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Business Officer Magazine
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Expanding Within Your Urban Boundaries

If you’re bursting through your urban confines, here’s a space-acquisition plan to keep you within city limits.

By David Hornfischer

To compensate, we’ve divided classrooms in two and scheduled classes at night, during lunch, in the summer, and on weekends. We’ve expanded internships and study-abroad programs. We’ve even created a new online school (www.berkleemusic.com). Even with all of these fixes, members of the entire institution—faculty, administration, staff, students, alumni, and trustees—have all thrown up their hands and cried, “Help!”

We responded by repeatedly trying to buy nearby buildings, but most came with outrageously expensive price tags or couldn’t be isolated for sound, an important quality for classrooms supporting our contemporary music curriculum. Many properties were old and small, making it difficult—or impossible—to renovate them to suit our needs. Some contained hazardous materials that would have been very costly to remove. Others sat on ground contaminated earlier by gas stations, cleaners, or leaky oil tanks.

Two other options came to mind: The first was to buy or lease suburban spaces accessible by car, more affordable, and easier to modify acoustically. This choice can be perfect for graduate schools, commuter colleges, and institutions in locations that already make cars a necessity. We’re aware of several urban-institution business officers who are considering such suburban space. Our second option: Look for space further away from our campus core but still within the city and accessible by Boston subway. Becoming a subway campus would give us a large stock of properties from which to choose, allowing us to find suitable space faster.

Staying True to Our Mission

When considering location alternatives, our core mission became the deciding factor. In addition to being the world’s largest independent music college and a premier institution for the study of contemporary music, Berklee has included in its newly defined vision the goal of enhancing our students’ experience. Once we made a conscious effort to stay true to that promise, campus planning became easier.

At Berklee, a rich student experience means enjoying the exhilaration of living in the bustling, energizing city of Boston and identifying with a diverse, thriving, and coherent community. And for students coming to Berklee, we know that another key dimension is the combination of creative people, performance venues, and a thriving live-music scene. Suburban locations work well for many institutions, but the city is generally best for those who focus on art, architecture, and urban planning—and for students like ours who thrive on contemporary music.

Toward that end, Berklee’s mission led us to decide not only to stay in Boston but to further condense our campus around a lively, recognizable center. Our plans include fostering a sense of community by creating spaces where students can easily gather to socialize and collaborate.

We discarded any consideration of suburban and subway campuses, with the realization that we would have to face the realities of the city, including older buildings, small lots, close neighbors, and expensive real estate. Despite these challenges, we’ve been able to tap some urban advantages and, with some consulting help, develop a strategy to effectively manage campus growth. 

Factoring in Some City Savings

Although urban real estate can be pricey, other services are free, saving us significant costs. Here are some examples:

  • Accessible amenities. We can spend less on our library because the Boston Public Library is world class and only five city blocks away from the main campus. Students have access to nearby fitness clubs, so we don’t need to spend money on one of our own. Berklee does not provide a student health center, because the college is literally surrounded by hospitals and clinics of the highest caliber. And we don’t develop green space, because the beautiful parks of Frederick Law Olmsted’s Emerald Necklace are close by.
  • Swapped services. Another way our college capitalizes on what’s already in the city is to barter with other schools for space and services. We belong to the Pro Arts Consortium, which also includes the Boston Architectural College, the Boston Conservatory, Emerson College, the Massachusetts College of Art, and the School of the Museum of Fine Arts. Because it holds most classes at night, the Boston Architectural College leases 2,400 square feet of prime classroom space to us during the day. Our students play on Emerson sports teams, attend courses at other consortium schools for Berklee credit, and share dorms in summer. We also share staff development programs and various administrative partnerships with other local colleges.

Each of these arrangements means—directly or indirectly—additional, affordable, urban space for us. Belonging to a consortium also helps us improve neighborhood spaces, because we can leverage our collective influence to lobby the city for action.

  • Advantageous partnerships. Berklee has learned from other institutions that public-private partnerships can also produce creative space solutions. Public officials, realizing that colleges and universities are magnets for businesses, are usually eager to help institutions find space to stay in the city. For example, when the mayor of a nearby city had a run-down theater on his hands, he asked a consortium of local colleges about its interest in renovating and sharing the facility. The approach worked beautifully—the mayor replaced a derelict building with a jewel, and several institutions got a high-end theater for a fraction of what it would have cost to finance it themselves.
  • Bargaining chips. Business officers also have something to offer when negotiating for much-needed space in brand new structures. If a private developer is planning a new building in a prime location and your institution can commit to leasing part of it, the developer can often obtain tax-exempt financing for your portion. Even if that’s not the case, the developer will definitely benefit from having a tenant who requires little parking or vehicle traffic but may generate foot traffic for retail space that may be part of the project. In return, once the building is finished, the project might also benefit from reduced property taxes.

