2024 Winter Issue of Urban Land - 41

is diminishing every year. Many private
academic institutions, particularly small liberal
arts institutions, are also facing economic
difficulties. Some will not survive. Universities
with large endowments may have a backstop
with additional sources of funds. However,
many HBCUs [historically black colleges
and universities], for example, are more
challenged, due to a record of receiving
less funding and small endowments. When
rating agencies and financial institutions
underwrite a real estate project, they look
at the economic health of the surrounding
market, the financial health of the institution,
and the cash flow projections anticipated
from the project. With those criteria, the rich
institutions are going to get richer, the poor
poorer.
KEVIN KIRBY: The best universities have
figured out how to keep their classrooms in
use [during] as many hours of the day as
they can, so they don't have to build more
classrooms. Also, some research facilities
have extremely high activity, and others
have low use. Universities have to do a
significantly better job of using existing
space more effectively, because they can't
afford to build. The escalation of construction
costs these days is huge.
SARA LU: A lot of academic institutions
have the opportunity to create some
stability in a down market [by] providing a
sustained flow for development firms when
the capital market is not fluid. We have
different capital and financing solutions than
[do] conventional real estate developers or
partners. I'm excited about the years ahead,
where we may have opportunities to work
on new product types or [to] partner with
developers who otherwise may not work
on university projects. Privately developed
projects that have not yet secured financing
or broken ground and that are being shelved
might provide an opportunity for us to be
in the driver's seat, helping some of these
projects across the finish line, especially in
the area of housing.
What do you recommend for universities
and colleges partnering with private
developers?
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URBAN LAND
41
JAIME FLAHERTY: Universities can successfully
partner with developers when they have a
clear understanding of their programmatic
needs and the ability to contribute to-and
participate in-projects with ... land, equity,
or lease commitments. Engaging with
developers on revenue-generating auxiliary
uses, such as residential, commercial, and
research, allows institutions to benefit from
developer expertise, operational efficiency,
and regional/national relationships for mixeduse
tenanting.
LU: Understand your local market, and
appropriately allocate risks, controls, and
profit and loss. Consider: What are you trying
to control? What risks are you willing to
allocate and how? We've seen partnerships
that are completely [at] arm's length, and
we've seen ones in which, ultimately, the
university assumed all control. It depends
on how vibrant the market is and how
much competition there is. The real estate
market in our immediate vicinity, whether
it's office or residential, is largely driven by
Emory, the health system, and the Centers
for Disease Control and Prevention. So, if we
want something to happen in our immediate
submarket, we have to drive that change.
CONDRIN: Universities and colleges may enter
into joint ventures and equity participations,
but a ground-lease relationship is the most
common, with the university as a ground
BOBB, LLC, an affiliate
of Washington
University in St. Louis,
purchased a 1930s
rotogravure printing
facility located in
St. Louis's Cortex
Innovation Community
and brought in
architecture firm HOK
to adapt the building
into the 4340 Duncan
Multi-Tenant Lab and
Office Building.
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2024 Winter Issue of Urban Land

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