<p>sm74, that article doesn’t speak too highly of PE.</p>
<p>"And, he argues, even if these properties go into bankruptcy, the pattern of harassment may continue. Distressed-debt investors interested in buying them may continue trying to force out tenants, he said.</p>
<p>“Vulture funds are lining up to buy the debt at what is still a speculative price,” he added. “The question is, will they recognize that in a rent-regulated building, you need to pay a price that the current tenants can support? Paying any more eventually leads you to a business model that is based on harassment, as the attorney general’s action has shown.” "</p>
<p>Fair enough. I don’t think you need to be sitting by the phone!</p>
<p>Of course, having seen that admissions video, some might argue that Yale might be better off without electricity.</p>
<p>Your point about Swensen is well taken. It was just unfortunate timing on his part to be traipsing from TV show to tv show on his book tour tellng the world how brilliant he was at the exact moment his school was borrowing money to make payroll because of what can only be described as mismanagement of endowment liquidity.</p>
<p>Apparently, Yale’s strategy (if you can call it one) is to yield the #1 spot to no one, whether it’s “Top Location for an Episode of Glee”, or “Road Paved With Best Intentions”.</p>
<p>According to <a href=“http://www.ephblog.com%5B/url%5D”>www.ephblog.com</a>, Williams College announced this weekend that it is rescinding its no-loan policy effective with first year students entering in Fall 2011 (not this year’s applicants). They are also going to offer early retirement inducements to reduce the size of the staff and faculty.</p>
<p>I follow the school pretty closely and I’m surprised. They should have come through downturn in relatively strong position. I guess that some other programs were higher priority, I don’t know.</p>
<p>I know that a lot of schools have been looking at rescinding no-loan. Willliams is the first, I believe, to actually do so.</p>
<p>And I will bet Amherst isn’t too far behind. I also believe Dartmouth has changed their policy somewhat but perhaps that is just about bringing up the minimum income to qualify. Can need-blind be too far behind?</p>
<p>I have mixed feelings about the Yale video. I am not sure that it will wear very well. But I was certainly impressed by the talent, creativity, technical skills, and enthusiasm of that group of undergraduates that produced and created this with no adult supervision. </p>
<p>BTW, I have no animosity for Swat. Whenever I visit the Barnes Foundation I try to make time to visit Swat and enjoy its beautliful campus. I have great admiration and respect for this institution. I tried desparetly to interest my son to apply to Swat but to no avail.</p>
<p>I was a little surprised by Williams as well but looking again at their finances it does look like they are running an expenses over revenue gap of about 10% which is coming from less revenue from the endowment, smaller short-term investment income, a decrease in the annual gift giving, and greater demand on tuition help. I’m pretty sure most LAC’s are seeing the same impacts. The good news is that they are not facing liquidity pressure from their endowment. The big endowment schools are seeing the same impacts but it’s interesting that unlike the LAC’s they are getting a fair amout of help from me and you the taxpayer through government research grants-not sure how they are creating middle class jobs but they are getting a big hunk of money. See attached article from Yale:</p>
<p>Its hard to find schools that are not getting whacked by the recession:
-Many LAC’s are experiencing revenue shortfalls
-State schools are feeling the pressure of massive mis-management within their Statehouses
Big money schools are facing huge liquidity pressures from overly risky investments</p>
<p>^ The impact of reduced annual giving shouldn’t be underestimated. At some schools this represents a substantial fraction of the operating budget, and it can dry up pretty fast in a sour economy.</p>
<p>Not now, they’re not. But, Williams is obviously on the horns of a dilemma, largely of its own making. They’ve decided to go ahead with the second phase of a complicated scheme to reconfigure the central part of its campus. The first part, involving two brand-new faculty office buildings, barely made it under the gun before the credit markets seized. Everyone assumed their cost was factored into whatever long-range projections – including, long-range debt service – were then available.</p>
<p>The second phase, involving the nearly simultaneous construction and demolition of two different buildings of nearly identical square footage, introduces an entirely new set of costs into the equation. I can only think of one other college foolhardy enough to commence two such gigantic construction projects in today’s credit climate – and, that’s Yale.</p>
<p>Yale, apparently, thinks it’s worth whatever risks to its financial stability to commence construction of a brand-new residential college (thus, enlarging the size of its entering class), it’s first in forty years.</p>
<p>I don’t agree Wesley. The only reason they met budget in 2009 was because their annual gift giving that had been around $20M a year shot up to $40M-doesn’t seem like a sustainable number. In addition they are going to need to reduce their endowment draw to keep it at a 5% rate. So they are dealing with an operating budget that cannot be sustained with the amount of revenue they are generating.
Normally big capital projects are paid from a combination of gifts and debt. I don’t see where they are looking to take on considerably more debt so my guess is that the cost of the project will come largely from gifts.</p>
<p>It may or may not be sustainable; annual gifts are just one piece of the pie, as it were. The fact is, every little bit of uncertainty is a drag on the long-range outlook. The Stetson-Sawyer project is one more bit that is probably already draining the life out of the silent phase of the capital campaign, just as you said. The bottom-line is, Williams is in deeper water than a superficial analysis of their “endowment per student” would indicate.</p>
<p>Another big hit to college budgets. Tuition in many big endowment schools provides only about 10% of their revenue. The biggest chunks come from the endowment and annual giving campaigns. Yale is cited as taking the biggest drop in annual giving.</p>
<p>Ranking of giving by University. This I believe includes both the annual giving campaign that supports the budget and long-term campaigns for things like buildings, scholarship funds, and endowed chairs.</p>
<p>These lists combining annual giving and contributions to endowment can be misleading. A school in the middle of a big capital campaign is going to show higher totals even if the capital campaign is falling well short of goals. And a school just completing a capital campaign is going to show a big year-to-year drop, even if its fundraising is meeting all expectations. </p>
<p>What would be useful is a breakout of annual giving. At many schools, this represents a significant chunk of the operating budget. Princeton’s FY 2009 financial report, for example, shows that in FY 2008 “private gifts, grants, and contracts” totaled $77.1 million, or roughly 7.7% of its $1 billion operating budget. In FY 2009, that figure was down to $57.4 million. That $20 million hit is huge, coming on top of endowment losses and smaller net tuition revenue after figuring in increased financial aid expenditures.</p>
<p>I’d agree with BC. One thing that has not been written about much is that alot of these splashy campaigns the big dollars are from people who want their name attached to a building. What happens when the school (Alston) decides not to build the building. Presumably they don’t get the money then. One thing that struck me is that Harvard was building based on the assumption of 20% from donations and 80% debt. The old-fashioned more conservative way of building was you didn’t build until you got all the money. There are a few old fashioned schools like Notre Dame that still do it that way but I think Mr. Summers was both a little impatient and didn’t want to do the dirty work of raising money so we have Alson where it is today.</p>
<p>Colleges are seeing reductions in all three revenue streams:</p>
<p>A) Net tuition revenues (as recession incomes fall and financial aid discounting increases)</p>
<p>B) Alumni donations, impacting annual funds used for current operations and endowment giving to fund future increases in endowment spending</p>
<p>C) Endowment spending.</p>
<p>This triple whammy of correlated items, all tied to the economic downturn, shows the follow of those who have attempted to claim an easier road because of their small endowments, or lack of tuition dependence, or whatever. There’s no place to hide in his recession.</p>