Tuesday, July 08, 2014

Buying a Campus

Let’s say, for the sake of argument, that Corinthian starts selling off campuses, like its agreement with the Education Department says it will.

Who would buy them?  And what would they get?

I don’t mean those questions as gotchas; I mean them at face value.

A college has value in physical assets, human capital, and accreditation.  Human capital can’t be sold.  Employees may “come with” a campus, but they’re free to leave at any time.  Students may be enrolled, but can also leave at any time.  And since some overdue reforms were enacted a couple of years ago, my understanding is that regional accreditations can no longer be sold like taxi licenses.  (Some fraction of Corinthian’s campuses hold regional accreditation.)

Buildings and land can be sold, but my sense of proprietaries is that much of the time, they lease or rent rather than own.  I suppose there could be some value in taking over a lease, but it wouldn’t compare to selling a building in most contexts.  There’s presumably some value in office computers, furnishings, and the like, but in the grand scheme of things, we’re talking small numbers.

Some campuses have a sort of brand equity in their names, but I’m not sure that applies here.   The name “Harvard” has a cachet that “Everest College” does not.  In six years at DeVry, I don’t recall ever seeing a student wear a DeVry t-shirt.  At Williams and Rutgers, I saw students wearing school shirts almost every day.

Even assuming that some of the buildings are owned, which is possible, it’s not clear to me that any higher education buyer would be interested.  Other for-profits are largely struggling, and to the extent that they plan to grow, it’s mostly online.  Publics are in a similar spot.  

I could imagine some of the buildings becoming fairly generic office buildings, but again, that’s largely a soft-ish market.  

These questions matter on their own, but also as precedents.  From what I’m hearing, Corinthian may not be the last large-scale for-profit to close up shop and sell itself.  Whatever corners get cut this time around will be precedents for the next time.

It’s always possible that there’s some rapidly expanding college that’s coveting Corinthian’s properties, but I tend to doubt it; if it existed, presumably Corinthian would have sold some off on its own to pay the bills.  And unless it’s the buyer itself, the government can’t conjure buyers out of thin air.  Honestly, I’m perplexed as to how this is supposed to play out.

Wise and worldly readers, am I missing something?  Is there a way this could actually work?