Jan. 31 (Bloomberg) -- Christopher Whittle, the education entrepreneur whose company lost more than $300 million running public schools, is opening a for-profit private school in New York City headed by veterans of Phillips Exeter Academy, Hotchkiss School and Dalton School.
Backed by $75 million in private financing, Whittle, 63, is responding to parents’ demand for spots for their children in the most selective private schools, he said in an interview on Jan. 27. Whittle aims to build a chain of more than 20 schools in cities worldwide, including London, Shanghai and Mumbai, he said.
Investors may be leery of the for-profit institution, called Avenues: The World School, after Senate hearings raised questions about the cost and quality of for-profit colleges, said Trace Urdan, an analyst with Signal Hill Capital Group in San Francisco. Avenues also lacks the cachet of New York’s top private schools, Amanda Uhry, a private-school consultant, said in a telephone interview.
“The New York parent who can afford this -- they want Fieldston, Horace Mann, Trinity,” said Uhry, founder of Manhattan Private School Advisors, listing three selective New York private schools. “They have 20 schools in their mind, and that’s it.”
Avenues World Holdings LLC plans to open its first school in September 2012 in Manhattan’s Chelsea neighborhood and will start taking application inquiries tomorrow. The school will charge about $36,000 a year, about the same as top-tier private institutions, and can compete with 200-year-old rivals because of its “all-star” management team, Whittle said.
Avenues’ co-heads are Tyler Tingley, 64, who led Phillips Exeter in Exeter, New Hampshire, for 12 years, and Robert “Skip” Mattoon, 69, who ran the Hotchkiss School in Lakeville, Connecticut, for 11 years. Gardner Dunnan, 70, academic dean, led Dalton in New York for 23 years.
Benno Schmidt, 67, the former president of Yale University in New Haven, Connecticut, will be chairman of Avenues. Schmidt co-founded New York-based Edison Schools Inc., the public schools operator, with Whittle in 1992.
The school wanted to “assemble a leadership group so parents just go ‘Wow!’” Whittle said.
Tingley, who retired from Exeter in 2009, wouldn’t disclose his pay at Avenues. At Exeter, in the year ended June 30, 2009, Tingley received $1.15 million in compensation, according to a tax filing. Of that sum, $354,000 was salary, and the rest was deferred compensation and benefits, Tingley said.
‘About the Excitement’
“They’re paying me well, as Exeter did, but this isn’t going to change my standard of living,” Tingley said. “It’s all about the excitement.”
To attract families that want their children to compete in a global economy, Avenues will require all students become fluent in a second language and take a “world course” that stresses non-Western history, geography and issues, according to the school’s marketing materials.
About 6 million students -- or about 11 percent of U.S. schoolchildren -- attend more than 33,000 private schools in the U.S., including parochial institutions, according to the U.S. Education Department. The average tuition is about $10,000. There are about 3,000 to 4,000 for-profit elementary and secondary schools in the U.S., said James Williams, executive director of the National Independent Private Schools Association, which represents for-profit schools.
Avenues has little in common with for-profit colleges, whose students depend on federal money for loans, Whittle said.
“We take not one dollar of government money,” Whittle said. “That has been the core debate area and we’re not involved with that.”
Avenues will contribute $4 million a year from its tuition revenue to financial aid, Whittle said.
Edison had public contracts to operate schools in cities such as Philadelphia, Detroit and San Francisco. In the 2002-2003 school year, Edison enrolled about 80,000 students in 149 schools in 22 states and the District of Columbia, according to a Securities and Exchange Commission filing.
Edison went public in 1999 at $18 a share and peaked at $36.75 in February 2001. A group of investors, including Whittle, took the company private in 2003, acquiring it for $1.76 a share. At the time, the company had run up more than $300 million in losses since its founding, according to an SEC filing. The company is now called EdisonLearning Inc.
Whittle’s failure to deliver on his promise -- of running public schools more efficiently while turning a profit -- raises questions about the credibility of his latest venture, Henry Levin, director of Columbia University’s National Center for the Study of Privatization in Education, in New York, said in a telephone interview.
Whittle “is a marketer par excellence,” said Levin, a professor at Columbia’s Teachers College. “He’s lost a lot of money for a lot of people. He’s got a track record on that.”
Edison had difficulties because it was a pioneer in a movement to overhaul public education through charter schools, Whittle said.
“It was tough, it was very hard,” Whittle said. “We had our ups and downs, as anybody in the charter movement did.”
New York City already has individual for-profit schools owned by their administrators, said Ronald Stewart, headmaster of Manhattan’s for-profit York Preparatory School, which he founded in 1969. London-based Word Class Learning Group oversees British Schools of America and is opening a school called World Class Learning Academy in Manhattan’s East Village in September.
To contact the editor responsible for this story: Jonathan Kaufman at Jkaufman17@bloomberg.net.