Convert Colleges to Senior Hsg. Enrollment Declines Create New Opportunities

I have written three times before on this blog about augmenting college finances and declining enrollment by introducing senior housing on campus or by fully converting small college campuses into senior housing communities. The first time was February 2, 2019, in response to an opinion piece in the Wall Street Journal about the challenges facing small, private colleges. The author said many of these institutions will need to close or radically change their operations to survive.

I republished my second blog post, with some updated commentary, in September 2019 after Welltower (WELL), the largest publicly traded Healthcare REIT, announced it acquired for$34 million Newbury College’s 7.8-acre campus in the Boston suburb of Brookline to convert the campus into a seniors housing community. Newbury had an enrollment of 600 mostly disadvantaged students, to which it was providing substantial financial aid, and was reportedly operated at a loss for several years before closing. The campus included 142,000 sq. ft of built space. The sales price was sufficient to repay all of the college’s debt, provide severance for staff and provide funds to assist some disadvantaged students obtain a college education elsewhere according to press reports.

On April 30, 2020, The Wall Street Journal published an article entitled “Coronavirus Pushes Colleges to the Breaking Point, Forcing ‘Hard Choices’ about Education.” The Journal article leads with the announced closing of MacMurray College in central Illinois after 174 years. The article goes on to indicate 50% of college enrollment managers are very worried about meeting fall targets for enrollment and tuition, which prompted my third blog post.

Before the pandemic, Robert Zemsky, a professor at the University of Pennsylvania graduate school of education in his book The College Stress Test indicated that 100 of the nation’s 1,000 private, liberal arts colleges were likely to close over the next five years. He now says 200 of these colleges could close in the next year, according to the Journal. Cancellation of on-campus classes during the pandemic, growing impediments to overseas students wishing to study in the U.S., and the increased appeal of lower cost, closer to home college alternatives all contribute to the growing financial distress of small, private American colleges.

Another news item last week prompted me to again revise, update and publish a new blog post on converting small colleges to senior housing conversion. On September 12, 2022, The Trustees of the College of Notre Dame of Maryland announced this Catholic women’s college, founded in 1895 with an undergraduate enrollment of about 660, would go Coed. The college already has about 1,750 coed graduate students, most part-time evening or weekends. I am friends with a number of Notre Dame of Maryland graduates, some dating back to my undergraduate days at Johns Hopkins. I live less than a mile from campus and my wife was an adjunct professor of management at the College in the 1980s. It has many great attributes. But it is hard for me to see how going coed will meaningfully improve its competitive or financial position.

The Notre Dame of Maryland is located on a hilly, wooded 60-acre campus in a very attractive wealthy residential part of Baltimore. The campus adjoins and connects with the campus of the coed Loyola College of Maryland, with which it shares a library. Loyola University Maryland is a Jesuit, Catholic University with nearly 4,000 undergraduate and 1,300 graduate students. Land constrained Loyola has long been interested in acquiring the smaller woman’s college to accommodate future growth, something which Notre Dame has long resisted.

The seniors housing and care industry has faced its own admissions and operating challenges during the pandemic, including lower occupancy, some overbuilding, restricted admissions to due Coronavirus self-isolation and high levels of COVID infections and deaths at some skilled nursing facilities. But the number of seniors 75+, when many begin seriously considering seniors housing and care options, is expected to grow about 40% between 2020 and 2030, while no growth is expected during that time in the undergraduate U.S. college population, age 18 -24. The lack of growth in the undergraduate age population in U.S., increasing administrative burdens and geopolitical tension, and the high costs of a four-year college education are continuing to reduce college enrollment, particularly for small, private colleges.

Strong population growth in the 75+ senior population, together with the fact that many seniors are looking for more dynamic living environments that include life-long learning, make us optimistic about redeveloping exiting college campuses in whole or in part to seniors housing. At a college like Notre Dame of Maryland, the College could joint venture with a for profit or nonprofit senior housing developer to add a senior housing community on campus, generate some immediate cash, leverage its existing dining and maintenance staff, providing on-campus work-study experience for students in nursing and allied health programs and providing opportunities for the College of Notre Dame of Maryland to expand it’s curriculum to include seniors housing management.

Notre Dame of Maryland should also consider selling its entire campus and fully converting it to a senior housing community because it is one of the few uses (other than an educational institution) that its neighbors and City officials are likely to support on the site. Conventional, higher density housing or commercial development is likely to be opposed by owners of large single- family homes nearby because of increased traffic and congestion. A seniors housing community will generate little if any additional traffic and should generate a substantial number of jobs for city residents. It might be able to accommodate retired nuns at a preferential rate, as well as provide an endowment that could continue the mission of educating woman. If I were the university’s real estate advisor, I would see seniors housing as one of the few real competitors to Loyola to purchase the site.

Earlier in my career, before I began to focus on seniors housing and care and health care real estate as a stock analyst and investment banker, I spent more than five years as a real estate market and feasibility consultant doing a lot of work for colleges and universities including: University of Maryland at its flagship College Park campus, its Baltimore professional schools and UMBC in Baltimore County. Other clients included Johns Hopkins Health System, Penn State Hershey Medical Center and Arizona State University.

Please contact me at jdoc@robustretirement.com with comments and questions.