How One Institution is Monetizing its Physical Assets

The Ohio State University recently monetized their parking operation -- which OSU identified as a campus asset that was non-mission critical -- and secured $400 million, most of which OSU invested in its endowment. As other institutions seek to counterbalance increasingly depleted revenue streams, OSU provides a key example of how to identify assets that are ideal for monetization.

To learn more about the thinking behind OSU's recent transition, we interviewed Michael Papadakis, Ohio State University's treasurer, and Sarah Blouch, president of CampusParc LLP, an entity formed to manage university parking concessions—including the transaction recently closed at The Ohio State University.

AI: What do institutions need to keep in mind when looking to monetize physical assets?

"Typically in the past," Papadakis notes, "when a service is needed, we have tended to think that we can provide that service better than anyone else. Our instinct is to want everything customized to our particular needs and culture. So the trend in the past was to bring everything in-house. That's very counter-intuitive; it's very different from how the corporate world looks at this."

"There are some things that it may not make sense for us to do in-house, and where it may be advantageous to include services in a concession agreement in order to free up capital resources to focus on teaching, research, and service to the community."
Mike Papadakis, The Ohio State University

Keeping your eyes on what is core to the institution's mission, what physical assets can your institution monetize by bringing in a partner? For example:

  • Parking
  • Energy infrastructure and distribution, if your institution owns a power plant
  • Golf courses
  • Real estate (Would it make sense to contract with other entities to develop it?)

"Looking out five years from now, ten years from now, as external sources of funding continue to decline, as pressure on tuition continues, what are other assets you can monetize, other services you can privatize? For one campus, it may real estate. For another campus, it may be something else. But it's a question you need to start asking."
Mike Papadakis, The Ohio State University

OSU made a list of assets that were not essential to teaching, research, or community outreach--and in their case, parking emerged as the first asset to reconsider, both in terms of the potential revenue that could be generated and the ease and speed with which campus parking could be monetized.

"There are gray areas," Papadakis acknowledges. "There are some things that we do that are not really mission-critical but that are complicated enough that a high degree of customization is desirable. Where to draw the line can be challenging, and it's important to have an inclusive conversation when you are reviewing services and assets. When we considered parking, we needed to talk with our parking operators, our legal advisors, our financal advisors--we wanted a clear sense of how they all saw this opportunity."

Papadakis also cautions that monetizing these assets may represent a significant shift in mindset and culture.

"We spent a lot of time looking at varied financial scenarios for the institution. Getting several million dollars that grew our endowment X% in a specific day -- that's really hard to do through any other effort. The critical mistake institutions make is when they use those dollars to plug a hole in the budget or build a new facility. We put it in the endowment, opting to spend only a small percentage of the principal."
Mike Papadakis, The Ohio State University

AI: You decided that this public/private partnership was the right avenue for OSU to take. What has made that partnership an effective one?

Papadakis and Blouch spoke to the importance of due diligence and clear expectations up front, to ensure that:

  • The service will maintain the same quality (or better) that they experienced prior to bringing in a partner. "You have to have quality operators," Sarah Blouch remarks. "Parking may not be core to your mission, but it is an essential service that needs to be handled well."
  • The institution has a degree of certainty about next steps prior to reaching out to potential partners. OSU had passed a resolution with their board of trustees, determining that if specific criteria were met, the institution would move forward. "This was key from an investor's perspective," Blouch notes.
  • The partner has a long-term view of the partnership. "The institution needs to know that the investor isn't planning to approach this in a hurry, flip it, and move on," Blouch comments. Papadakis adds, "You have to realize that the principals who are at the table when the deal closes probably won't be there 20, 30, or 40 years down the road, but the structure they put in place has to stand the test of time."