Maximizing Real Estate Assets: A Strategic Imperative for College Presidents

Higher education institutions are facing unprecedented financial challenges. Declining enrollment, shifting demographics, rising operational costs, and increased competition are pressuring college presidents to find innovative ways to bolster their budgets and balance sheets. One often-overlooked opportunity lies within the real estate assets owned by colleges and universities. By strategically managing these assets, institutions can unlock new funding sources, enhance financial stability, and support their long-term missions.

The Impact on Budgets and Balance Sheets

Colleges and universities frequently own significant real estate holdings, including academic buildings, dormitories, research facilities, and underutilized land. These assets represent a substantial portion of an institution’s balance sheet, yet many remain untapped as revenue-generating resources. Efficiently leveraging these holdings can create financial flexibility, provide immediate liquidity, and support long-term institutional priorities.

Funding Opportunities Through Real Estate Optimization

College presidents must consider a variety of strategies to maximize the financial benefits of real estate holdings. Some of the most effective approaches include:

1. Generating Rental Income – Leasing surplus space to businesses, start-ups, or community organizations can create steady revenue streams. For example, Arizona State University has successfully leased space to private companies for research collaborations, generating significant additional revenue while fostering innovation and economic development.

2. Asset Sales and Sale-Leaseback Arrangements – Selling non-core properties or engaging in sale-leaseback transactions can inject capital into an institution while allowing continued operational use of critical facilities. In 2018, the University of Wisconsin-Madison sold a 1.2-acre property in downtown Madison, using the proceeds to fund scholarships and academic initiatives.

3. Utilizing Real Estate as Collateral for Debt Financing – Colleges can leverage their real estate assets to secure favorable financing terms for capital projects, infrastructure improvements, or debt restructuring. Columbia University has used its extensive real estate holdings in New York City to secure low-cost financing for campus expansion projects, ensuring continued growth without placing undue strain on operational budgets.

4. Public-Private Partnerships (P3s) – Engaging private developers in real estate ventures can help institutions finance new construction or redevelopment projects without shouldering the full financial burden. The University of California, Merced, utilized a public-private partnership to fund a $1.3 billion expansion project, allowing the institution to grow its campus without taking on excessive debt.

   
   

Strategic Considerations for College Presidents

Successfully managing real estate assets requires a proactive, data-driven approach. College presidents and their leadership teams should conduct comprehensive portfolio assessments to identify underutilized properties, evaluate market conditions, and determine the highest and best use of each asset. Additionally, institutions must navigate regulatory considerations, donor expectations, and long-term campus planning objectives when making real estate decisions.

By adopting innovative strategies such as rental income generation, asset sales, sale-leaseback arrangements, and leveraging properties for financing, institutions can strengthen their financial positions and sustain their missions. Real-world examples, from Arizona State University’s leasing strategy to UC Merced’s public-private partnership, highlight the potential of real estate to transform institutional finances.

At KDM Advisors, we help higher education leaders navigate complex financial landscapes and unlock the full potential of their assets. Contact us to explore how your institution can turn real estate into a powerful tool for financial resilience and growth.

Kenneth Maher is a principal at KDM Advisors, LLC, which partners with higher education leaders to build long-term sustainable business models that ensure financial stability and faculty/staff engagement. You can reach Ken directly at kmaher@kdmadvisors.com