University’s foundations play a role in development
University foundations play a role in development
- June 1, 2011
Jeff Rountree knows what it’s like to be the big man on campus. Four years ago, the University of Mary Washington Foundation, where he is CEO, bought an aging 21-acre shopping center next to the school’s campus in Fredericksburg and began turning it into a modern, mixed-use development. The first phase of the $76 million project broke ground in March 2009, at the height of the recession.
For the next 15 months, Rountree was a local celebrity. “Every time I walked on that site somebody would come up to me and say, ‘I just want to thank you … because if you didn’t have this project going, I wouldn’t have a job.’”
The project — Eagle Village — included apartment housing for more than 600 students, first-floor retail spaces and Class A offices, plus a parking deck, all done in the collegiate red brick style. The construction businesses that had a share of the work had reason to be grateful: Eagle Village generated a $17 million payroll, Rountree says, at a time when few other projects could get financing. What’s more, because contractors were so hungry for work, Eagle Village was done $8.9 million under budget. “That gives you an idea of how far a dollar went during that period,” he says. “It was a fabulous time to do something like this.”
Around Virginia, foundations associated with the state’s major colleges and universities are doing similar work. They’re spearheading expansions, usually on land adjacent to main campuses. These not-for-profit groups can secure funding and assemble tracts for projects, something the private sector can’t do quite as easily. Most developments are similar to Eagle Village — retail, housing and parking. “The banks are skittish, and if they can find a client like a university foundation that has the backing of its institution and everything else, there’s such a safety net there,” Rountree says. “They’re very eager to do business with foundations right now.”
Next up for Eagle Village could be a $13 million, 96-room hotel. With a change in state law coming on July 1 that allows tourism-related projects to be reimbursed for a portion of the sales tax generated, the foundation could be looking at more than $600,000 in state and local incentives — funds that would help get the hotel built.
In Williamsburg, The College of William & Mary has a small project, called Tribe Square, under way next to its campus. When completed in August, it will offer about 12,000 square feet of retail space and housing with room for 56 students. Nancy Buchanan, executive director of the William & Mary Real Estate Foundation, says the $9.5 million project is a step toward responding to what students and parents said they wanted in a survey about five years ago. “Everyone said the academics are great, but there isn’t enough to do,” she says. “So my task is to create more things for students to do.”
When asked why private-sector contractors didn’t do the project on their own, Buchanan says they faced bigger hurdles. Getting land right next to a campus — especially one like William & Mary — is difficult and expensive, she says. Plus, the state has building standards for such projects that the private sector wouldn’t use. “The commonwealth wants you to build something that will last forever. The typical contractor doesn’t see that as important,” she says.
In Blacksburg, the Virginia Tech Foundation has ambitious plans. This summer, it will begin construction on what is called the Turner Street Project, a four-story, 141,000-square-foot, mixed-use building with an 800-space parking garage. It’s going in next to the school’s new Center for the Arts facility, which is under construction. Plus, the foundation also purchased the Collegiate Square Shopping Center, adjacent to the Turner project, for $9.5 million in 2009.
Kevin Sullivan, the foundation’s attorney, says the projects are something “that the university needs that usually would cost a great deal more if the private sector did them.” Foundations exist primarily, he adds, to do the university’s bidding and, in this instance, control the development of property around the main campus. “We don’t make money, and we don’t lose any money. There’s no profit motive,” he says. Still, the foundation expects to gain revenue from its retail and office tenants and reinvest that “solely for the benefit of the university,” Sullivan says.
Perhaps the most ambitious redevelopment project in Virginia is under way at Old Dominion University in Norfolk. The school is in the midst of developing a 75-acre University Village. The project includes 50,000 square feet of urban-style retail space, two 100,000-square-foot commercial office buildings and a privately done student residential project called The District, which will have more than 900 beds. The residential project sits on four acres of the ODU campus and is owned and managed by a Texas firm, RDH LLC. It was a good deal for the school “because the university didn’t have to spend millions of dollars to build new housing,” says Tara Saunders, director of ODU’s real estate foundation.
Robert Fenning, ODU’s vice president for administration and finance and the foundation’s former director, says the development is part of a long-term plan the university began in the mid-1990s. Today, the 8,600-seat Ted Constant Convocation Center, new retail and housing and expansion of the school’s Innovation Research Park produce “well over $4 million a year [in tax revenue] for the city,” Fenning says.
Well-funded foundations can be powerful forces for remaking the landscape. Yet sometimes the neighbors don’t want it. ODU, for example, is engaged in a protracted legal battle with a few businesses that don’t want to give way to the school’s plans for the university village. To help develop the project, the ODU foundation is working through the Norfolk Redevelopment and Housing Authority and using its eminent domain powers.
A private developer might be able to buy a few properties and do something next to a campus, “but to do it on the scale that we’re doing you need to have an entity that is clearly focused,” notes Fenning. A foundation, he adds, “is a perfect entity. It exists at arm’s length from the university and is created specifically to acquire, hold and develop property. It’s hard for schools to do that on their own.”
Virginia’s university real estate foundations
Here’s a sample of some of the state’s largest foundations
Virginia Tech Real Estate Foundation….............................$65,935,928
Old Dominion University Real Estate Foundation…...............87,559,514
Christopher Newport University Real Estate Foundation ........62,441,091
James Madison University Real Estate Foundation…..............5,480,598
Figures come from Form 990 for 2009, or most recent figures available. Source: Foundation Center