It’s been a busy fall on Drexel’s University City Campus, with new building projects in various stages of construction seemingly sprouting left and right. This term has seen the openings of two major new buildings, Gerri C. LeBow Hall and Chestnut Square. But even those won’t tower quite as high as the new, 24-story student housing, dining and retail complex at Lancaster Avenue and 34th Street, on which Drexel broke ground in November.
University leaders, though, have noticed unease among some members of the Drexel community about all these new building projects. And this is because of misconceptions about how some of those projects are funded, said Jim Tucker, senior vice president for Student Life and Administrative Services. Tucker, in an attempt to put those misconceptions to rest, spoke with DrexelNow about the financial backstories behind the buildings that are reshaping Drexel’s campus.
What should the University community know about how some of these new building projects are being funded?
The two largest, most expensive building projects on the University City Campus — Chestnut Square, opened in fall 2013, and the new mixed-use development coming to Lancaster and 34th Street in fall 2015 — are funded entirely by American Campus Communities (ACC), a third-party student housing real estate development firm based in Austin, Texas. Combined, the two projects represent a $267 million investment in our campus at absolutely zero cost to the University and our students.
What are the terms of those deals with American Campus Communities?
In exchange for using Drexel land to build high-quality student housing, retail and amenities to serve the Drexel community, ACC makes annual ground rent payments to the University. Therefore, not only does the University pay nothing for these buildings, we actually earn income from the ground lease agreements with the third-party developer. At the end of the ground lease term, the buildings and all the improvements revert back to Drexel’s ownership.
Why did the University pursue that type of arrangement?
These developments are part of a larger strategy, articulated in the University Strategic Plan and Campus Master Plan, to partner with third-party developers on projects that enhance the quality of life for Drexel students and the larger community, while reserving University funds and debt capacity for investments in our core academic mission. Thanks to partnerships with developers like ACC, we no longer have to decide whether to upgrade student housing and amenities or invest in academic and research buildings like Gerri C. LeBow Hall, the URBN Center or the Papadakis Integrated Sciences Building. We can do both, with third parties funding the residential and retail improvements and the University, with the generous support of our donors, funding upgrades to our academic and research facilities. For instance, the new LeBow College of Business building was funded by a mix of University funds, $9 million in state Redevelopment Assistance Capital Program grants and more than $45 million in donor gifts.
What new developments are still to come, and how will they be funded?
In the coming years, you will continue to see this mix of Drexel-funded and third-party developments transforming our campus. Later this year, the School of Public Health will move into a newly renovated Nesbitt Hall, a project funded by the University and the state’s Campus Energy Efficiency Fund, which will directly benefit our students and faculty. Meanwhile, we are in final negotiations with a third-party firm to build a 190-key hotel at 33rd and Chestnut streets, which will provide a convenient and inviting place for Drexel visitors to stay right on our campus, again at no cost to the University. That deal will also be structured as a ground lease, in which the developer pays rent to the University over the life of the agreement, and the building reverts to Drexel at the end of the lease term. The University will pursue the same model in developing the Drexel Innovation Neighborhood from 30th to 32nd streets and JFK Boulevard to Market Street.
How do these externally funded developments tie into the University’s mission?
The first initiative outlined in the Strategic Plan is, “Invest in Academic Excellence,” and that continues to be priority No. 1 for University administration. But thanks to our partnerships with third-party developers, I am proud to say we can continue to make improvements that intensify and improve the student experience and transform our campus into the nation’s most dynamic transportation hub-based university district, without compromising our commitment to the University’s core academic mission.