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DENVER-Crème de la Crème Inc., a locally based chain of high-end early childhood learning facilities is looking to grow by 50% in 2008. Company chairman/CEO Bruce Karpas tells GlobeSt.com he is in the process of identifying and securing sites that will grow the number of centers from 20 to 30 locations before the end of 2009.

The prototypical Crème de la Crème property totals three acres, costs $7 million to develop, takes seven months to build and is anchored by a 21,000-sf building with an elaborate build-out that resembles a Victorian village. Inside the building are a computer lab, arts and music studios, library, dance studio, gymnasium and a mock television studio. Outside, there are reduced size tennis and basketball courts, a custom designed mini water park and numerous play areas containing an assortment of toys and playground equipment. Children move to a new area every 30 minutes that is staffed by a specialist in addition to their regular teacher.

“It’s a state-of-the-art, educationally engineered facility that others have said looks like Disneyland inside,” he says.Crème de la Crème Ivy League pre-schools have found a home in upscale suburban lifestyle centers and mixed-use districts situated close to upscale residential communities and major transportation routes. Developers of such centers like the chain because it attracts their kind of demographic and also because it can take spaces toward the back of a center that traditional retailers have shied away from, and also are closed on weekends, when the center is the busiest.

Other developers are treating them more like an anchor tenant. One developer, in North Chicago, put them out front of his center following a front page story about the company in the Chicago Tribune, Karpas says. Another, in a suburb of Dallas, redesigned its center to provide a view corridor from the street to the school, named the center after the school and flanked it with a maternity store and a spa, Karpas says.

Crème de la Crème either self-develops its pre-schools with a subsequent sale-leaseback transaction upon completion–in order to recycle the capital for a new location–or enters into build-to-suit-to-lease deals with the developer. The company currently has six schools in the Atlanta area, five schools in the Dallas area, four in the Chicago area, and one each in or near the following cities: Philadelphia, Denver, Cleveland, Washington, and Kansas City.

Karpas says the next five locations in the next 12 months, including two more in Chicago, another near Washington, DC, another outside of Cleveland and the first in Arizona in Scottsdale. Five more are expected to open before the end of 2009, including a second school in the Denver area. There are no schools on the West Coast yet because the cost of land has been prohibitive, Karpas says. “That $7-million development cost per store includes the cost of land; if land in a certain market is $1 million an acre, that’s $3 million on just the land,” which doesn’t pencil out, he says.

That having been said, Karpas hopes the current market opens up some new opportunities to break into the West Coast market. “I’m hoping in this current economic environment to see a little bit of a price break,” he says. “We haven’t seen it yet but we are hoping because other retailers are somewhat slowing down.”

The first Crème de la Crème was opened in 1980 in the Houston area. Crème de la Crème Inc. became a licensee in 1997 and opened its first store in 1998 in Plano, TX, with money from family and friends. In 2004, Crème de la Crème Inc. acquired the Atlanta schools and, last spring acquired the ownership rights to the Crème de la Crème Inc. name. Karpas declined to discuss the acquisition cost but did say Crème de la Crème Inc.’s current ownership includes institutional investors.

Karpas says the company’s growth has been funded internally since 2000. To help keep costs down with regard to new development, Karpas says the company is moving away from ground-up development and more toward build-to-suit-to-lease deals, where the developer spends the money to build the facility with a long-term lease commitment from Crème de la Crème. Kimco and Duke as well as smaller developers have built facilities for Crème de la Crème under both models, Karpas says.

As for competition, Crème de la Crème believes it has separated itself from the independent pre-schools and the big national chains like Kindercare and Learning Care by having a higher-end facility, one that costs a few hundred dollars more per month than the national chains. The average tuition for a two-year-old attending the school five days a week for 12 hours a day is $1,200- to $1,400 per month. In addition, the schools offer after-school program for six- to 12-year-olds, and also offer private music and sports lessons.

“We are raising the image, we believe, of any lifestyle center we go into,” Karpas says.

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