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Business Officer Magazine
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Business Briefs

Short news articles based on research surveys and peers’ business experiences that can benefit institutions

FACILITIES
Converted Hotel Curbs Housing Crunch

Salaries of Senior Staff

0%

The median change in base salaries for all senior-level administrative staff at colleges and universities from academic year 2008–09 to 2009–10.

2/3

The proportion of senior administrators who received no salary increase.

$158K

The median salary for chief business officers in academic year 2009–10.

$97K

The median salary for chief accounting officers and comptrollers.

Source: 2009–10 Administrative Compensation Survey Report (College and University Personnel Association for Human Resources, February 2010).

*With growing enrollments, increased student retention, and limited on-campus housing, the University of Massachusetts (UMass) Lowell sought a creative solution to the university's housing challenges. In July 2009, we acquired a Doubletree Hotel in the center of Lowell on the Concord River. We converted this nine-story, 225-room hotel into the UMass Lowell Inn and Conference Center (ICC), a facility housing 400 students and a regional conference center-all within 30 days of purchase. While the time frame wasn't something we'd recommend, the project solved our housing challenges and will provide ongoing benefits for years to come.

Growth Spurts

“It was the perfect storm of events.” That's how Larry Siegel, UMass Lowell's dean of student affairs, describes what led up to the hotel's acquisition. In the fall of 2008, the number of incoming first-year students increased 20 percent (exceeding our goal of 10 percent), transfers to the university went up 17 percent (exceeding our goal of 7 percent), and student retention bumped up by 5 percent. “We also had the largest percentage of residential students return to student housing in the school's history,” says Siegel.

The soaring demand was not entirely unexpected, as one of the university's goals is to have 50 percent of undergraduate students reside on campus by 2014. By fall 2008, that number was 31 percent. But, since the undergraduate headcount itself is increasing, reaching the 50 percent residency goal is especially challenging.

The combination of factors caused immediate demand for student housing and ever-growing waiting lists for rooms. Of UMass Lowell's 7,600 full-time undergraduate students, 3,100 (or 40 percent) requested student housing. Despite the faster-than-anticipated need to provide housing, the university is committed to support its residency goal. That's for good reason. “Students are more successful if they live on campus,” says Martin Meehan, chancellor. “They are more likely to be involved and feel more connected to the institution.”

Where to Put a Growing Population?

The Great Recession was likely a major contributor to our 5 to 10 percent per year enrollment growth over the past few years. Consequently, we'd already been expanding our facilities, and by 2008, the search for additional housing was well under way.

The university's executive management team, led by Chancellor Meehan, explored various options in the local area and analyzed build-versus-buy opportunities. We brought in expert facilities and financial consultants to aid us in our evaluations.

Eventually, what began as a request to lease hotel rooms from the Doubletree Hotel in downtown Lowell ended up as a purchase proposal. We determined that the hotel was the best purchase option given the size and quality of the facility, the dining possibilities, the adjacent parking garage, and the multipurpose uses available. And, the hotel chain was eager to sell this location, which had fallen victim to the faltering economy. We also saw the new facility as a means to further strengthen the university-city partnership by creating a center of academic, civic, and corporate activity in the heart of Lowell.

Negotiations for the building began in the fall of 2008, the board of trustees approved the transaction and finance terms, and UMass Lowell closed on the $15 million purchase in July 2009. By the end of August 2009, 400 upperclass students were scheduled to move in.

Rapid Renovations

In the summer of 2009, we invested an additional $3 million in infrastructure, room upgrades, and IT, bringing the total cost for the facility to $18 million. (Cost per student bed is roughly $45,000—an expense that would have more than doubled if we had opted to build the facility ourselves.)

Just hours after papers were passed in late July 2009, construction began. Building improvements and IT infrastructure upgrades had to be completed in four weeks before students moved in at the end of August. Strong project management and a dedicated facilities and IT team, along with committed vendors, were critical in meeting our aggressive deadline.

Facilities work included coring and construction to accommodate the data and telecommunication cabling the building. A robust data, voice, and wireless network designed by the IT staff was built off-site and installed and tested at the new facility. Connectivity back to the campus network from the ICC is done via wireless antennas broadcasting from the roof of the building to the roof of Fox Hall, a nearby 18-story residence hall.

Six Tips for Hotel Conversions

After nine months in the new UMass Lowell Inn and Conference Center (ICC), we are quite pleased with the outcome of our hotel purchase and conversion. With the addition of the ICC—and expansion of other residence halls—our residential student population totals 36 percent of all full-time undergraduate students, closer to our 50 percent goal. 

We've learned much over the past year. Recommendations for universities exploring this type of project include:

  • Do a detailed physical due diligence for the building and infrastructure. We found some costly surprises that we needed to remedy after we acquired the property.
  • Look more closely at the state of the inventory. UMass Lowell needed to replenish certain hotel and conference center inventories, such as mismatched or missing smallware and soft goods, at our own expense.
  • Hire expert project management; it is critical for success of a project this large.
  • Ensure you are working with the right business partners; we did a request for proposal and engaged in a competitive bidding process that resulted in the selection of ARAMARK for property management and ongoing conference center management. With tight timelines, effective partners can be the difference between success and failure.
  • Plan for increased transportation services, such as shuttles and buses, to transport students to your campuses.
  • Allow a longer time frame for execution. We learned that we can build out a property in four weeks, but best practices indicate that with more time we would incur less risk and have a buffer should any issues arise.

