The Board of Trustees at Burlington College approved on November 14 a memorandum of understanding with Eric Farrell for the sale of 25 acres of land on the main campus and two properties located about a mile from the campus. The vote was unanimous of those board members in attendance. This sale of land is, in essence, a complicated four-party transaction that has two types of distinct and different purchase structures: a sale to a developer or a sale to a conservation group.
The sale involves Peoples United Bank (the holder of approximately $6.1 million in Burlington College debt), the Roman Catholic Diocese of Burlington (according the diocese is approximately $4.0 in debt), Burlington College, and the buyer.
The master plan for the BC campus includes its intention to partner with Farrell Real Estate as the developer for a mixed housing development and student housing it hopes to build on its 32-acre property. The comprehensive plan maximizes the use of the College property, as an urban campus, to fulfill the College’s growth plans as well as benefit the City of Burlington. The campus master plan, originally drafted by local architecture firm TruexCullins and later enhanced by Farrell, includes two 200-bed residence halls, a student center, a lakeside pavilion, an outdoor amphitheater for recreation and teaching venues, a facilities operation and maintenance building, a woodworking and sustainable agriculture facility, a sustainable agriculture field, and a public open space with a community access path leading to the bike path and waterfront.
The sale involves 25 acres of the College’s approximately 32 acres south, north, and west of the campus. In addition, the sale also includes property approximately one mile south from the main campus that is located behind the old campus of the college. This includes a parking lot and an older house, used for student housing, located at 9 Lakeview Terrace. Both of these properties currently are fully mortgaged to either the bank or the diocese.
The remaining 7.3 acres that will be Burlington College’s main campus includes the existing infrastructure, room to expand north, south, and west of the existing main campus infrastructure which should accommodate future growth and a football sized green that the College will not be able to develop located west of the existing main campus infrastructure.
Terms of Sale and Uses of Proceeds
In an outright sale to a developer, the general terms of memorandum of understanding are for the developer to purchase the properties for $7.5 million ($7 million for the 25 acres and $500K for the parking lot and 9 Lakeview Terrace.) At the time of the sale, the developer would assume all of the Catholic Diocese debt (valued at $4 million) with $3.5 million in cash remaining for the College to pay down additional debt.
In the MOU there is a proviso that within 60 days of the signing of the MOU a conservation group that wishes to purchase the development rights and preserve the land will have that opportunity, as long as the purchase price matches the developer’s $7 million offer price on the 25 acres. If this were to happen, then the Diocese would be paid directly from these proceeds. The Lakeview property and parking lot (the diocese and bank have blanket mortgages on these properties respectively) would go to the developer and he would assume the debt and the College would end up with $4 million to pay down bank debt. The bank and the diocese would agree to release all mortgages on the sold property.
This sale will provide the College with some further liquidity through the line of credit — liquidity that the College currently does not have. In order for this transaction to be successful, the bank and the diocese must agree to release any claims on sold land. Bond counsel must also agree to defeasement of the bonds for the sold property (the bank is the sole bond holder).
It is anticipated that this transaction will reduce the debt from approximately $11.4 million to approximately $4.3 million. Debt service liability is projected to decrease from $735K in FY15 to just under $300K in future years. In addition, property taxes could be reduced by as much as $100K. The savings generated from the sale will also produce positive cash flow. This sale is not the magic bullet to the College’s future salvation, Burlington College said in a statement, but it does give it time to see if increased enrollment strategies are taking hold and gives time to explore consortiums with other small liberal arts colleges in Vermont.
Source: Burlington College 11.20.2014