I went down a significant rabbit hole trying to understand a Philadelphia charter school bond issuance last week. It almost ended me. I was reading it before passover seder. I couldn’t stop myself from reading it when Thisbe our ten-month old woke me up crying one night. I tweeted a lot.
I think I finally came to some understanding about the Philadelphia Authority for Industrial Development’s (PAID) limited offering memorandum on a nearly $53 million bond it issued last year.
Here’s a post breaking down some of the news in this issuance, as well as what we should call this Performing Arts Charter School. I did so much writing I’m going to need at least three or four more posts, so buckle up.
(I may need to take a little break after this since I’m starting to feel the sadness Bruce Baker talks about when spending a lot of time thinking about school funding.)
Every bond issuance has news. The news in this issuance is that ‘String Theory’, or the swarm of entities (dis)connected to it, is acquiring another property at 2632 South Broad Street. It’s going to renovate the building and use it for elementary education. They’re borrowing $6,147,211.38 for the acquisition and $1,507,278.01 for renovation.
But that’s just $7,654,489.39. The issuance is for nearly $53 million. What’s the other $45 million going to?
I’m not entirely sure. What I know is that ‘String Theory’ —which, again, doesn’t just mean a school but also a pseudo-school district/corporation that’s formed around it—is adding 2632 South Broad Street to its list of real estate holdings, for which it is still in debt. It already owns 2630 South Broad next door, for instance, as well as three other properties on Ritner Street and Vine Street
The biggest of these is the old GlaxoSmithKline building on Vine Street where the high school and middle school are. They’re now expanding the elementary school on Broad. All these properties together constitute a ‘project’ worth about $64 million. To acquire Vine Street, ‘String Theory’ had to take out what was, at that time, the biggest loan to date for a charter school in Philly history.
This 2020 bond issuance is partially to take out a loan for the new property, like I mentioned, but it’s also to take out another loan to pay back the loan ‘String Theory’ took out to buy Vine Street in 2013.
But actually it’s not that simple.
This loan—bare with me—is (I think) to pay back the loan that PAID took out on ‘String Theory’s’ behalf in 2013, and which PAID maybe paid back partially, which means that ‘String Theory’ needs to pay PAID back for it. But ‘String Theory’ doesn’t have that kind of money, so PAID is taking out another loan for ‘String Theory’ to pay PAID back for the 2013 loan (in addition to the new loan for the new acquisition).
One person, Javier Kuehnle, controls this project and all the money flowing to and from it. His name is attached to all the (dis)connected but essential parts of the apparatus developing this real estate. I talked a bit about him in a previous post on the 2013 issuance. He sells specialty car parts and looks like this:
This deal works out well for everyone involved because interest rates are still really low. It looks to me like this is also a kind of refinancing of the original 2013 bond, whose interest rate was 8%. This loan’s getting half that rate at 4%. Thanks Federal Reserve! Cheaper money!
I think, anyway! I’m not 100%.
Again, the news is that ‘String Theory’ is engaged in a real estate development project, controlled by Javier Kuehnle, now worth over $63 million in Philadelphia. In 2020, they borrowed more money to add to their footprint in the city and help them pay back some of the money they’ve borrowed to do it, all for half the interest rate.
String Theory Development Corporation
Let’s pause. I don’t like writing ‘String Theory’. How should we talk about this thing called String Theory Philadelphia Performing Arts School that engages in all this real estate development?
I know charter schools have a chip on their shoulder about being ‘just like’ public schools and not being corrupt or shady. Instead, they’re good schools run by good-hearted people trying to ensure educational excellence by providing families with a choice of where to send students.
But come on. Let’s be real. This ‘school’ is a real estate development corporation.
It’s not a typical real estate developer, in the sense that it has an educational mission and, as it goes out of its way to demonstrate in painful repetitive detail in the bond issuance, everything is non-profit. But, as I’ll show later, it is not publicly controlled though it receives significant public funds.
Of course, the people behind this development corporation need to go to these lengths because all their moves and holdings—including the interest payments on the loan they’re getting from an anonymous ruling class cabal—are tax-exempt. And if things go south for String Theory, Javier Kuehnle becomes the owner of the property, which certainly isn’t a good look. I’ll go into this later.
The question right now is what do we call ‘String Theory Performing Arts School Philadelphia’. It’s certainly more than a school.
So let’s call this thing String Theory Development Corporation.
I think it fits into the broad category of oppressive-exploitative arrangements with which some groups with more power steal resources from others through complex apparatuses.
A charter school development corporation is particularly impactful in this sense, as it draws money away from district schools that serve disproportionately more high-need populations, keeping a tax-exempt status and not facing regulations. It’s a way of acquiring and controlling capital without regulation, in this case commercial real estate.
The bond issuance is an essential source of information about how String Theory Development Corporation works and its legal, political, economic, and cultural place in the larger Philadelphia social formation.
Next time, I’ll get into that.