Imagine Schools: The crumbling accelerates

by David Safier

NOTE: This is the tenth in a series of recent posts examining Imagine Schools. (Here are 1, 2, 3, 4, 5, 6, 7,  8 and 9.) If you have ideas or information to add, please leave comments at the end of the post or email me at safie[email protected]. I keep all email correspondence confidential.

The steady slide of Imagine Schools into insolvency may have just hit a slick patch and picked up speed. We already knew 6 Imagine Schools closed in St. Louis in June leaving the buildings empty. The fact that 5 of the buildings are owned by a separate company, Entertainment Properties, makes it sound as if Imagine won't be stuck with the buildings, but this wasn't a standard deal where one business sells a building to another business and that's the end of it. Imagine Schools is either responsible for paying rent on the empty buildings, or it has to swap them for full school buildings elsewhere.

Entertainment Properties announced today in a news release it has engineered the swap of 3 of the empty buildings. I learned from the release that Imagine actually has 9 empty buildings owned by Entertainment Properties, not just the ones in St. Louis.

The Company continues to explore solutions for the remaining schools. The schools are included as part of a 27 school master lease that is supported by a corporate guarantee and a substantial letter of credit and as such, the Company expects that there will be no monetary default at this time.

Entertainment Properties CEO David Brain said he expected his company would suffer no economic loss. That means Imagine Schools will bear the economic burden, to the tune of $36 million worth of empty schools. That's 6 schools that usually pay an average of a million a year apiece in rent. If I understand correctly, that means Imagine will be paying about $6 million a year to Entertainment Properties for the empty buildings.

Imagine CEO Dennis Bakke knows he needs to expand or die. But who would grant him a charter to open a new school with the corporation's reputation for low student achievement scores and its current financially tenuous situation?