New & Next Webinar Series | Top Facilities and Operations Challenges Facing College Leadership Today

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ABOUT THE NEW & NEXT SERIES

The New & Next series focuses on innovation in higher education featuring guest speakers from thought leaders in our industry and beyond.

Sessions are designed to spark new and next discussions around the topics outlined each semester. The Fall 2016 series zeroes in on space and people. Topics of discussion include creative use of space on college campuses, architecture and design for new buildings and executive leadership and recruitment.

Fall 2016 New & Next Series Schedule:Thursday, October 20: Jay Sharman, CEO, of TeamWorks Media

“The Modern Campus: Utilizing Space to Tell Your Story”

Thursday, November 17: Craig Cassell, Global Leader, Education Practice GroupCushman & Wakefield“Top Challenges in Facilities and Operations”

Wednesday, December 15: Korn Ferry, Managing Principal, Julie Staggs“Four Dimensions of Leadership and Talent”

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Top Challenges in Facilities and Operations Facing Campus Leadership Today

Presented by Craig Cassell

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Cushman & Wakefield’s Education Practice Group seeks to assist in the development and implementation of strategies throughout the lifecycle of Pre-K, K-12, and post-secondary school clients. With over 15 years of commercial real estate advisory experience, Mr. Cassell has spent most of his career building the education platform, expanding its capabilities and resources, and creating and growing client relationships. As leader, Mr. Cassell is directly responsible for team assembly around the globe, creating and implementing overall strategic planning initiatives for education entities, as well as benchmarking key performance indicators (KPIs) for institutions. Key services performed by the Education Practice Group are demographic analysis, site selection and negotiations, construction management, operational efficiencies, property appraisal, and structured finance.

Acting as an operating partner to educational institutions, private equity investors, venture capitalists, financiers, and consultants, Mr. Cassell has gained an unparalleled understanding of trends within the education sector.

Craig CassellGlobal Leader,Education Practice Group

Craig Cassell serves as the Global Leader for the Cushman & Wakefield Education Practice Group, a full service, integrated platform focused on real estate solutions for the education sector.

YOUR PRESENTER TODAY

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AGENDA

1. Top Challenges in Higher Education

2. The Student Experience

3. Facility Solutions - Financing

4. Operational Efficiencies

5. Enhancing the Student Experience

6. How Cushman & Wakefield Can Help

7. Q&A Session

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Enrollment � Tuition � Student Debt � Funding � Competition

SIGNS OF STRESS IN HIGHER EDUCATION

More than half in of bachelor’s degree holders under the age of 25 are unemployed or underemployed, the

highest share in more than a decade

In 2014-15, appropriations per FTE student were 8%lower in inflation-adjusted dollars than they were a decade

earlier and 11% lower than they were 30 years earlier.

The price tag for a traditional four-year residential degree

program averages just over $35,370 per year

Between 2003-04 and 2013-14, educational expenditures per FTE student at public four-year institutions increased

by 16% in inflation-adjusted dollars.

…at an average rate of 3.5% per year beyond inflation.Between 2006-07 and

2016-17, published in-state tuition and fees at

public four-year institutions increased…

CONS

UMER

PRIC

E IN

DEX

TUIT

ION

Published 2016-17 in-state tuition and fees at public four-year institutions range from $5,060 in Wyoming to

$15,650 in New Hampshire$1.3 TrillionAmericans owe nearly

in student

• Per the NCES, 20.2 million students enrolled in degree-granting postsecondary institutions during the 2014-2015 school year (latest data available). Enrollment fell roughly 0.8% from the prior school year—the fourth consecutive year of decline and the first time that has ever happened based on NCES records.

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Declining Enrollment

TOP CHALLENGES IN HIGHER EDUCATION

• Annual tuition increases handily outpace inflation, though annual increases have slowed in recent years.

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Higher Tuition


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Student Debt

Federal funding doubled from 2006 ($20.6 billion) to 2016 ($41.7 billion), however, federal funding decreased by

$10 billion since 2010 ($51.9 billion).

24% of federal student loan borrowers who did NOT graduate defaulted

on their loans.

In 2015, 38% of all borrowers with outstanding student loan debt owed less than $10,000 and 16% owed $40,000 or more.

Default rates are highest for borrowers who leave school owing less than $5,000.

In the third quarter of 2016, the outstanding federal student loan debt was $24,100.


In 2015-16, students and parents borrowed $106.8 billion.

The average Class of 2016 graduate has $37,172in student loan debt, up 6% from last year.

