Angela Johnston Derby Parent
Definitions Sale Lease ‐ back “An arrangement in which one party sells a property to a buyer, and the buyer immediately leases the property back to the seller” Public ‐ Private Partnership Not a business partnership, where partners share in decision making and risks & rewards. Instead, a business deal defined in a contract negotiated between 2 parties – a landlord & a tenant.
Elements: • BWDSB negotiate an agreement for the sale of Derby school (land & building) and subsequently lease it back for a defined term • A private investor (individual, corporation, NPO) purchases the property from BWDSB, operates the maintenance aspects of the facility, and makes all required improvements • BWDSB would make lease payments to the investor over the defined term • Contract could be structured such that BWDSB could buy the property back at the end of the term
Benefits: BWDSB perspective: • Converts an existing asset into cash, which can be used elsewhere (capital project needs, operating needs, future lease payments) • Removes the capital burden of renovating Derby school from BWDSB • Shifts the responsibility for managing the financing, planning, design & renovation construction of Derby to a private entity, while retaining control over the education purpose • Potential to create a model that could be applied to schools throughout rural Ontario • Promotes a positive relationship with community partners
Benefits: Investor’s perspective: • Steady cash flow for a defined term • Tax write offs in the form of depreciation on the building • Property may be available at end of term for their own purposes (ex. rental property, land value) • Return on investment
Benefits: Overall benefits: • Cost effectiveness of outsourcing renovation costs to local contractors by competitive bidding process • Creation of jobs in our community • Renovations to school to support the high quality educational program it already has (grants, AODA)
Challenges: • In ‐ depth analysis of the financial aspects of the transaction (fair value determination, operating costs, renovation costs) • Negotiation with local municipality in regards to property taxes • Develop a model How to identify a prospective investor? • Request for bidders? • How to evaluate a proposal? • Who will monitor lease & agreements? • How to measure building standards? • • Policies prohibiting a partnership with the private sector? • Deal must be customized to meet objectives
Summary: • The existing financial infrastructure does not meet existing needs • Need to think outside the box to arrive at a solution
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