A change in operational needs
During a time of expansion, a New England college acquired an off-campus building to serve as a new administrative and academic center and began an extensive renovation and expansion process. However, with the rise of remote working and online courses over the following years, by the time the building neared completion five years later, the college’s operational needs no longer called for the extra space.
The challenges of a COVID-19 market
Coinciding with the near-completion of the college’s new building was the arrival of the COVID-19 pandemic in the United States. Not only did the pandemic’s effect on the college’s operations underscore their need to consolidate space, it also necessitated an immediate increase in cashflow from alternative sources. However, the pandemic’s disruption of the real estate market posed a significant challenge to any attempts to sell. DBI was engaged to assist the college in monetizing the asset successfully despite the difficult market conditions.
Our research into the college’s debt structure and into the surrounding real estate quickly confirmed that an outright sale would likely result in a loss.
Seeking a solution through extensive strategizing
DBI began to map a set of strategic paths through entitlements and construction that would lead to the most promising buyer. Utilizing zoning research as well as input from the lender, several brokers, and potential buyers, DBI determined the building was most suitable for use as a single or multi-tenant office or a research center. Within a matter of weeks, DBI developed and quantified a range of 20 different strategies within the parameters established by our research. From selling the project in its current state of incompletion, or as a white-boxed building, to holding and leasing up, to entering into a joint venture, DBI aimed to give the college a clear understanding of all options available to them, and a well-supported recommendation.
The highest possible return
The college elected to pursue the strategy that would give them the highest potential return: selling the building to a developer specializing in research centers. DBI engaged a broker to market the property, engaged a land use attorney to assess the viability of a change of use, and began active negotiations with several developers. In the end, DBI was able to negotiate a satisfactory price for sale of the building on behalf of the college, following the completion of the building envelope. DBI then oversaw the completion of the building envelope to the specifications of the developer, while ensuring the burden on the college remained fair and per the agreement. In this way, DBI was able to help the college transform what had essentially become a multi-million-dollar liability into a source of alternative funds to help alleviate the strain placed on the college's revenue streams by the pandemic.
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