When a school or institutional lease can support buying a building

What education leases are priced at

Term and the guarantee move the price more than the building does. Every figure below is an asking price, not a closed sale; none is in South Carolina, and none is a start-up school's lease.

Brokers have said early-learning buildings historically traded at higher cap rates "largely because of their smaller guarantees", and that full corporate guarantees "tend to be the exception rather than the rule". Most such buildings are 8,000-12,000 sq ft, free-standing and in residential areas.

Who stands behind the rent, and what stops it

Test the credit at the payer behind the tenant, not at the lease's face. A charter school's rent comes from public per-pupil money that follows enrollment and depends on the charter being renewed. A state agency's rent comes from an appropriation the state can withdraw.

The record on charter credit: 3.3% of charter bond dollars had defaulted by 2015, "mainly because the authorizer of the school did not renew their charter due to sub-par academic performance". Charter bonds had the most defaults of 32 municipal categories in 2025 and the first half of 2026, and rating agencies call start-up charters "particularly vulnerable". Fourteen South Carolina charters closed in the decade to 2023.

The lease terms that change the value

• Term. The same income is worth about 42% more with 16-20 years left (5.65%) than with under five (8.00%). Charter lenders warn schools that a landlord "may prefer a lease term shorter than your charter".
• Net or full service. On a triple-net lease the tenant pays operating costs, insurance and tax. On the state's full-service form the landlord does, and a for-profit landlord with a state or college tenant is taxable: about $72,000-$96,000 a year at a $3.3M value in Spartanburg.
• Escalators. The leases above rise 2% a year, 3% a year, or 10% every five years.
• A purchase option. Charter-facility developers' leases commonly let the school buy within one to seven years, most often four to five, at the project's cost or 103-115% of it. South Carolina charters may buy by installment purchase or option. An education REIT that sold its 47 charter schools in 2019 cited bond financing that made its income volatile, and its accounts show fees from schools exercising buy-outs.

The rent a purchase needs

Rent needed = basis × cap rate ÷ rentable sq ft. The table applies it to the 19,728 sq ft campus used as the example on this page; the calculator lets you change every input.

On a full-service lease with a taxable owner, add operating costs ($3.00-$6.50 per sq ft assumed) and tax: the price alone then needs about $20.12-$25.31 per sq ft at government-lease cap rates of 8.06-8.34%. Before reserves, vacancy and leasing costs. Not a valuation.

What each tenant type supports

How lenders finance education buildings

Across lenders: rent or debt service covered at least 1.10-1.20 times, commonly 30 or more days of cash, and real-estate cost below 15% of the school's income. No lender's interest rate was available, so debt service is not modelled here.

Property tax depends on the tenant

South Carolina exempts property owned or leased by a public charter school, and an appeals court applied that in 2018 to a private company's campus leased to a charter. A for-profit landlord with a state agency or college tenant is taxable. A 1972 Attorney General opinion read the school exemption as covering only premises "actually occupied by a school", so space let to anyone else is likely taxable; whether today's text carries that limit for a leased charter campus has not been settled. Property tax by occupant.

If the tenant leaves

The building is worth far less than it cost, and its likeliest buyer is another school. Over 40% of the shuttered district schools reused in 12 large cities went to charter schools, and most sold for $200,000-$1M.

• A closed Philadelphia charter's campus went at auction for $810,000 on a $3.5M loan (2011).
• A defunct Ohio online charter's 138,000 sq ft headquarters sold for about $23 per sq ft (2018).
• A bankrupt Chicago charter operator accepted $11M for a building that cost $27M to build (2026).
• In a study of 430 charter loans, losses turned on "demand for school facilities in local market" and "debt per student".

In Spartanburg, recorded resales of churches, halls and day-care buildings ran at $7 to $77 per finished sq ft. At those prices a vacant 19,700 sq ft campus would fetch about $0.14M-$1.52M, a loss of 54-96% against $3.3M. That is the case for buying only once a tenant's lease is signed.

A worked example: 325 South Church

One parcel of 2.49 acres with a 12,128 sq ft block building and a 7,600 sq ft metal building, zoned for institutions only, offered at $3,300,000 (about $167 per sq ft). Run through the table, it works as an investment only with a signed 15-20-year triple-net lease from a charter school of roughly 140-330 students, with the campus exempt and delivered vacant. No state, college, training or speculative lease read carries the price.

• Occupancy. No public source says whether or when the current occupant will leave, or why the property is for sale.
• Systems. Whether Building 1 is air-conditioned is not established; cooling and a fire alarm would cost about $0.33M-$1.54M if absent.
• Exit. The zoning permits institutions only, not offices or warehouses, so a vacant campus resells to another institution (the zoning).
• Timing. Whether the seller would close only once a tenant's lease is executed is not known.

For the school's side of the same transaction, see opening or financing a charter school campus.

What to establish before committing