MAXIMIZE THE VALUE OF THE REAL ESTATE ASSETS
OF HIGHER EDUCATION INSTITUTIONS
Shepley Bulfinch
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Carole Wedge, President
Shepley Bulfinch Richardson & Abbott

Thomas Kearns, Principal
Shepley Bulfinch Richardson & Abbott

Wallace Mlyniec, Former Associate Dean
Georgetown University Law School

Jeff Turner, Senior Vice President
Brailsford & Dunlavey

John Augustine, Managing Director
Lehman Brothers
Georgetown Law
BRAILSFORD & DUNLAVEY
L EH M A N B R O T H E R S
Carole
Linking Strategy:
Valuing Assets:
 Operating and Capital Budgets
 Payback / Lifecycle
 The Campus
 Fresh Students Every Year
Evaluating Delay:
Understanding Options:
 Escalation
 Recruitment
 Opportunities Missed
 Real Estate
 Funding
 New Models
CAPITAL PROJECTS IN CONTEXT
Initiatives that may impact space
needs…capital planning…
and dollars.
 Strategic Plan
 Curriculum Plan
 Growth
 Technology
 Innovation
 Administration Change
 Sustainability Commitments
QUESTIONS INSTITUTIONS ARE ASKING
 How can we accomplish this?
(Show me the $$$$)
 How do we garner support?
(Show me the $$$$)
 How will this make us competitive?
(Why is this important?)
 How will this improve our recruitment?
 Can we afford this?
(Why is this important?)
(What are the operating costs?)
TRENDS IN HIGHER EDUCATION

Institution as Economic Engine

Transformational Student Experience

Changes in Teaching and Learning

Changes in Living Environments
Wally
GEORGETOWN LAW SCHOOL FOUNDED IN 1875
2006 GULC
DOWNTOWN D.C.
GEORGETOWN UNIVERSITY LAW CENTER CAMPUS
BERNARD McDONOUGH HALL
EDWARD DURRELL STONE, ARCHITECT
EDWARD BENNETT WILLIAMS LIBRARY
HARTMAN & COX, ARCHITECT
BERNARD AND SARAH GEWIRZ BUILDING
HARTMAN & COX, ARCHITECT
BERNARD MCDONOUGH HALL EAST WING
HARTMAN & COX, ARCHITECT
GEORGETOWN UNIVERSITY LAW CENTER CAMPUS
ERIC HOTUNG INTERNATIONAL LAW BUILDING
SHEPLEY BULFINCH, ARCHITECT
GEORGETOWN SPORT AND FITNESS CENTER
SHEPLEY BULFINCH, ARCHITECT
THE FUTURE
Tom
INSTITUTION AS ECONOMIC ENGINE
INSTITUTION AS ECONOMIC ENGINE
INSTITUTION AS ECONOMIC ENGINE
INSTITUTION AS ECONOMIC ENGINE
INSTITUTION AS ECONOMIC ENGINE
INSTITUTION AS ECONOMIC ENGINE
INSTITUTION AS ECONOMIC ENGINE
INSTITUTION AS ECONOMIC ENGINE
CHANGING LEARNING STYLES
Problem – Traditional classrooms have key
restrictions of limited resource availability and
physical isolation.
CHANGING LEARNING STYLES
CHANGING LEARNING STYLES
Class with Remote Guest Speaker – Imported into
the classroom via video with the session including
guest captured in streaming format and shared with
faculty and students doing interdisciplinary work in
related fields.
CHANGING LEARNING STYLES
Goal - Establish a portfolio of flexible and
technologically-enhanced formal and informal
learning spaces in support of socially-enabled
inquiry and discovery.
CHANGING LEARNING STYLES
Media Creation – iPods, iTunes, iPhoto, eBooks,
iLectures, videophones, BluRay disks for
stereoscopic video, Lectopia, Symposia,
Blackboard.
CHANGING LEARNING STYLES
CASE STUDY: XAVIER UNIVERSITY
CASE STUDY: BUCKNELL UNIVERSITY
CASE STUDY: BUCKNELL UNIVERSITY
Jeff
TRENDS TOWARDS ALTERNATIVE FINANCING & PARTNERSHIPS
 Limited State Financial
Support
Construction
Costs
 Speed of Delivery &
Execution
 Increasing Construction
15-25%
budget
shortfall
Owner's
Budget
Costs
 Allow for greatest expertise
2001
 Community Partnerships
2002
2003
2004
2005
2006
2007
TRENDS TOWARDS ALTERNATIVE FINANCING & PARTNERSHIPS
TRENDS TOWARDS ALTERNATIVE FINANCING & PARTNERSHIPS
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Less defined campus edges
Off-campus university bookstores make
for strong anchors
College towns potentially incubate new
business
Student population accounts for 20% of
the market*
Successful college towns consists of
high-end national (30%) as well as local
merchants (70%)*
*Source: Ayers Saint Gross
MARSHALL UNIVERSITY – WELLNESS CENTER & STUDENT HOUSING
 Initial RFP for design services
 Revised RFP Issued for full development
services including:
 Health/Wellness Center
 Student Housing
 Campus/state limited debt capacity
 Developer led process
 120,000 gsf Wellness Center
 780 beds of housing
Courtesy of Capstone, D/C, & H&C
GEORGE MASON UNIVERSITY – FREEDOM CENTER
 Limited Recreational Facilities in Prince
William County
 Tri-partite Agreement with George Mason
U, city of Manassas, and Prince William
County
 Facility covers operating costs plus a
portion of debt service
 Remaining debt service split based on
usage
FY 2004 Usage
George Mason
University
5%
City of Manassas
26%
Prince William
County
69%
 Over 600k users a year
 Over 5,000 members, 7,000 memberships
 Discussing an expansion
 New Performing Arts Center looking at
similar operating model
BUCKNELL UNIVERSITY - LEWISBURG, PA
CURRENT SITUATION

