Since 2013, the University of Wisconsin-Madison’s pace of revenue growth has underperformed, compared to peer schools. With state politics resulting in increasingly smaller shares of the university’s budget coming from the state, the university is looking to alternative revenue streams to make up for lost cash.
Over the years, UW has pursued a number of revenue-generating strategies in an attempt to make up for the deficit. Previous actions included increasing tuition for out-of-state students and those enrolled in professional programs, in addition to growing summer term offerings, expanding the undergraduate student body and adding professional master’s degree programs. Chancellor Rebecca Blank described these strategies as “low-hanging fruit.”
Even after implementing all of these strategies, the university still needed new revenue streams to contribute to a successful long-term financial strategy, and that’s where real estate development comes in.
The Wisconsin State Journal reported that UW-Madison is actively exploring a real estate development strategy across campus as a means to grow the university’s endowment.
Earlier this month, the Board of Regents approved a general agreement allowing the university to sell its land to University Research Park, which would ultimately lease the land to real estate developers for private projects. The agreement sets out that revenue from rent would flow into an endowment, which would partially fund UW-Madison’s annual operations.
The sale of each parcel would require approval from the Board of Regents, and university officials emphasized the strategy would be carefully managed, with projects being vetted by the school and University Research Park employees.
“We have a valuable partner in University Research Park, with a track record of working with the university, private developers and businesses for over 30 years to transform former UW-Madison agricultural lands into a thriving innovation district west of campus,” said Rob Cramer, interim chief financial officer. “The real success of this will be judged in 20 or 30 years.”
The university is reportedly planning to bring a few initial ideas to the Board of Regents in December for approval. Of these proposals, one reportedly includes development of the land on which the Humanities Building sits following its demolition over the coming decade. Cramer reported that this was “on the bigger end of the spectrum of possibilities.”
University investment in real estate as a means of increasing endowment is not a new idea. UW-Madison based its real estate development strategy off of that of the University of British Columbia in Canada (UBC). As reported by the Vancouver Sun, UBC began selling excess land for residential development in the form of 99-year leases in the 1980s under the leadership of developer Robert Lee.
Thirty years later, the investment has generated $1.6 billion CAD for the school’s endowment. University of British Columbia President, Santa Ono, noted, “[Lee’s development has] created a stable, autonomous and unprecedented source of funding for the university that forever changed UBC.”
Proponents are hopeful that UW-Madison’s development strategy will yield similar long-term successes such as those of UBC. However, according to UW-Madison geography Professor and Planner Kris Olds, “each institution’s real estate market is unique and will yield very different levels of return.”
