KIPP Academy Boston will construct a new charter school in Mattapan using $18.5 million in financing provided by Citizens Bank.
KIPP Academy Boston is part of a national network of 162 KIPP (Knowledge Is Power Program) public charter schools that primarily target underserved communities. Locally, KIPP serves 1,200 students at five schools in Lynn and Boston.
Bruce Figueroa, the head of Citizens’ not-for-profit division, said the bank’s relationship with KIPP Academy Boston grew out of its relationship with the Lynn affiliate.
“A few years ago, we discovered that KIPP Academy Lynn was expanding. They added higher grades, from kindergarten through fifth grade all the way up to high school, and we financed the expansion of that school,” he said.
KIPP Academy Boston started in 2012 with a founding class of 72 fifth-grade students. Today, KIPP Academy Boston Middle School serves nearly 300 students in grades five through seven and will be fully enrolled to serve grades 5-8 by 2016. KIPP Academy Boston Elementary School was founded in August 2014 and currently serves 70 kindergarten students. The new 53,000-square-foot, four-level school building is scheduled for completion in August 2016 and will house both schools to accommodate 600 students in grades K-8 when fully enrolled.
Citizens Bank’s not-for-profit division is comprised of 60 bankers across its 11-state footprint who specialize in three primary sectors: education, health care and human service providers. Figueroa said education represents the largest chunk of its not-for-profit business.
While education financing is a specialty business all its own, charter school financing entails its own special challenges, in no small part because these schools’ charters are up for renewal every five years. Since the state could potentially pull the school’s charter, the bank is taking a bit of an additional risk.
“It’s unusual for a bank to step in and provide financing during the first five year charter. Many of our charters we would wait until they’re into their second or third five-year period,” Figueroa said. “But because of the good experience we had with KIPP Lynn, we got comfortable with financing somebody in their first five years, and their performance academically has been really, really strong.”
He added that the school is also eligible for tax-exempt financing and that Citizens entered into an interest rate derivative to lock in a fixed rate now, rather than 18 months from now, to protect the school from rising interest rates.
“With charter schools, controlling your cost of capital is critical,” he said.