Adopting an Acquisition Strategy

If You Land on Park Place, Buy It

Anyone who has ever played Monopoly knows that you can learn a lot about investing in real estate simply by rolling the dice. Here are 10 lessons Berklee staff have learned as we have leased, purchased, and renovated properties for our institution.

  • Be bold. Don’t pass on Park Place because you’re viewing it as an expense instead of an investment. A few years down the road, you may find yourself looking at the same building you might have purchased, imagining what you could have done and feeling amazed that the astronomical price you rejected then seems ridiculously low now.
  • Be patient. Understand that development and construction projects can take a long time. But also be diligent. Fully understand the consequences of every decision early on, and then continuously verify that the work is being done the way you’ve planned.
  • Invest in the best advice available—credible and exhaustively detailed—as early as you possibly can. The seller and builder might not alert you to costly potholes in your plans, and your architect is probably a little behind on current prices and availability of materials and labor. Hire experts with direct experience in project details, including issues with older buildings, particular neighborhoods, current market conditions, and construction projects in occupied buildings inches away from other properties.
  • Capitalize on the built-in amenities that your city has to offer. Among them: hospitals, parks, health clubs, and libraries.
  • Do your homework on promising properties so that you have a head start when they come on the market. Sometimes you have to act quickly, but you don’t want to buy something just because you can.
  • Look for buildings that are 20,000 square feet or larger. They’re easier to repurpose and they cost less per square foot to renovate, particularly when considering permits, licensing, and information technology networking.
  • Lease strategically for cost-effective, short-term solutions, such as filling in gaps to make your campus more unified or for hedging against an unforeseen drop in enrollment.
  • Collaborate with governments, private developers, and other institutions. You can acquire brand new space through tax incentives for developers, trade space with other organizations, and develop older buildings in concert with local governments that want to add life to an area.
  • Be willing to admit that you need new space once you’ve exhausted the creative ways to make the most of the space you have.
  • Stay in the city if it furthers your core mission. You can’t put a price on city life, and the city saves money in many ways. Work with and listen to your neighbors. They can be important partners in planning for new facilities.

Once Berklee had taken advantage of these urban opportunities, it was time to develop a strategic space-acquisition plan. Whether we were leasing, buying, renovating, or constructing from scratch, we knew that we’d need to invest in detailed, credible, expert advice as early as possible. At some point, the quest for new space might also lead to construction, and we’re not construction experts. For most of these scenarios, we knew that decisions we might make midway through a project would cost much more than decisions made at the beginning. For these reasons, we’ve been working with real-estate advisors, McCall and Almy; space planner, Goody Clancy; and Boston construction management firms, Shawmut Design and Construction and William A. Barry construction, to help us with construction-related decisions associated with space acquisition. Together, we’ve developed effective principles for making property decisions.

1. Establishing location limits. One part of staying true to our mission is creating a walkable campus. That’s why generally we’ll consider space only if it’s within a five-minute walk to classes or within a safe 10-to-15-minute walk to residences. With these restrictions, buildings suitable for our requirements don’t come up for sale or lease every day. When they do, they’re usually snapped up quickly.

Consequently, within our target area, we've conducted strategic preliminary analyses on interesting properties that are not yet for sale. If they ever do come on the market, we'll have a head start on the competition. A professional real-estate consulting firm keeps a constant lookout for us. Eventually, we may incorporate that function into a new department of campus development.

2. Learning leasing lessons. At Berklee, we have developed a leasing strategy to fill in the geographic gaps between the buildings we own and others that might come on the market. Over time, the combination helps create a more compact and unified campus. While leasing isn’t always cost effective in the long term, it provides a hedge against unexpected enrollment declines and has been a great strategic tool in our pursuit of space in the short term.

If we have a choice between leasing and buying a specific property, size is an important consideration. Operating buildings smaller than 20,000 square feet hasn’t proven to be financially beneficial for us. Most have been built for specific purposes, which translates into compromises and tricky renovations that cost more per square foot than they would in a large building. In addition, connecting a small building to the campus information technology network can be almost as expensive as connecting a larger building.

3. Making buy or bypass decisions. Often, it makes good financial sense to purchase a property outright, although a variety of factors go into the decision to make an offer. When an acceptable building comes up for sale but seems overpriced, it can be easy to pass up. You may want to think twice about that. For example, several nearby buildings came on the market about 20 years ago. Berklee didn’t make an offer on the properties because of the price and some other problems: tenants with long-term leases, deferred maintenance issues, and underground water contamination.

In hindsight, had we seen the buildings as investments and bought them, today we would not be staring at the buildings we could have owned. The next time we find a property for sale in a perfect location, on a sizable lot, we will try to get over the sticker shock and buy it. Real estate in a great location is usually a long-term investment in our institution.

