A real estate bubble is enveloping many parts of the United States and colleges are cashing in before it bursts. Gwynedd Mercy University in Pennsylvania recently sold a 154-acre property for more than double what it paid for the land three years ago. Last week, Southwestern University in Texas sold two properties it had owned since the 1930s for tens of millions.
Gwynedd Mercy first bought the land, located about 22 miles north of Philadelphia, from pharmaceutical company Merck & Co. in 2018 for $12.1 million. The property, which includes a 157,000 square foot building, doubled the footprint of the campus, and at the time, university officials planned to transform the existing building into a “facility for teaching and learning innovative,” said Deanne H. D’Emilio, President of Gwynedd Mercy.
But after completing a facilities planning process and watching the property market boom in the Gwynedd Valley, university officials changed course.
“We started looking at what space we have available here on campus and the cost of renovating the property,” D’Emilio said. “And then with the pandemic, the real estate market in that area really took off, and there was a lot of interest in property.”
The university sold the property to an affiliate of Beacon Capital Partners, a Boston-based real estate firm, for $31.5 million. The profit nearly doubled the university’s endowment, which was valued at $41 million before the land was sold. D’Emilio said university officials are still figuring out exactly how to use the proceeds.
Southwestern was in a similar boat – the private university began receiving offers for two parcels of land, totaling 493 acres, offered to it in the 1930s for $1. At the time, the land was worth $56,000.
“Time is your friend,” said Laura Skandera Trombley, president of Southwestern. “There is a real estate bubble going on here. We had leased the land for grazing rights, and so with the huge increase in land values here, we thought it was the perfect time to put these plots up for sale. »
The properties are not close to Southwest Campus, which is in Georgetown, Texas, and the university never planned to develop the land.
“The land was valuable for livestock, so we kept it,” Trombley said. “With Tesla and Samsung coming in and all these other companies, there’s just a boom. So we thought, since this is land that we’ve never used and we would never use, that it seemed appropriate to abandon this land portfolio and pay the proceeds into the endowment.
Southwestern earned $28 million from the sale and invested $25 million in its endowment. The university will use the remaining $3 million for strategic projects, including financial aid and pay equity adjustments.
The pandemic has prompted many institutions to reassess their footprint, said Jeff Hubbard, senior managing director of real estate sales at A&G Real Estate Partners.
“Educational institutions view their real estate as a place for potential cash creation,” Hubbard said. “This will support the implementation of all their long-term plans.”
American Jewish University plans to sell “all or part” of its 35-acre campus in Los Angeles and use the funds to increase its community programs and academic offerings, which are increasingly digital. Boston’s Lesley University is selling 10 historic Cambridge properties to help fund capital improvements on its three campuses.
Some colleges are selling non-essential properties — like plots sold by Gwynedd Mercy and Southwestern — reducing their occupancy costs and potentially selling sale-leaseback properties, he said.
D’Emilio said when university officials reassessed Gwynedd Mercy’s footprint, they decided the university’s need for additional space had not changed. Last fall, the university enrolled 2,304 students, roughly on par with the number of enrollments over the past decade.
“We have to take into account that some people are working more remotely than we were before, but we haven’t made any decisions to have a smaller footprint,” she said. “We still have plans to invest in strategic options that will expand our innovative teaching and learning options – basically what we planned to do before buying the land.”
Demand for space in Gwynedd Valley, where Gwynedd Mercy is located, is on the rise, said Brian Regli, a property professional and member of the university’s board of trustees. The biomedical and life science industries are growing around Philadelphia, and companies are looking to purchase additional lab space. At the same time, logistics companies like Amazon are also looking to build distribution and transportation centers.
“There are only certain amounts of land in certain places that are zoned for that particular use,” Regli said. “Our property happened to have that use attached to it, and so it’s become a real interest for some of the players trying to look at that particular type of market.”