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INVESTMENT PROSPECTUS

Education for the future OCTOBER 2019 SEPTEMBER 2019


This document is confidential and is being supplied to recipients for their own information. Recipients shall not directly or indirectly copy, reproduce, publish or further distribute this document and its content in whole or in part to any person, nor discuss with any other person the proposal in this document without the prior written consent of the Company, except for the purposes of analysis or evaluating this investment by advisers of the recipients who have agreed to treat such information as confidential.


INVESTMENT OVERVIEW This is a unique opportunity to participate in an exceptional educational project in southern Spain. The school will be: 

The first Montessori school for children aged to 18 years in Spain outside of Madrid.

The first ecological school in southern Spain.

The first purpose-built school in Spain to provide a fully flexible learning environment fit for the 21st century.

It will provide an educational concept that specifically meets the needs of an ever increasing complex work place, society and environment in the 21st century. The concept will be scalable with the opening of schools across Europe.   We are initially seeking private equity investment of 3.5m euros for the construction and capital resourcing of the new school. The project will be completed in 3 phases, Phase 1, Early Years and Primary, Phase 2, Secondary and Phase 3, Sixth Form. This initial funding is for Phase 1. It has long been proven that educational impact investments offer excellent financial returns over the medium to long term.

(Illustrative purposes only)


BUSINESS OVERVIEW Marbella Montessori School opened in 2009 by the acquisition of a small Spanish nursery school. Although this was at the time of the global financial crises, the business quickly became established and gained an excellent reputation with both expatriates and the local community.    As a result of increasing demand, in 2014 the business relocated to a large country villa to open a Montessori Primary school.  Since that time, the school has continued to become established with exponential demand to extend into Secondary and Sixth form education.  As the new purpose built premises will fall just outside the muncipality of Marbella and to provide a modern and distinctive identity, the business will be re-branded as mont21school. 

10 Year Anniversary

A new S.L Spanish company will be incorporated for the purpose of the new school.

OUR EDUCATIONAL APPROACH Our educational approach will continue to be based on the long established and proven Montessori methodology and the world leading British National Curriculum. However, this will be extended further by developing traditional Montessori principles with those which form the basis of progressive education needed for the 21st century.  In particular, this will provide personalised learning with opportunities to experience real life, ‘hands-on’ learning including: project based learning, entrepreneurship, STEM (science, technology, engineering, math), multi-media and additional foreign languages.


MONTESSORI EDUCATION - although developed by Dr. Maria Montessori over 100 years ago, Montessori popularity continues to grow around the world. As a child-centred educational concept, it focuses on academic, personal, social and emotional development through a holistic approach. Those who have benefited from a Montessori education include: Larry Page and Sergey Brin – founders of Google, Jeff Bezos – founder of Amazon, Jacqueline Bouvier Kennedy Onassis – former first lady (John F. Kennedy) Prince William, Prince Harry and Prince George. “The primary goal of Montessori education is to prepare the whole child to reach his full potential in all areas of life” From the AMI statutes

BRITISH EDUCATION - often regarded as among the best in the world with growing demand in international schools across Europe and Asia. 40% of international schools across the globe have incorporated the British National Curriculum. Students not only receive a high-quality education, but many parents are motivated by the thought that this will support applications to some of the world’s best universities in the UK.

PROGRESSIVE EDUCATION - there is a growing awareness that mainstream education, originally developed for the industrial age, is not preparing children for the knowledge economy of the 21st century. This has led to the establishment of several innovative schools in America, some which have been sponsored by leading technology entrepreneurs and also through the state education systems in Denmark and Finland. It has been well publicised and established by the OECD (Organisation for Economic Cooperation and Development) that Finland’s educational system is one of the best in the world.

ECO-SCHOOL A fundamental part of the new school will be it’s sustainable credentials, both in it’s type of construction and management of resources. It will be part of the globally recognised Eco-School programme to promote environmental consciousness in the students for life and in future generations.


MARKET ANALYSIS The most recent report by the Forum for Sustainable and Responsible Investment estimated that in 2018, education accounted for 3.5 billion euros in assets under management.  It has recently been reported by ISC Research that as a result of continuing demand for Englishmedium education, today’s international school market is a profitable one, currently generating 51billion USD from fee income. The Montessori movement has been in existence for over 100 years and has continued to grow in popularity with an estimated 22,000 schools worldwide. In America and the United Kingdom, a Montessori education has traditionally been the preserve for demographic grades AB (UK NRS social grades) including the rich and famous.   Although it has been relatively slow to come to Spain, there has over the last 10 years been an insurgence of new Montessori schools opening across the country. There are presently only a few traditional Montessori secondary schools in Europe due to the limitations of when children reach the age of 16 years. However, as the new school will follow the British National Curriculum, students will sit the world recognised International General Certification of Education and at 18 years, the Advance Level examinations to provide entry into UK and American Universities.  Whilst there are several large international schools on the Costa del Sol which follow the same British National Curriculum, this is traditionally taught without the value-added benefits of both a Montessori and progressive education.   In addition, this will be a green school where sustainability will form a core element and where the children will benefit from a natural learning environment not found in the majority of schools. Inspiration has been taken from the acclaimed Green School in Bali, Indonesia where through the use of the natural environment, they have created an authentic sustainable school. The entire school building is constructed in Bamboo which is provided with renewable energy sources. Through their success, they are currently in the process of constructing new schools in New Zealand and South Africa. As this school will be similarly at the forefront of sustainability in Southern Europe, it is anticipated that it will attract high levels of interest from environmentalists, educationalists, politicians and the general public. It is expected to receive considerable media exposure from around the world.    There are currently no schools in Spain which offer this unique educational concept.  It has been established since the opening of Marbella Montessori school, that there is considerable demand for this type of education, not only from the local population but also from those families internationally who move to the Costa del Sol. The school is the preferred choice for those parents from an entrepreneurial background who fully understand the need for their children to receive a 21st century education. 