On the other hand, 10 years ago, Berklee found a building that had been a car dealership in the 1970s and suffered from the worst exterior design that the decade had to offer. But, apart from the building’s appearance, we couldn’t have asked for a better facility—it was roomy, structurally sound, and close to campus. The college bought it. Some years ago, we might have partially renovated the building, but we’ve ceased to be fans of that approach, which has proven to be a major headache. Instead, we gutted the building, completely rebuilding the interior for classrooms and a performance venue.

Shawmut verified that the shell was structurally sound, so we expanded upward one floor. We also expanded horizontally, connecting the main building to an adjacent townhouse. Shawmut restored the exterior to what it should have looked like earlier, so the neighbors were ecstatic. And our institution got a beautiful new music building constructed to our exact specifications.

Although we know we have to act fast and consider buildings that need a lot of work, we also know we can’t buy a property merely because it comes up for sale. For example, we were looking at an 18,000-square-foot building, and the owner’s construction adviser suggested that the renovations could be made within what we felt was a reasonable budget. Then we solicited a professional cost opinion from Shawmut.

“We knew the owner’s builder could do the work and stay within Berklee’s budget, but only if they overlooked a lot of costs and risks that weren’t explicitly called out in the plan,” explained Frank Hayes, Shawmut’s vice president. “Sometimes sellers and building contractors don’t know about these issues, and sometimes it’s just not in their own best interest to point them out. The seller just wants to make the sale, and the building contractor knows the missing pieces will turn into lucrative change orders halfway through the project.”

Hayes also cautions that costs for structural weaknesses, concealed conditions, and hazardous materials are frequently omitted. “Other things—like the costs associated with neighborhood mitigation, disability access compliance, just-in-time materials delivery for tight spaces, and working in occupied buildings two inches from a neighboring building—get left out too,” he says.  “After we filled in the blanks for Berklee, the real cost of ownership approached $1,000 per square foot on a net useable basis after purchase and full renovation.”

Once Hayes explained all of this and we got Shawmut’s detailed estimate, we decided not to buy, saving our institution millions of dollars.

4. Deciding to keep a building intact or raze it. Berklee believes strongly in maintaining historic architecture, but sometimes even the most enthusiastic preservationist sees the logic of demolition. Our plan for the theater at our Berklee Performance Center and its neighboring building provides a good example of how much a university, neighborhood, and city can benefit from destroying one or two historic buildings to make way for something new.

In this case, the proposed site for the performance center is a former movie theater that we bought and renovated in the 1970s. Built in 1915 as a 1,200-seat movie house, it served Berklee well, but after 30 years, we’ve outgrown it. A while back, we sponsored a concert honoring the music of Stevie Wonder, and the theater’s small stage hardly provided room for some of the musician’s cheeks to expand while blowing into their instruments, much less space for dancing.

We wondered: Why not raze the theater and our adjacent former bank property? We would then be able to capitalize on our urban air rights with possibly up to 30 stories of new building, adding more than 300,000 square feet to our available space. We could use two thirds of the space for 600–700 new beds, helping us meet our goal of housing half the student population. The remaining space could accommodate two state-of-the-art performance spaces: one seating 1,800, which is much larger than our existing theater, and another seating 400 for smaller productions. We’d also gain 50,000 square feet of classroom and office space and another 50,000 square feet of retail and student life space.

In moving ahead with preliminary plans, we hope to include in the new building a large, common dining hall and student lounge, plus a lively, open, outdoor area. Such spaces, where students can easily gather to socialize and collaborate, help fulfill the part of the college’s mission that calls for students to feel they’re part of a flourishing college community. This new building, if approved according to Boston’s complex urban planning guidelines, will be a distinctive landmark, enabling our students to identify with a distinct place within the city. Its modern design reflects Berklee’s world-class status and symbolizes our investment in cutting-edge technology.

The city and surrounding neighborhoods clearly benefit from this kind of project because of the retail and theater space on the ground floor, which brings more foot traffic, and because the building would mark the intersection of two storied Boston neighborhoods—the Back Bay and the Fenway. Located on the newly designated Avenue of Music, the building is meant to serve as a symbolic gateway to our neighborhood’s Fenway Cultural District.

In this case, removing the existing structure and building something new—and skyward—can provide real benefits to our students, our neighborhood, and our city.

Love the City, Don’t Leave It

Yes, it’s hard to find space in the city, but Berklee has done it. By working with expert consultants, you can

  • analyze suitable buildings in advance so that you’re prepared to act as soon as properties come on the market;
  • lease strategically to continually add buildings where you want them;
  • expand buildings vertically, horizontally, or both;
  • raze and build new;
  • barter with other institutions; and
  • work with governments and private developers.

You can even buy an ugly duckling building that nobody else wants and turn it into a beautiful enhancement for your campus and the city of which you are a part. Making your urban campus work can be a challenging proposition. Berklee has found that it’s an ongoing project well worth the planning.

DAVID HORNFISCHER is senior vice president of administration and finance, Berklee College of Music, Boston.