Lincoln Educational Services Completes the Sale-Leaseback of Newly Acquired Levittown, PA Facility

Rhea-AI Summary

Lincoln Educational Services Corporation (LINC) has entered into a sale-leaseback agreement for its property in Levittown, PA, for $11 million. The 90,000 square foot facility will be the future home of Lincoln Tech’s Philadelphia campus, offering additional career training programs and accommodating more students. The company expects to invest approximately $15 million in the buildout of new classrooms and training areas. The new campus is expected to begin offering classes in the second half of 2025, with triple the capacity of the current campus.

Insights

Financial Analyst

Examining the sale-leaseback transaction from a financial perspective, the move by Lincoln Educational Services Corporation to sell and then lease back its property is a strategic financial decision. The sale generates immediate capital, approximately $11 million, which can be used to bolster the company's cash position or reinvest in the business. The decision to enter a triple-net lease, where the tenant is responsible for all costs associated with the property, including maintenance, taxes and insurance, indicates a preference for predictable expenses over the long term.

The tenant improvement allowance of $2.5 million is a significant incentive that reduces the company's out-of-pocket expenses for the new campus buildout. However, the net investment of $15 million into the facility is substantial and represents a long-term commitment to the site. Investors should consider the impact of these capital expenditures on the company's financial statements, particularly in terms of cash flow and debt levels.

Furthermore, the capacity expansion to accommodate more students could potentially lead to increased revenue streams. However, the success of this expansion will depend on the company's ability to attract additional students and effectively manage the larger operational scale.

Market Research Analyst

The education sector, particularly technical and vocational training, is experiencing a shift in demand due to the growing skills gap in the United States. Lincoln Educational Services Corporation's expansion and introduction of new career training programs align with market needs for skilled labor in the Automotive, Welding, HVAC and Electrical industries. The strategic location in the greater Philadelphia area positions the company to meet employer demand and suggests potential for growth in enrollment numbers.

However, the effectiveness of this strategy will hinge on the company's ability to maintain the quality of education and adapt to industry changes. The investment in state-of-the-art classrooms and training areas is a positive indicator of their commitment to providing a best-in-class campus. This could enhance the institution's reputation and attract partnerships with industry leaders, further driving student enrollment and potentially increasing market share.

Educational Consultant

From an educational standpoint, the relocation and expansion of Lincoln Tech’s Philadelphia campus is a significant development. The move to a larger, modernized facility could greatly enhance the learning environment and offer a wider range of programs. This is in line with the current educational trend towards creating more immersive and comprehensive learning experiences.

However, the transition must be managed carefully to ensure that current students can complete their programs without interruption, as promised. The long-term success of the new campus will also depend on the institution's ability to update curricula and integrate emerging technologies that align with evolving industry standards. The ability to produce highly qualified graduates who meet employer expectations will be critical in maintaining the institution's reputation and ensuring the return on investment for both students and the corporation.

Parsippany, NJ, Feb. 01, 2024 (GLOBE NEWSWIRE) -- Lincoln Educational Services Corporation (NASDAQ: LINC), a national leader in specialized technical training for more than 75 years, has entered into a sale-leaseback agreement for the property located at 311 Veterans Highway, Levittown, PA. As previously reported, the Company purchased this 90,000 square foot facility in September 2023. 

The facility will be the future home of Lincoln Tech’s Philadelphia campus, which is being relocated from its current location at 9191 Torresdale Avenue in Philadelphia, where it has been in operation for more than 60 years.  With this move, the campus will be able to offer additional career training programs and accommodate more students. 

The sale transaction is for an aggregate purchase price of approximately $11 million. Simultaneously with the closing of the sale, the Company and the purchaser have entered into a triple-net lease agreement pursuant to which the property is being leased back to Lincoln for a twenty-year term.  The lease agreement includes $2.5 million in a tenant improvement allowance.

The Company expects to invest approximately $15 million, net of the tenant improvement allowance, in the buildout of new classrooms and training areas to ensure a best-in-class campus that provides a positive experience for students, faculty, and industry partners.   Students training at the new campus will go on to launch new careers in the Automotive, Welding, HVAC, and Electrical industries throughout the greater Philadelphia area.

"Since our Philadelphia campus first opened its doors in 1962, employers across the area have known that they can turn to Lincoln for highly qualified, trained automotive technicians,” said Scott Shaw, Lincoln’s President and CEO. “We’ve also known there is a demonstrated need for trained welders, electricians, and HVAC professionals. When the new campus opens in Levittown, we’ll be able to support employer demand in these industries as well. What’s more, the sale-leaseback provides additional capital to fund program replications and new campuses as we seek to fill the skills gap that exists in our country.”

The new campus is expected to begin offering classes in the second half of 2025. Students enrolled at the Torresdale Avenue location at that time will be able to complete their program without interruption. While the current campus can accommodate 250 students, the new facility will have more than triple that capacity with room for additional expansion. 

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About Lincoln Educational Services Corporation

Lincoln Educational Services Corporation is a leading provider of diversified career-oriented post-secondary education. Lincoln offers recent high school graduates and working adults career-oriented programs in five principal areas of study: automotive technology, health sciences, skilled trades, information technology, and hospitality services. Lincoln has provided the workforce with skilled technicians since its inception in 1946. 

Lincoln currently operates 22 campuses in 13 states under four brands: Lincoln Technical Institute, Lincoln College of Technology and Euphoria Institute of Beauty Arts and Sciences.  Lincoln also operates Lincoln Culinary Institutes in both Maryland and Connecticut.

For more information, go to lincolntech.edu. 

FAQ

What is the purpose of the sale-leaseback agreement for LINC?

The purpose of the sale-leaseback agreement is to fund program replications and new campuses as LINC seeks to fill the skills gap in the country.

Where is the new campus of Lincoln Tech’s Philadelphia campus located?

The new campus is located at 311 Veterans Highway, Levittown, PA.

How much is the aggregate purchase price for the property?

The aggregate purchase price for the property is approximately $11 million.

When is the new campus expected to begin offering classes?

The new campus is expected to begin offering classes in the second half of 2025.

What is the expected capacity of the new facility compared to the current campus?

The new facility will have more than triple the capacity of the current campus.