THE PROJECT The new school will be located in the municipality of Estepona on the Costa del Sol, Spain. Estepona is a forward looking town in comparison to that of it’s immediate neighbour, Marbella in terms of economic and physical development. There has recently been the construction of a new athletic stadium, a theatre, hospital and many high end villa developments. The local authority is in full support of the new school.

A plot of land of 8,156 square metres has been identified on the eastern side of Estepona town. It is an attractive semi-rural, reasonably flat site with mountain views. It is situated approximately 10km west of the existing school with excellent access from the A7 coastal road. It is owned by Estepona Town Hall and has been zoned for educational activity. It will be acquired through a concessional agreement for a term of at least 50 years. A leading UK Architectural practice specialising in educational and sustainable buildings have been commissioned to undertake the design. The new school will consist of a series of linked single and two-storey structures around a central courtyard with a total net floor area of 4000m2. Internal spatial configuration will be based on current progressive educational design including the use of open flexible classrooms, learning pods and social areas. The plot will be extensively landscaped to provide a natural environment including sports facilities, swimming pool, playgrounds, forest school, organic garden, wildlife habitat’s and car parking.  The new building will be constructed of sustainable timber (GLT) and incorporate renewable energy sources including Photovoltaic panels, heat pumps, wind turbines, rainwater harvesting and natural ventilation.  

The new school will achieve BREEAM certification (Building Research Establishment Environmental Assessment Method) to confirm sustainability in accordance with internationally recognised standards.


PROFIT GENERATION The school will generate its primary revenue from tuition fees.  As the school will provide a high-quality, alternative education which currently does not exist on the Costa del Sol, fees will be set within the upper quartile of those charged by other local private schools.  There will be a total increase of 18% over the initial 5 year period on those fees presently charged by Marbella Montessori school. Additional increases will be applied once the new school has become fully established with the potential to become the second most expensive on the coast.  Secondary revenue streams will be provided by: 

REGISTRATION FEES non-returnable

COOKED LUNCHES

SCHOOL UNIFORM

DEPOSITS returnable subject to one term’s notice

AFTER-SCHOOL CLUBS

HOLIDAY CLUBS

HIRE OUT CHARGES for conferences, training courses, local community events and sport

SCALABILITY The new school will be able to be replicated using the same design, educational approach and environmental credentials in the future.


STRATEGY & IMPLEMENTATION

1 2 3

Phase

Early Years and Primary Departments Construction will start spring 2020 for completion September 2020.

Phase

Secondary Department Construction will start spring 2022 for completion September 2022.

Phase

Sixth Form Construction will start spring 2024 for completion September 2024.

FUNDING REQUIREMENTS

TOTAL FUNDING FOR PHASE 1 IS REQUIRED IN THE REGION OF 4.5 MILLION EUROS, TO BE EXPENDED AS FOLLOWS:

Construction costs (inc. statutory fees, professional fees etc)

4,100,000€

Start-up costs (class room furniture, information technology, playground equipment and teaching resources)

350,000€

Ancillary expenses, e.g marketing costs, legal fees etc

50,000€

Total costs, including VAT @ 21%

4,500,000€

Phases 2 and 3 have been costed at 2,600,000 euros and 1.600,000 euros respectively. The total project value will be 8,700,000 euros


FUNDING OF THE PROJECT This will be achieved by a combination of loans and share capital. Investors will be offered a total of 139 investment units each of which combine loan and share capital as follows: Loan capital

25,180 €

Ordinary shares of 1 euro each

10,791 €

Non-voting shares of 1 euro each

14,388 €

Total investment unit value

50,359 €

Total capitalisation of the company will be: Phase 1

Phase 2

Phase 3

Total

70

42

27

139

1,762,600

1,057,560

679,860

3,500,020

755,370

453,222

291,357

1,499,949

Investor non-voting share capital Class C shares

1,007,160

604,296

388,476

1,999,932

Bank mortgage loan

1,000,000

500,000

250,000

1,750,000

Totals

4,525,130

2,615,078

1,609,693

8,749,901

Number of investment units of 50,359 euros Investor loan capital Investor ordinary share capital Class B shares

In addition, the owners of the Marbella Montessori school will transfer the existing school business to the new company in exchange for Founder Class A ordinary share capital of 500,001€ , representing 12.5% of equity in the company. The founders will benefit from an option scheme whereby they would have the right to acquire a further 12.5% (500,001 euros shares) of equity at the par value of 1euro once the company has achieved cumulative EBITDA of 1.5m euros with a deadline of 31 December 2028. The projections show this will be achieved by the end of Year 5. On completion of the investor financing process for each phase, the investors will be issued with shares in the company and a formal agreement for loan capital. Investors capital will be required in February 2020 for Phase 1, February 2022 for Phase 2 and February 2024 for Phase 3. Investors in Phase 1 will be given the first right to subscribe for Phase 2 and Phase 3 investment units.


