With the State budget crisis weighing heavily on the minds of California School Boards, many questions are arising about the ability to fund future school facilities. While many bond measures have passed, the status of the ability of the State to match these funds is a big question mark. This in turn is halting construction on most major district campuses in California.

Several school districts in California are looking to more genuine Lease-Leaseback delivery methods to overcome these hurdles. Typically, California school districts have used temporary lease-leaseback ground leases to smooth out the procurement process, and simplify the bookkeeping that comes with more traditional delivery methods. Lease-leaseback works by the developer-contractor executing a site lease in order to develop the project and a facilities lease to design and build the project while the improvements and site are leased back to the District that eventually owns the improvements when the leases expire. This expiration date has typically been at the end of construction for K-12 Districts (paid off by district or bond funds), but may be shifting to a more traditional lease-leaseback approach with a longer expiration term allowing Districts to pay off the construction over a longer pre-determined timeline.

Traditional lease-leaseback delivery has existed on the private side of development for several decades, but true long-term lease-leaseback financing is not often utilized by K-12 Districts. School Districts are turning to private developer-contractors to help bridge this gap. Developer-contractors with access to financial capital can assist in implementing school facility construction that is at a standstill based on the State financial crisis. If a District is confident in its ability to pay for the school over time, a longer lease-leaseback expiration term may make sense. Districts can take advantage of current affordable construction rates, speedy procurement, and a low cost of capital.

If you are a district or client that would like more information on Lease-leaseback financing, and to see if it makes sense for your next project, Legacy Building Services can help. Contact us for a free evaluation of your school facilities program. Our funding and development relationships have been built over the past 30 years here in Southern California.