Success Stories
campus redevelopment - Financial stewardship in the public interest
Industry: Public Sector
Delivered:
$15MM in price paid
Rapid due diligence
Post-acquisition financial model and scenario planning tool
Client
A county government on the East Coast wanted to acquire, manage and redevelop a large, complex piece of urban real estate while remaining responsive to the community and upholding its fiduciary obligations.
Challenge
After a century-old urban college declared bankruptcy, the county saw the necessity of redeveloping its centrally located campus, lest it go derelict and drag the neighborhood and local economy down. However, the county lacked experience with bankruptcy auctions and worried that post-acquisition costs could present an enormous, and unpredictable, financial burden for taxpayers.
Engagement
Morningside immediately recognized that the financially troubled college had deferred necessary maintenance and that the offering prospectus likely understated the remediation needed to redevelop the property. We conducted rapid due diligence on the campus, including interviews with local service providers and national developers, to derive an accurate assessment of the campus’s current market value and post-acquisition operating costs. We then used those to develop a bidding strategy designed to limit the county’s downside regardless of the outcome.
Impact
Our valuation and bidding advice resulted in the county acquiring the property for $15MM less than previous estimates, resulting in immediate and substantial taxpayer savings and a substantial reserve fund generated by the issuance of municipal bonds. In addition, we delivered an operating model for the entire campus (~75 individual properties) that allowed the county to budget accurately, capture ongoing cost savings and see clearly how various redevelopment scenarios would affect the county’s financial obligations and ability to pay down its debt. Subsequent events validated our higher estimates of ongoing costs and the need for remediation of the property.