TERMS FOR INVESTOR LOAN CAPITAL Investor loan capital will be repayable in full in 15 years and will receive interest payable quarterly in arrears at the rate of 4,75%. Interest will be payable on the reducing balance of the loan in the manner of typical repayment bank loans. The loan capital will be subject to a 2 year repayment holiday.

TERMS FOR SHARE CAPITAL All shareholders (Class A - Founders Shares, Class B - Voting Shares and Class C - Non-voting Shares) will have the right to participate equally in the profits of the company by receiving dividends according to the number of shares they own. At the Annual General Meeting of the company, which will take place in June each year, the directors will make a proposal to the shareholders for the amount of dividend that should be paid to shareholders, taking account of the profits and cash flow of the company and its future cash requirements. Nevertheless, non-voting shares (Class C shares) will have the preferential right to receive a minimum dividend of 1 cent per share (a 1% return) each year, commencing in Year 1. If for any reason it is not possible to pay this minimum dividend, the Class C shares will acquire normal voting rights until all preferential dividends have been paid for all unpaid years.

SHAREHOLDERS AGREEMENT In order to supplement the rules that will be incorporated into the statutes of the company, a shareholders’ agreement will regulate the affairs of the company and the relationships between the founders, the investors and the company.  To the extent that Spanish company law allows, these regulations will be incorporated in the actual statutes of the company. Subject matters of the shareholders agreement will include supplementary matters for example; 1. Policy for distributing profits to the shareholders. 2. Voting rights in relation to the appointment of directors and other key policies of the company, including school management. 3. Details and proposed timing for the development of phases two and three of the school, together with the financing proposals that will apply at these stages.


FINANCING PROCEDURE FOR PHASE 1 Step One

Step Two

Preliminary

Agreement on the full terms of the investment

It is proposed that agreement in principle with the investors will be sought by December 2019 to the following proposal. The formal documentation required will be: • Statutes of the company • Investors loan agreement • Shareholders agreement   As part of this Preliminary step, funds will be requested from the interested investors to make a payment on account to the professional advisers totaling 16,000€ including IVA. The payment of these fees will be met proportionately by the interested investors and will be treated as a loan to the company and will, in due course, become part of the investor’s total investments.

The formal documentation drafted by the professional advisers will be circulated to the proposed investors in January 2020 and then meetings will be held between the founders, the investors and the professional advisers to review, discuss and complete the documentation ready for signature as part of Step Three. Assuming agreement in principle is reached, professional fees will be agreed for executing and completing the investment. These fees will be payable at the end of Step three out of the investment funds provided by the investors.

Step Three

Step Four

Execution and completion

Construction phase

A final meeting will be arranged to take place at the end of February 2020 at a notary’s office in Marbella to sign simultaneously the company statutes and the investor share subscription and loan agreements. At this meeting, a non-executive Director will be appointed to represent the Investors.

Investment funds will be disbursed as the project progresses including stage payments for the construction works as certified by a suitable qualified English speaking construction expert.


CASH FLOW PROJECTIONS The operations of the new school will be cash flow positive from Year 1 onwards and detailed projections have been prepared by extrapolating current operating results and taking account of expanded operations. Projected cash generated, before corporation tax but after bank and investor loan interest and capital repayments, is between approximately 100.000€ and 300.000€ in Years 1 to 4 and in Year 5, the first year of Sixth Form Department operations, is 30% of total income. EBITDA (Earnings before Interest Tax Depreciation and Amortisation) grows steadily for Years 1 to 4 but in Year 5 rises considerably to achieve an excellent 42% of income as a result of Phase 3 completion for post 16 education. Thereafter EBITDA should remain at similar levels to 2024/25.

More detailed information is available on request.


EXIT STRATEGY Investors will be able to sell their shares at their prevailing value at any time to another willing buyer, subject to the requirement in Spanish law that gives the right to remaining shareholders to acquire the shares on the same terms as those agreed by the selling investor with the proposed purchaser. It is envisaged that in the long term, the business will be sold to one of large international educational groups who acquire well established and profitable schools worldwide.

To obtain further information, please send email to info@marbellamontessori.org Michael Garrett  Director of Montessori Marbella S.L 


info@marbellamontessori.org www.marbellamontessori.org Tel: 0034 952 884 153 Mob: 0034 600 850 114

Profile for mont21school

A Sustainable and Educational Investment Opportunity