Washington University in St. Louis
Planning for future growth while addressing an off-campus housing crisis.
For over 12 years, U3 has worked closely with Washington University in St. Louis (WashU) to support decisions on campus growth, student housing management, and off-campus and campus edge development strategy. Beginning in 2008, concerned about limited space on its historic campus, WashU needed a growth strategy that could leverage its significant off-campus real estate holdings. Working closely with the design team at Ayers Saint Gross, U3 examined WashU’s properties surrounding the core campus, asking how much and what types of University growth these sites could support. Or, if they were to be sold, what might be built and at what value? The team’s detailed development and financial analysis yielded a clear answer to grow north of campus. This strategy would enable the University to position the Delmar Loop—hailed as the “best Main Street in America” — as its northern edge and leverage real estate available in the area.
However, the University would first have to address the myriad problems of housing vacancy and the financial drain imposed by its off-campus housing portfolio. With more than 1,200 units in 160 widely dispersed buildings, WashU’s portfolio of off-campus housing was old and in poor condition, with low occupancy rates. Unable to cover its direct operating costs, the portfolio had been financed with debt, generating exponentially escalating losses. The University also lacked a conventional “exit strategy,” given a weak housing market and the location of the properties on the University’s edges.
U3 began by benchmarking peer universities, demonstrating that WashU had far more graduate housing than other institutions, despite the low-cost housing market. A survey of graduate student preferences revealed that many of the units were simply too far away from campus, while a detailed capital needs assessment and financial analysis of the portfolio provided the framework to dramatically shrink the portfolio. U3’s plan called for a mix of selling single-family homes to WashU affiliates, redeveloping properties into high-quality undergraduate housing, and most dramatically, moving 30 buildings into a new, non-University entity and making them available for rent to the general public. For the remaining housing portfolio, U3 worked with a committee of WashU leadership to develop a phased renovation plan and new management standards.
The housing plan enabled WashU to shrink its graduate housing portfolio and to reduce the associated debt and operating losses. But even with the infusion of $40M in historic preservation tax credit capital, these moves were not sufficient to completely reverse the operating losses of the portfolio. To further strengthen the portfolio, U3 developed a neighborhood redevelopment strategy to help stabilize value across the neighborhood. Key components included a new Strategic Investment Fund for the acquisition of blighted properties; a manager for Loop retail support and a revolving loan fund for tenant improvements; new parks and community open space; housing incentives for university affiliates moving into the area; and execution of the Housing Plan outlined above. Together, these measures helped stabilize a community that will be attractive to academic units, students, and residents alike.
U3 has since worked with WashU on several other engagements, such as a detailed portfolio and operations benchmarking study against other peer university real estate departments. U3 is also assessing the University’s options regarding properties in an off-campus area known as West Campus, including phased redevelopment, renovation, and sale or lease. For each option, U3 analyzed total development capacity against anticipated need over time, operating and capital costs, third-party leases, and funding strategies, in the context of changing real estate conditions and inter-jurisdictional governance. In this project and others, U3 continues its long partnership with WashU to develop thoughtful solutions to complex challenges and intersecting goals.