Governing boards need a methodical approach to portfolio optimization, panelists say during webinar.
NEW YORK, Feb. 6, 2023 /PRNewswire/ -- Colleges and universities can generate more liquidity from real estate optimization projects if they first study the needs of landlords, prospective buyers and local communities, advised executives from A&G Real Estate Partners and Cambridge College in a Jan. 19 webinar.
The Association of Governing Boards of Universities and Colleges (AGB) produced the one-hour program, "Using Real Estate to Bolster Liquidity in Higher Education." The recording is available at: https://youtu.be/kATjTUmU1wM.
Healey, who formerly spearheaded real estate strategies at Connecticut's The University of Bridgeport, said many schools could benefit from real estate optimization given today's declining enrollments, rising interest rates and higher inflation. "This is a time of challenge for higher education," he said.
Panelists said boards of healthy and distressed schools can avoid leaving money on the table by taking a methodical approach to renegotiating leases, selling real estate assets and conducting sale-leaseback transactions.
Amendola, who leads A&G's Real Estate Sales division, has generated millions of dollars for creditors of institutions such as The College of New Rochelle and Dowling College by finding multiple bidders to go toe-to-toe for campuses, vacant land and buildings.
He stressed the importance of understanding the reuse potential of each asset and identifying the likeliest buyers. Boards should be wary of third-party consultants who apply a one-size-fits-all approach to real estate marketing and deals, Amendola cautioned.
"Make sure the process is built around the asset and not the other way around," he said. "Hire someone who understands the real estate, has a plan for it and knows how to market it to the right kinds of buyers. Otherwise, you won't get full value."
The executive cited his team's work in New Jersey on behalf of Bloomfield College. The private institution's board responded to a projected cash shortfall by tapping A&G to conduct an exhaustive real estate review.
According to Amendola, the project yielded clarity into the value of the school's real estate—critical information that paved the way for Bloomfield to find a merger partner and secure short-term financing. Bloomfield and Montclair State University are expected to finalize their previously announced relationship this year.
Renegotiating leases is another opportunity. Here, too, Graiser said, market intelligence matters. He advised governing boards to consider the perspective of today's landlords whose capital costs are rising even as the values of their properties decline.
"We try to go in with the ability to present all the facts and answer landlords' questions with a well-thought-out package," said the 30-year real estate veteran, whose firm has saved approximately 750 clients more than $10 billion in occupancy costs. "Providing this type of detailed information makes the conversations and negotiations go easier."
Negotiating skills also can pay off during complex real estate sales. Amendola walked the audience through A&G's disposition of one college's 54,000-square-foot satellite building in downtown Patchogue, Long Island. A&G found a replacement tenant for the former department store: Blue Point Brewing Co.
The transaction required close collaboration with the landlord, because tenants such as a coffee shop and a deli also occupied the two-level building. "The landlord had to buy out both tenants because they had leases that went on for five or seven years," Amendola explained. "We terminated the lease for the college at pennies on the dollar. The brewery opened up and the town is back and doing terrific."
Healey, who became provost at Cambridge College in October 2021, summarized his real estate work over 23 years at Bridgeport, culminating in his position as interim president. The deals included the sale of multiple real estate assets to Paier College, the City of Bridgeport and Goodwin University, which acquired The University of Bridgeport in May 2021.
The 2018 steep decline of international student enrollment and then the Covid-19 pandemic had led to a crisis for Bridgeport. Healey explained how the board weathered that difficult period and preserved the university's service to the city, state and region. The university remained separately accredited with its own board.
"There were conversations aplenty with people in the community," he said. "That included the mayor and—certainly for me—ongoing meetings with the board chair nearly every day for about nine months straight."
Given such pressures, boards must rely on third-party experts to move forward with confidence. "We were in no position to do all of this analytical work ourselves," Healey said. "We still had day jobs running the university."
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SOURCE A&G Real Estate Partners