from today's chronicle of higher education:
Land-Rich Universities Weigh New Options for Real-Estate Development By PAUL FAIN Real-estate-rich universities are taking advantage of new ways to develop their holdings through corporate partnerships, says a report released this week by Moody's Investors Service, a credit-rating agency. Those partnerships pose a wide range of payoffs and risks, the agency says. Universities have long been strategic real-estate investors. Many urban institutions own off-campus buildings while rural and suburban colleges often hold tracts of vacant land. Those "banked" real-estate holdings are viewed second only to endowments as strategic assets, the report says. Many institutions are looking for new streams of revenue and forming public-private partnerships to develop their land and buildings. Under those deals, colleges typically retain the long-term ownership of their real estate while private investors build or operate a facility on the property, generating revenue for both the college and investor. Most college leaders are reluctant to give up the ultimate ownership of their land, writes the report's author, Roger Goodman, a vice president and senior analyst for Moody's. But the partnerships allow institutions to make money off the real estate without developing it themselves. "Newer options allow those universities to monetize their real-estate assets or create a new revenue stream to support other mission-focused activities, without sacrificing complete control or ownership in the long term," Mr. Goodman said in a written statement. The report, which is available by e-mailing [EMAIL PROTECTED], is titled "Public-Private Partnerships in U.S. Higher Education: Real-Estate Rich Organizations May Benefit, but Credit Impact Always Assessed on Case-by-Case Basis." The development options listed in the report are included below, with descriptions of potential benefits and risks. * Privatized student housing. These projects are generally 100-percent debt-financed. Their construction can be cheaper and faster than if managed by universities. However, institutions lose control, including over the "pricing and programming of residential experience." * Commercial development. Private development of mixed-use facilities near colleges can enhance neighborhood appeal and campus life while also generating significant financial gain through upfront payments. The projects can also fail and result in vacant lots or "unattractive tenants and services." * Retirement communities. These projects can bring in money through profit-sharing with a developer. They can also help build alumni connections. The downsides include potential financial losses and distractions for university leaders as they help manage these typically complex developments. * Outright property sale. This option improves liquidity and increases endowment holdings. It is also the loss of a long-term asset that could be used for future campus growth.
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