The University of Minnesota’s Board of Regents reviewed a potential purchase of the University Village apartments Thursday, which members said could help preserve affordable rents.
University Village, located at 2515 University Ave. SE. in Prospect Park, is expected to be purchased by the University for $43 million in March. The apartments offer a more affordable housing option for students and present a long-term development opportunity for the University, said Senior Vice President for Finance and Operations Brian Burnett.
“As you might know, not all of our students can afford some of the high-end student housing that’s been built,” Burnett said at Thursday’s meeting. “And so this facility actually helps keep prices reasonable in that regard, in a very key location.”
The University’s Housing and Residential Life office currently holds a master lease on 112 units in the property, which is expected to end in August. The board is now looking to purchase all 199 units and take control of the property. Properties on the edge of campus are a good investment for the school, said Chief Investment Officer Stuart Mason.
“It’s right on the edge of the campus. We make a habit of, maybe, not always trying to purchase, but at least evaluating if it makes sense for us to purchase any land or any building that is on the edge of campus,” Mason said. “Because we know we’re growing.”
The creation of a private LLC called the 2515 University Avenue SE. LLC was approved by the regents in September with the University as sole member as part of an effort to manage the property.
The University’s temporary investment pool is used to pay University staff and other University expenses. The consolidated endowment fund is a long-term fund that pays out a set percentage of money to the University each year and funds University expenses like scholarships. About $35 million going toward the purchase of University Village will come from TIP and the remaining $8 million will come from CEF. This money will need to be repaid by University Village profits.
Regents expressed support for the purchase, despite some initial concerns. Regent Michael Hsu questioned the property’s relationship with the TIP.
“I support purchasing the property, but this just seems very complicated,” said Regent Michael Hsu. “If this [LLC] is a vehicle to help TIP make money, then we’re not doing what we said we were going to do in terms of keeping the cost of housing down, if we’re actually trying to make money off of it.”
Burnett said the benefits of the property are worth the investment.
“No question it’s more complex,” Burnett said. “We saw an opportunity because we’ll have control over this as the LLC to ensure that our returns come back to CEF and to TIP at the same time, [so] we [can] preserve the land for future University use down the road.”
Another concern raised by regents regarded the property’s tax exemption. Regent Steve Sviggum said University Village, which was built by a nonprofit organization, would add to a burden of similarly tax-exempt properties in the area.
Despite this exemption, taxes are paid on the retail portion of the property, said assistant vice president for planning, space and real estate Leslie Krueger.
A decision on the purchase from the board is not expected until March.
“I’m supportive of [the purchase], I think it’s a good investment and it makes sense,” said Regent Abdul Omari.