Thomas Jefferson University (TJU) was facing mandatory renovations in excess of $35 million to upgrade its high-rise residence halls along Walnut Street in center city Philadelphia with new life safety systems (new sprinkler systems) and amenities. TJU did not have any other options others than using their “mission critical” capital for residential housing purposes. Additionally, TJU’s real estate operating expenses were over $15/SF without RE Taxes.

APPROACH

We created a strategy that allowed TJU to save the $35 million of capital expenditures on the residence halls and add more capital to their coffers by selling the residence halls to Lubert-Adler Partners entity for $13 million.

RESULTS

Thomas Jefferson received $13 million in cash from Lubert-Adler Partners, and avoided over $35 million in renovations to the residence halls, resulting in a combined financial outcome and cost avoidance of $50 million for TJU. We also developed a cost savings and occupancy reduction strategy which saved $5/SF across their portfolio for an annual savings of over $25mm.

As part of the agreement to sell the residence halls, Lubert-Adler also agreed to renovate the historic Victory Building (in the heart of TJU’s campus) and TJU signed a favorable lease for a new bookstore and future sections of the Victory Building for administrative and residential purposes. The other RE savings have been managed through a optimization model in place.