Other projects included upgrading the electrical system, completing roof repairs, making HVAC adjustments, customizing the space for student living, installing new debit card systems, and relamping the building with compact fluorescents for energy efficiency. Exterior lighting was improved and soon new signage went up announcing the UMass Lowell Inn and Conference Center.

A Mixed-Use Business Model

Along with the initial $18 million investment—with certain infrastructure improvements paid for by the seller—an additional $5 million is going into the facility in 2010 to fully realize its multifunction potential. We plan to remodel 31 rooms on the first two floors for use as year-round hotel rooms for visiting parents, families, and other campus guests. Construction is under way to build additional conference rooms and differentiate the student residence from the inn and professional conference center. When completed in December 2010, we anticipate the total investment to be $23 million.

We project that the second year of operations, FY11, will be a breakeven year. Student housing charges make the investment financially feasible. In addition, we've seen steady growth in the conference center business during our first year of marketing the new facility. Since the conference center business is regional, we expect business to improve as the economy gets better. We anticipate also that branding and marketing the conference center will also increase business.

To finance the purchase, UMass Lowell borrowed tax-exempt debt through the UMass Building Authority (UMBA). Terms are a 30-year weighted fixed rate of 4.2 percent, and the debt service was factored into our financial model. The tax-exempt bond offering was part of a large borrowing ($500 million) issued by the UMBA in the fall of 2009 at historically low rates given the upgrade in UMass's bond ratings to “Aa3” by Moody's and “A+” by Standard & Poor's.

With a declining real estate market in many parts of the United States, opting to buy (or lease) a hotel and planning its conversion to a residence hall facility may be a viable, cost-effective way for colleges and universities to increase student housing while strengthening community partnerships. We hope our experiences benefit other institutions exploring this type of student housing option.

SUBMITTED BY Lori Dembowitz, director of IT project management, and Joanne Yestramski, vice chancellor for administration, finance, facilities, and technology, University of Massachusetts Lowell

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Spotlight: Comprehensive and Doctoral Institutions
Compelling Reasons to Corral Contracts

In an environment of expanding and ever-more-complex contracts, today's universities are challenged in managing, monitoring, and centralizing contract administration. A review of contract operations at our university revealed a number of issues that called for solutions:

  • We were experiencing a rapid increase in the number of contracts and heightened complexity of many agreements.
  • The university was using outdated means of tracking contracts, relying on multiple spreadsheets.
  • As contract administrators, department staff were not always aware of detailed contract terms and conditions.
  • We had no area in the university designated as a central contract repository.
  • Purchasing contract management software represented an expense for which we had a limited budget.

We concluded that we could benefit by consolidating our professional service contracts data into a single database that would capture decision-making information and allow better monitoring of the contracts for renewal.

Priority-Based Decisions

After researching various contract software databases, we chose Blueridge Software's contract management solution as the best value for addressing our goals.

We implemented the program in February 2007, resulting in a centralized repository in digital format that creates audit trails and includes the tools to quickly access important information, generate reports, execute contracts, and receive automatic reminders of critical dates. Everything is available within the database portal, so we no longer have to track down contract folders or deal with misfiled or missing paperwork.

Task Training, Rapid Results

We assembled an implementation team to learn the system, with each member assigned to work on a standard operating procedure. Once trained in their respective areas, team members then learned each other's tasks. The information technology (IT) personnel provided support and answered questions along the way. With training complete, we began to see the benefits of the centralized database system, including:

  • Saving personnel time in searching for a contract.
  • No longer missing contract deadlines, which improves our customer service to the campus and vendors alike.
  • Allowing the university to (1) review contracts well in advance, (2) fully research the renegotiation points, and (3) cancel a contract in the required time frame without penalty charges or increased escalation costs.
  • Launching automated e-mails and alerts for actions that are needed during and prior to the end of a contract term.
  • Keeping all contracts current by attaching relevant documents and notes to the contract file.

Shared Services and Future Goals

Because of the searchable categories, we share information with other Texas A&M campuses and appropriate outside institutions. This allows us to negotiate one contract for multiple A&M campuses, with better pricing and other terms.

For example, in contract negotiations for NCAA auditing of intercollegiate athletics programs, we asked that the agreement include the possibility of other A&M campuses using the audit services. The final agreement resulted in greater discounts and services for all and included the option that other campuses that did not contract with the vendor are still able to do so within the term.

This automated system will allow for expansion of programs and users as necessary. We anticipate, for example, being able to share our contract list and work with other A&M campuses to identify opportunities for negotiating other shared-services contracts that will best meet our needs.

SUBMITTED BY Kathryn Funk-Baxter, senior associate vice president for finance and administration, and Judy Harral, director of purchasing and HUB program, at Texas A&M University-Corpus Christi

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