Learning to Thrive: The University as Developer

Perhaps you haven't thought of the current situation as an opportunity for your campus to become a real estate developer?

Why become a real estate developer in the midst of a housing recession? Real estate markets are historically cyclical. It’s in the doldrums now, but the market will return to health. Planning and entitlements for real estate projects take time, often years, to complete. By preparing and positioning projects for development now, landowners will be in a position to capitalize on the value when the market returns.

Is the risk inherent in real estate appropriate for an academic institution? Value in real estate can be harvested at many points along the evolution of the property, from raw land to built product. An institution could sell surplus raw land. This, however, is typically the lowest value that might be achieved. It also leaves the use and quality of the development to the new owner, who may decide to use the land in a way that reflects poorly on the university. Value is added by creating an initial vision for the property through a master planning process, providing the university’s development partner and its stakeholders with a clear understanding of the institution’s desires and standards, which must be met in the development.

Some IHEs choose to sell the land once they have articulated their vision and the guidelines needed to ensure its implementation. Obtaining entitlements and approvals from a variety of state and local entities adds further value without committing funds to building roads, utilities, or buildings, and other institutions harvest value at this point in the process.

Still others choose to construct roads and utilities as the “master developer” of the property, leaving the construction and sale of homes and other buildings to private sector developers. As value is added, risk increases. By gaining a clearer understanding of the development process and weighing the potential risk against the gain, IHE leaders are maximizing the value of their real estate assets.