Considerable loss of regional
manufacturing jobs

Suburban development causing decline
of boroughs as commercial hubs

Changing demographics, “graying”
population

Fragile downtown Lewisburg with
independent retail

Rising threats to a Heartland Region
core community
TOWN – GOWN DYNAMICS
 Increasing competition for high school graduates
 Increasingly sophisticated student and
faculty/staff quality of life expectations
 Universities expected to look beyond campus

Courting of the “creative class”

Diversity of sports, cultural, and learning activities

Building a “creative ecosystem” to attract 21st
century jobs and workers
First Initiative: Neighborhood Improvement Projects
CURRENT NEIGHBORHOOD PROJECTS

Main Street & Elm Street
Grants

Streetscape and Façade
Improvements (1)

7th Street Reconstruction (2)
1
Market
Street
2
Bucknell
Second Initiative: Magnifying
Neighborhood Improvements
UNIVERSITY VILLAGE OBJECTIVES
 Strengthen Recruitment
 Enhance the Neighborhood
 Create Market Street Link
 Define a University Gateway
 Improve Community Relations
 Clarify Faculty / Student Housing
Options
 Complement existing retail on Market
Street
LEWISBURG NEIGHBORHOOD STUDY AREA
MARKET ANALYSIS CONTEXT
Study Area



82 Owners
181 Parcels
36 Acres
Primary Area

53 Owners

126 Parcels

29 Acres
PROCESS
Community Market
Demand
and
Supply
Analysis
Pro
Forma,
Project
Uses
Project
Sources,
Project
Participants
Campus Market
Market Feasibility
Preliminary Program
Financial Feasibility
Project Concept
Financing Mechanism,
Development Structure
Implementation Strategy
OUTCOMES
Neighborhood Real Estate Product Drivers
Community
Campus Market
Market
For-Sale Housing
Rental Housing
Retail
Conference Space
Hotel
Office Space
Dem
and
Neut
ral
High Dem
Dem and
and Neut
ral
High
Dem
and
CASE STUDY  ROCHESTER INSTITUTE OF TECHNOLOGY
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Park Point at RIT
Project Drivers
Create a new front door to campus.
Increase the sense of community by
developing a college town on
campus.
Generate revenue for the campus.
Project Statistics
$85 Million Mixed Use Development
67 Acres
67,000 GLA of Retail (100% leased)
300 Student Apartments (920 Beds)
(Over 75% leased)
Ownership / Management Structure
Ground Lease with developer
(Wilmorite)
United Realty Management
Company manages the housing.
CASE STUDY  ROCHESTER INSTITUTE OF TECHNOLOGY
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Park Point at RIT
Retail Concepts
40k GSF RIT Book Store (B&N)
Clothing
Salon/Spa
Convenience
Cellular
Fitness Center
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Restaurant Concepts
Sports Bar
Pizza
Coffee
Asian / Sushi

