More than 50 private colleges in the US have either closed or merged since 2020, and this trend is expected to accelerate, with projections indicating over 400 additional closures or mergers among private colleges in the next decade. This represents more than a quarter of all existing private colleges. The primary, and often only, way for these institutions and their investors to recover debt, particularly for those financed by municipal bonds, is through the sale of their physical campus real estate.
The value of these campus properties varies significantly based on factors like location, condition, and potential for conversion to other uses. Jennifer Johnston, head of municipal research at Franklin Templeton, notes that higher education investments are increasingly becoming a "real estate play." For instance, Keen-Summit Capital Partners sold Birmingham-Southern College's 192-acre campus for $126.5 million to the US Coast Guard. In contrast, Notre Dame College's campus sold for only $8 million to Akron Children's Hospital, leaving Bank of America facing losses on $17.8 million in bonds. Cazenovia College's campus sold at a 60% discount, providing bondholders only a 50% recovery.
Adaptive reuse of these campuses faces several challenges, including extensive deferred maintenance (with costs exceeding $112 billion nationwide, according to Gordian and APPA), institutional zoning restrictions, and limited buyer pools. Well-located campuses, like those in urban areas, are absorbed more quickly; Northeastern University acquired Marymount Manhattan College, adding $215 million of Upper East Side real estate. However, remote campuses can remain unsold for a year or more. Local opposition and the highly customized nature of campus buildings further complicate sales and redevelopment efforts.