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Funding

Total Grant Aid in 2015 Dollars by Source of Grant, 1995-96 to 2015-16


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Alternative Credentials/Competition

MOOCs Micro-credentials Nanodegrees Boot Camps


Based on surveys, blogs, forums, discussions and conversations, students have conveyed their most important wants and needs.

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THE STUDENT PERSPECTIVE

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Tier I

Tier III

Tier II

Experienced Professors/Diverse Programs & Degrees

Strong Civic/Culture Aspect

ExtracurricularActivities

Social/Living/Lifestyle

Good Associationsand Staff Contacts

Networking/Connections

Updated Housing

Cost of Tuition Reputable Curriculum Athletic Facilities Modern Library

Efficient Campus Safety & Security

Technology High QualityFacilities

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RE-focus, RE-invent, RE-finance

• At some colleges and universities, real estate represents the single largest asset on their balance sheet.

• Universities simply cannot afford to increase costs in nonstrategic areas and take on more debt, if they want to survive long-term.

So what do we do?

• Assess financial condition

• Evaluate strategic real estate alternatives

FACILITY SOLUTIONS - FINANCING

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Understand Highest and Best Use of Assets

Overview• Prominent public research university located in College Park, MD• Average annual enrollment of 37,000, including both undergraduate and

graduate students• Annual operating budget of $1.75 billion

Challenges• Large real estate portfolio with many stakeholders• Managing projects within debt capacity constraints• Identifying alternative sources of financing

Approach• Identify ways UMD can leverage their assets and resources to address current and future needs• Provide guidance to UMD to structure/negotiate complex P3 transactions• Projects focused on re-developing publicly owned assets to enhance local community• Drive economic development and support State of Maryland’s goals for transit-oriented development

Results• Structured ground lease transactions with developers to construct flex office spaces to house UMD affiliated technology companies• Built public charter school on campus property to attract more faculty and staff to live in/around campus• Negotiated agreements with private companies to invest capital into UMD owned buildings and then leasing for commercial use

CASE STUDY

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Overview• Prominent public research university in the San Francisco Bay Area• Average annual enrollment of 37,500, including both undergraduate and graduate students• Annual operating budget of $2.5 billion

Challenges• California’s budget problems dictated a drive within the UC Berkeley system to reduce

costs and drive efficiencies• With upcoming expirations of over 50 leases for leased space in off-campus buildings,

UC Berkeley desired to relocate into on campus owned assets totaling 800,000 square feet

Approach• Established a detailed five-year capital plan for the newly purchased assets, outlining all capital improvements, cost reduction targets and lease revenues to

tackle various challenges including:- Owned properties were almost fully leased to various commercial tenants- Each of the purchased properties employed different management and leasing vendors, each with their own proprietary data management systems- Multiple deferred capital items needed immediate attention- Green initiatives throughout UC Berkeley mandated further upgrades to the owned properties but funding was unavailable

Results• An overall $55 million in savings over a five year period of time• A comprehensive scope of services integrated into the capital plan called for the centralization of management and leasing of the owned assets; all other

contracts were bid to ensure cost efficiency• Created a prioritized timeline to address all deferred maintenance issues, ADA compliance, and green initiatives, all fully integrated into the cost containment

plan

Understand Best Real Estate Strategy (i.e. sale leaseback, portfolio optimization, etc.)

CASE STUDY

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So what do we do?

1. Assess Financial Condition• Work with finance staff (CFO, Treasurer, Tax, Finance, etc.) to understand current

and projected operating surplus/deficit and capitalization.o Specifically, tax-exempt bonds, review to determine maturities, call provisions and

covenants.o Understand relationships with the credit rating agencieso Compare the economic impact of monetizing real estate assets with other forms of

capital which may be available at the organizational level.

2. Evaluate Strategic Real Estate Alternatives• Segregate real estate footprint into three broad categories:

o Mission-critical assets which must remain under absolute controlo Commodity-type properties intended to remain in use, but which do not require long-term

control and can be replaced, ando Surplus assets suitable for disposition immediately or within the next 24-36 months.

FACILITY SOLUTIONS - FINANCING

Between 2003-04 and 2013-14, educational expenditures per FTE student at public four-year institutions increased by 16% in inflation-adjusted dollars.

1. Economies of scale:• Strategic sourcing and vendor management• Bundling/consolidating services for cost savings

2. Ensure cost-effective quality facility services:• Maintenance• Critical Environments• Custodial• Grounds and landscaping• Moving

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Are you being diligent with all dollars?

