10-30-14 – The Unprofitable Non-Profit

posted by Chris Campion

Burlington College, a few years removed from being on the receiving end of the management by Bernie Sanders’ wife, Jane Sanders, is now selling much of its once and future campus to the private sector, in order to cover its bills (h/t to Seven Days).  As has been discussed in the past, Burlington College’s revenue streams did not seem to match its operating expenses, nor did the acquisition of additional property seem to fall into a category of “advisable”, given that it was already servicing debt  and had clearly demonstrated a serious need for much higher enrollments to simply cover its operating expenses.

But in fact, it’s much worse than that:

Burlington College is planning to sell all but seven acres of the lakefront campus it acquired just a few years ago. Interim president Mike Smith said in an interview Monday that the school needs money from a sale soon in order to survive.

So, even though the property as originally purchased was valued at nearly $20 million dollars, yet sold for $10 million – and Burlington College went ahead with the purchase anyway, despite its lack of revenue growth and debt overhang – the college is forced to sell the property as fast as it can, since it’s heading underwater.

Perhaps this was the plan all along.  Burlington College would acquire 32 acres at half price, find itself unable to even maintain payments, much less develop the property, and then sell the bulk of the asset to a developer.  This has the happy circumstance of providing prime real estate to the private sector at roughly half the assessed value, in order to “save” Burlington College.

25 acres now goes on “sale” for $7 million, when the whole parcel at 32 acres was valued at almost triple that amount.  Even the lower-assessed value at $16.5 million, it’s  almost twice the per-acre price it will sell for now:

Mommy, when I grow up, can I be a real estate developer?

Mommy, when I grow up, can I be a real estate developer?

Oh, and Bernie Sanders’ wife, Jane Sanders, former Burlington College President, was handsomely rewarded with $150K annual salary for driving this ship so solidly onto the rocks before bailing out – and continued to be paid after she left the organization.  But that’s what life is like for the 1%.  The school’s finances are a ruin; meanwhile, a golden parachute awaits you (from Burlington College’s 2012 Form 990):

Damn, their separation packages are *tasty* at Burlington College.

Damn, their separation packages are *tasty* at Burlington College.

Burlington College, with an enrollment between 200-300 students, and annual revenues as of 2012 in the $5MM range, clearly did not have the revenue stream to support the interest and principal on a loan of that size.  But they went ahead with it anyway, which means they did so for a reason.  Which likely means that any financing deal anticipated the future sale of the asset, in the near short term, in order to prop up the school’s glaring revenue shortfalls.  Taken one step further, this meant that a local developer would probably have an inside track on buying 25 acres of some of the best real estate in Vermont at much less than the assessed price.

Christmas comes early for a few connected Burlingtonians.  If there is a silver lining, it is that Burlington will at least see some property tax revenues out of the developed property, so maybe the bath the city’s been taking on Burlington Telecom will ease up a bit, but as Interim President Mike Smith said, Burlington College’s days are probably numbered:

After what he described as a “deep dive” into the school’s finances during the last several weeks, Smith said he came to the conclusion that absent an immediate infusion of cash, “Burlington College is not a viable ongoing entity.” He determined that it would likely need to undergo a “soft closure,” starting next year.



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