Ideas

U3 Advisors responds to Forbes Real Estate Council CommunityVoice, December 19, 2018 “Three Reasons Real Estate Pros Should Get Smart About Investing in Educational Institutions”

Forbes Real Estate Council CommunityVoice, December 19, 2018 “Three Reasons Real Estate Pros Should Get Smart About Investing in Educational Institutions”

We commend Mr. Kalsi’s recognition of the important role that community colleges can and do play in today’s economy and in their local environments.  At the same time, we caution that the interests of institutional real estate investors may not always align with the mission, resources, expertise, and time horizon of community colleges, or other higher education institutions.

We agree with Mr. Kalsi that educational institutions and community colleges in particular can serve as vital anchors of economic development in their communities, and can help train the American workforce of the 21st century in the types of jobs that the innovation economy increasingly seeks.  Further, we agree that college partnerships with industry can be effective at job training and placement, spurring innovative research, and enhancing the built environment at college campuses and their adjacent communities.

However, at times the interests of neighborhood economic development can diverge from those of highest-and-best-use real estate development.  Pursuing the single-minded goal of maximizing real estate value for developers and investors can lead to gentrification, while academic institutions often care deeply about economic equity within the campus community - ensuring that quality and affordable housing is available at the campus edge, that public green spaces are accessible, and that retail, food, and beverage establishments are affordable to the college community.

So while we are cognizant of the manifold potential benefits of academic-industry partnerships, U3A attends carefully to  how those partnerships are implemented.  Institutional real estate interests often come to the table with asymmetric access to resources, namely capital, experience, and professional networks.  In contrast, community colleges (and many 4-year colleges and universities) often face the twin challenges of very limited access to capital and limited access to professional expertise.  This asymmetry can lead to colleges striking purchase and sale agreements, joint venture, ground leases, or other transactions whose upfront economic benefit may come at the expense of a college’s ability to meet provide the long-term resources it needs to meet its mission of providing a quality educational experience.

Finally, Mr. Kalsi argues for the critical role of innovation in aligning community college curricula with today’s workforce and technology trends.  We believe that private sector capital can lead the way in building this physical and programmatic infrastructure while partnering with community colleges to provide the intellectual capital and scaffolding necessary to make innovation hubs accessible to their students.  One challenge will be in articulating the differentiated roles and interests of private industry, community colleges, and 4-year research universities in these partnership, and in defining the risks and benefits to each of these parties.

At U3 Advisors, we serve our academic clients by helping to bridge the divide between the campus and their municipal partners.  In doing so, our objectives are to ensure that these sometimes divergent interests can be met through collaborative programs like buy-local procurement strategies that harness the the purchasing power of a college towards locally produced goods and services; live-local residential incentives that encourage college faculty, staff, and students to live locally by lowering their effective rental costs and thereby encouraging new residential development; and through collaborative planning and real estate development strategies that bring together municipal and college leadership under new, flexible governance structures that can respond nimbly to changing market conditions.