OPERATIONAL EFFICIENCIES

3. What is it worth? How long does it take?

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OPERATIONAL EFFICIENCIES

CONSOLIDATED FMOVERSIGHT & OPS

CONTRACTREVIEW

FLEXIBLESTAFFING

INVOICE REVIEW ANDBILL PRESENTMENT

LEVERAGEDPROCUREMENT

VALUEREENGINEERING

ENERGY REDUCTION& SUSTAINABILITY

Cost Saving Opportunities

10%-15%TYPICAL SAVINGS

1-2 monthsTIME REQUIRED


6 monthsTIME REQUIRED






ongoingTIME REQUIRED


1-12 monthsTIME REQUIRED



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Building Blocks of Education Facilities

ENHANCING THE STUDENT EXPERIENCE

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Work & Study• Incubate start-up businesses affiliated

with school/students • Private sector mentoring/hands-on

experience to help create jobs and training for students

• Virtual study programs inside/outsideclassroom

Students & Staff• Lower overhead costs associated with

administrative/office space• Foster mutually beneficial

relationships, environment for faculty, students and administration

• Strive for the “unified environment”

Safety & Security• Vertical buildings with fewer gateways• Emergency hotlines, cameras and

phones installed to ensure maximum safety on campus

• Emergency text alert systems

Room & Board• Modern amenities meeting today’s

standards• Restaurant quality food and beverage• Aids in recruitment of prospective

students

Community & Culture• Reflect of values and character of institution• Increased awareness of civic and social

responsibility• Integrate outdoor spaces/unions as heart of

each school

Third-Party Partnership• Unlock capital for various projects• Private sector partners can disrupt

traditional thinking• Preserve credit rating and debt capacity• Live, Learn, Work, Play

Teaching & Learning• Enhanced learning areas• Transition some lecture halls to

collaborative/group study work spaces• Customized tutoring areas• Interactive technology

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LIVE! LEARN! WORK! PLAY!

ENHANCING THE STUDENT EXPERIENCE

Central Location Updated Accommodations Social Environment

Fitness Center Coffee Shop Restaurants

TAKE AWAYS

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1. Have a succinct real estate plan and be prepared to implement

2. Efficiently run your operations

3. Need accountability and strive to be fiscally strong

4. Innovation leads to positive results and value creation for schools

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How Cushman & Wakefield Can Help

CUSHMAN & WAKEFIELD EDUCATION PLATFORM

Structured FinanceFinancing Solutions

Q. How can college and universities leverage private capital markets to build new or improve existing facilities without impacting their balance sheet?

A. Diverse and abundant 3rd party capital exists to help fund educational facilities, student housing, and athletic facilities on college campuses. University leadership is unaware or unsure of the options which exist.

Project & Development ServicesDevelopment and Construction

Q. Significant construction projects are planned on 75% of college campuses from 2016-2019. Who is responsible to ensure all budgets, timing, and phasing milestones are completed?

A. Local developers/general contractors are usually overseeing the process. With the amount of construction happening on college campuses, a 3rd party resource should be advising colleges and universities separately.

Valuation & AdvisoryReal Estate Opportunities

Q. How can an institution learn the true value of their real estate and then leverage for optimal gain?

A. By appraising their real estate every few years, schools may unlock capital from previously unknown areas, allowing access to a diverse method of growth and liquidity.

Integrated Facility ManagementProactive Management

Q. How can an institution prioritize sustainability and energy within their campus real estate?

A. Immediate cost savings related to each of these initiatives can be substantial. Identify long-term, preventative solutions and management strategies to address all short/long-term concerns.

Facility ServicesOperational Efficiencies

Q. How can an institution lower overhead costs without compromising necessary resources?

A. C&W Services can streamline services such as janitorial, maintenance, and landscaping under one contract, to improve efficiencies and ensure facilities reflect your client’s institutional brand.

Strategic ConsultingStrategic Planning

Q. How important is a master plan? When, where, and how does an institution invest in their campus and facilities?

A. Creating a 3, 5, or 10-year master plan is essential for the fluid growth of an institution. Identifying the highest and best use of owned/leased land and buildings is one of the first steps to consider. Communication of the plan allows transparency to current and future students and alumni.

Omni Rancho Las Palmas | Palm Springs, California

February 21-24, 2017

Graduate | Adult Learners | Undergraduate

REGISTER NOWconvergeconsulting.org/converge2017

Craig Cassell Olivia [email protected] [email protected]

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2. http://www.cbpp.org/research/state-budget-and-tax/funding-down-tuition-up

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16. https://nscresearchcenter.org/currenttermenrollmentestimate-spring2016/

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SOURCES