Student Corner: Town-Gown Development Partnerships

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Student Corner: Town-Gown Development Partnerships

By CED Program Interns & Students

Published March 24, 2016

In implementing plans for neighborhood revitalization, municipalities look for partners whose investment can help lift the desire for revitalization from plan into action. In the past 20 years, one of those partners has increasingly become the local university. Local universities and colleges already have a substantial commitment to the place in which they reside. They are often one of the largest employers, and like all employers, need to competitively attract employees, and also students. They have compelling reasons to ensure that their home base can continue to bring the best and brightest to their institution. And as universities are more and more likely to have to compete for funding, particularly if they are public institutions, investment in their local community is a way for these institutions to stay relevant to taxpayers.

For a municipality, a university partner can bring numerous benefits to neighborhood revitalization efforts. Sometimes these anchor institutions have access to financial resources through large endowments or expertise in real estate development that they can bring to the table. Universities may also have a captive audience in the needs of their employees and students. Their space needs that can anchor initial tenancy. As a result, they may be able to go into a blighted area first without fear. Their captive audience and investment can therefore attract private investment in adjacent properties, thus catalyzing revitalization.

Still, university-community partnership development plans have to be handled correctly to ensure success. University partners have a number of reasons to be careful when entering university-community partnerships. First and foremost, the development of surrounding neighborhoods is not necessarily a key part of the institution’s mission. When undertaking such development, the university can be seen as over-reaching in its influence on the surrounding community. Any such undertaking leaves the University open to criticism, particularly if plans fail. Universities must weigh the potential for bad publicity, plus the loss of control when undertaking partnerships, and the limited availability of exit strategies in acting as the catalytic hinge-point of a partnership’s success with the potential outcomes of a successful partnership.

When expediting plans on redevelopment efforts of West Philadelphia in the mid-1990’s after the murder of a student, the University of Pennsylvania had a number of past failed redevelopment initiatives that had caused lingering community resentment. They had to tread carefully when approaching revitalization, which at this point was seen as a critical need due to the violence and deterioration of the neighborhood. Plans had to both repair neighborhood relationships and be successful in bringing revitalization. The resulting plans were decidedly driven by the university, its staff expertise, and large endowment, but strove to be inclusive of the local community and government at every stage of implementation. Partnering with the City provided the university a key partner through which to reach out to the various neighborhood stakeholders as well as access to grants and government redevelopment funds it otherwise could not utilize. The City found a willing partner who could invest millions into property development and leverage further commitments from government resources such as Fannie Mae, as well as an expedited timeline on the improvement of neighborhood housing and retail stock. As the University led the way on neighborhood real estate development, the neighborhood experienced an increased level of investment by the private real estate market.

Success in university community partnership development projects such as those undertaken by the University of Pennsylvania in West Philadelphia have inspired other, even larger town-gown partnerships. In the South Side neighborhood of Chicago, the University of Chicago has partnered with the City to spearhead a $250 million dollar plan for revitalization of its Hyde Park neighborhood, and closer to home, in the Wake Forest Innovation District, a $670 million, 2.5 million SF district revitalization of the former RJ Reynolds manufacturing site in downtown Winston-Salem is well underway.

In Hyde Park, the City approached the University after decades of revitalization plans that had failed to gain implementation. The initial projects, a theater renovation and 600,000 SF retail, office, and hotel building, were completed by a private development team assembled together by the City and University partners. The City provided $23 million in TIF financing for the initial project, while the University guaranteed tenancy of the office development. Their investment helped attract a major retail tenant both within the building and across the street in another development. While the university will develop the rest of the Hyde Park plan itself without the City partner, its intention is not to become the area’s largest landlord, but rather to catalyze the private market.

An alternative model is the collaborative plan for the Wake Forest Innovation District, which calls for Wake Forest University and Winston-Salem State University to remain a large, long-term tenants within the district, along with a number of other local higher education tenants. While the development, which is still under construction, has thus far been successful in attracting a number of other companies to locate to the District, the City is placing its bet on the ability for the anchor tenants to attract further investment that can offset some of the potential drawbacks to relying on long-term university-led tenancy.

University partners, like all businesses, must ebb and flow with demand. University trends have changed over time, favoring suburban isolation in the mid-2th century and now vibrant urban centers. Though they do have significant investment to place, they can choose to move like any tenant, thus potentially sinking the plan. As another added caviat, if the University owns rather than rents a new development, the government forfeits its gains on property taxes, as higher education nonprofits are not taxed for any property they own. In any partnership development where the University is to continue to hold ownership, a municipality must weigh the gains it receives by potentially catalyzing adjacent development with the loss of tax base by removing a privately held property to university ownership.

When the concerns of both partners are well-mitigated in planning and negotiation, these partnerships can lead to great success. The potential benefit to communities in alleviating some of the worst neighborhood blight can be very worth the effort in undertaking these partnerships.

Lauren Joyner is a second-year real estate and place-making student at the UNC Department of City and Regional Planning and is currently a Community Revitalization Fellow with the Development Finance Initiative.