The Great University Property Scam
British universities own vast tracts of valuable land, and now beady-eyed speculators have their eyes on it. They’ve discovered that many VCs and Principals feel frustrated in their plans for estate development – either by the rules of public sector procurement, or by financing problems. But while the VCs get new buildings, staff and students look set to suffer.
The speculators are banking – literally – on the idea of Joint Ventures between property developers and universities: the university supplies the land free of charge; the developer builds shiny new buildings that are leased back to the university by a new company; then the developer sells that company on the open market, reaping sizeable profits. The speculators bank-roll the property developers.
One of most active speculators is a little-known company called Revcap. It is a subsidiary of Real Estate Venture Capital LLP, based in central London . Revcap are providing the £300m financing for a very grand scheme being rolled out across UK universities by a property developer called Andrew Colin and one of his many companies, INTO University Partnerships.
If this were just a story about property development there might be little to concern staff, students or parents of future students. But INTO have dressed up their scheme under a cloak of providing language teaching to overseas students. Drawing on his experience of teaching English to European teenagers in Brighton through his company Study Group (now sold to Daily Mail Group), Andrew Colin is seeking to cash in on another issue close to VC’s hearts – how to recruit more overseas students, who pay premium rate tuition fees.
INTO has developed a model ‘business plan’ which Colin is busily touting to any VC or Principal who will listen. Establish a Joint Venture company with INTO on a 50:50 basis and transfer any current staff teaching English for Academic Purposes to the new company. INTO will then, through another Colin company Espalier, build a shiny new building for teaching and, more importantly, accommodating the hordes of new overseas students who will flock to the university. That’s the bait, and it’s been swallowed hook, line and sinker by at least three universities so far – University of East Anglia , Exeter University and Newcastle University . Two others are also in advanced talks, Oxford Brookes University and Leeds Metropolitan University .
Of course, nothing has been built or even planned just yet – Colin probably needs to accumulate a good portfolio of developments before Revcap will stump up the cash. Meanwhile, the new joint venture companies have down-graded the terms and conditions of transferred language teachers; they are hiring new staff at lower pay and qualifications; and are recruiting students with much poorer English, hoping to ‘cram’ them through the necessary language exams.
But assuming most VCs and Principals don’t simply want to get rid of their language staff, why is this deal so tempting? The answer lies in the complexity of public procurement rules. Universities are still public bodies – indeed they are often charities, but the government has kindly transferred formal oversight from the Charities Commission to the Higher Education Funding Councils, staffed by folk more sympathetic to the new competitive markets for higher education.
When public bodies want new buildings they need to go through tightly specified procedures to ensure that the contracts are awarded on a fair and transparent basis, rather than going to friends. The projects must be managed according to complex rules and procedures to ensure that sub-contracting is equally fair, costs and timescales do not escalate, and that all construction work accords fully with health and safety legislation. At Newcastle University an official Competitive Tender was duly put out but it was cleverly worded to exactly fit INTO’s ‘business plan’:-
The service provider, operating in a joint venture company with the contacting
authority, will:
(i) make a substantial financial investment in setting up an international
college including accommodation and to put a new brand and international marketing
network in place to compete with established service providers;
(ii) develop and deliver subject and language based courses qualifying overseas
students for entry into university under-graduate and post-graduate programmes;
(iii) specify, fund and procure the construction of teaching and residential
accommodation.
Not surprisingly, only two other companies tendered for the contract, only one of those was interviewed, and INTO won the ‘competition’.
Real Estate Venture Capital are trying to raise their respectability through the recent appointment of George Mitchell as non-executive chairman. Mitchell was formerly Governor of the Bank of Scotland and saw through the merger with Halifax to form HBOS. Let us hope their desire for respectability will move them to withdraw from the INTO scheme.
Further References
http://www.ucu.org.uk/index.cfm?articleid=2010
Richard Hull, PhD Senior Lecturer in Management University of Newcastle-upon-Tyne Business School Newcastle NE1 7RU