenomenal money-makers for investors like him. Here’s the transcript.
Anchor: Charter schools have become very popular as parents seek more choice in educating their children. But are charter schools a wise addition to your investment portfolio? Well let’s ask David Brain, President and CEO of Entertainment Properties Trust. David, why would I want to add charter schools into my portfolio?
DB: Well I think it’s a very stable business, very recession-resistant. It’s a high-demand product. There’s 400,000 kids on waiting lists for charter schools, the industry’s growing about 12-14% a year. So it’s a high-growth, very stable, recession-resistant business. It’s a public payer, the state is the payer on this category, and if you do business with states with solid treasuries then it’s a very solid business.
Anchor: Well let me ask you about potential risks, here, to your charter school portfolio, because I understand that three of your nine “Imagine” schools are scheduled to actually lose their charters for the next school year. Does this pose a risk to investors?
DB: Well, occasionally—our Imagine arrangement’s on a master lease, so there’s no loss of rents to the company, although occasionally there are losses of charters in certain areas and they’re used to peculiar, particular circumstances. In this case it’s a combination of relationship with the supervisory authorities and educational quality; sometimes the educational quality is very difficult to change in one, two, or three years. It’s a long-term proposition, so there are some of these that occur, but we’ve structured our affairs so this is not going to impact our rent-roll and in fact you see this is maybe even a good experience as the industry thins out some of the less-performing schools and we move on to the best-performing schools.
Anchor: David there has been somewhat of a backlash to charter schools in some areas given their use of public money, as you noted. Any risk to the growth of charter schools generally?
DB: I don’t—there’s not a lost of risk, there’s probably risk to everything but the fact is this has bipartisan support. It’s part of the Republican platform and Arne Duncan, Secretary of Education in the Obama Administration, has been very high on it throughout their work in public education. So we have both political parties are solidly behind it, you have high demand, high growth, you have performance across the board, most studies have charter schools at even or better than district public education. So, I think it has some risk because it’s new and it’s emerging and it is a high-growth category. But at the same time I think much more’s going forward so it’s still a safe area for investment.
Anchor: You’ve invested in retail centers, ski parks, you’ve got charter schools, you’ve got movie theaters. If you could buy one thing right now, David, one type of asset in real estate, what would it be?
DB: Well, probably the charter school business. We said it’s our highest growth and most appealing sector right now of the portfolio. It’s the most high in demand, it’s the most recession-resistant. And a great opportunity set with 500 schools starting every year. It’s a two and a half billion dollar opportunity set annually.
Two and a half billion dollar opportunity set annually.