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Lessons Learned
Wetlands Issue Created Significant
Delays
College wanted more retail/apparel
but no demand

John
PRIVATIZATION PROCESS
1. Conceptualize
Project.
8. Complete Financial
Analysis.
12. Develop Public/Private
Financing Structure.
2. Establish Project
Objectives.
3. Create the Project
Vision.
4. Complete Development/
Market Demand Analysis.
5. Develop Land, Building
and Infrastructure
Program.
6. Complete Design.
7. Prepare Total
Development Analysis.
Source: Stainback and Associates
9. Prepare Development
Phasing Plan.
13. Choose Developer.
10. Develop Alternative
Public/Private Finance
Plans.
14. Negotiate Development
Agreement.
11. Develop Alternative
Ownership, Investment,
Development and
Operation Scenarios.
15. Obtain Equity and Debt.
16. Start Construction.
PRIVITAZATION – FINANCING OPTIONS FOR NEW PROJECTS

There is a broad continuum of financing options:
Tax-exempt financing can be used for a significant portion of most
structures.
Publicly Owned and
Financed with
Tax-Exempt Bonds
(Interest Rate:
5.5% - 6%)
Privately Owned and
Financed with
Equity Contributions
(Rate of Return:
20% -30%)
Between these two extremes, a variety of structures utilizing tax-exempt
debt, taxable debt and equity funding are possible.
THERE ARE TWO TYPES OF NON-RECOURSE DEBT:
ON-CREDIT AND OFF-CREDIT
On-Credit Non-Recourse Debt

Secured only by a limited, particular stream of revenues or assets,
usually those of the financed project, rather than by a general
revenue pledge.
Off-Credit True Non-Recourse Debt

In addition to the limited security described above, there is a transfer
of risk (legal and perceived or real vested interest) away from the
University or Affiliated Organization to some other creditworthy entity.
ADVANTAGES AND DISADVANTAGES – THE GOOD NEWS
From the Perspective of the Public or Non-Profit Partner

Reduces ownership and development risks.
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Reduces primary public or non-profit partner capital investment.
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Monetizes excess and underutilized assets.
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May utilize private partner expertise and creativity.
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Implementation schedule may be accelerated.
ADVANTAGES AND DISADVANTAGES – THE GOOD NEWS
From the Perspective of the Private or For-Profit Partner

Often public/private developments are high profile projects.

Jointly control a college or university-owned real estate asset available
for the first time.

If needed, primary and secondary college or university partner provides
capital and/or non-capital investments.

Reduces development cost and enhances cash flow.

May utilize private partner expertise and creativity.

Approval process may be accelerated.
ADVANTAGES AND DISADVANTAGES – THE BAD NEWS
From the Perspective of the Public or Non-Profit Partner

Reduces control over design, delivery, and operation.

Reliance on a virtually unknown private entity.

Deal structure may be perceived as not a fair and reasonable sharing of
costs, risks, responsibilities and economic return.

Private partner has the right to sell project to an unknown
third party.

Economic return is primarily contingent on performance of private
partner.
ADVANTAGES AND DISADVANTAGES – THE BAD NEWS
From the Perspective of the Private or For-Profit Partner

Substantial cost in time and capital risk.

Often public or non-profit partner is not prepared to structure, negotiate
and implement.
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Development site is either not under control, has environmental
problems and/or is not entitled.
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Public or non-profit partner’s expectations are not in line with the capital
markets.
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Public or non-profit partner is subject to political change.
PARTNERSHIPS CAN BE CUSTOMIZED TO MEET
THE OBJECTIVES OF PARTNERS
Variables to Consider and to Evaluate
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Level of participation in structuring, implementing, and managing the project.
Financing sources.
Financing techniques.
Financing, design, construction, and operational responsibilities.
Finance structure.
Accounting Factors:
FASB vs. GASB

Distribution of cash flow among the public and private entities.
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Ownership position.
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Design, construction, and operational risks.
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Level of control.
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Implementation schedule.
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Legal interrelationships among the project entities.
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