Knoxville Place purchase

Wed

Sep 26 2007

11:06 pm

By: rikki

The University of Tennessee is going to pay the UT Foundation $56 million for Knoxville Place, the massive apartment complex that takes up most of the block behind the law school.

This seems strange to me, but I can't quite say why. It's like trying to understand hedge funds and crap, it's just not my part of town. The building was constructed with $60 million in bonds. They want it because Strong and Melrose Halls will be closed next year, but it is full of students already and will not be able to hold more students because someone else owns it. Or will they cram them in?

How do you determine a purchase price between a university and some quasi-wtf foundation that is supposed to be helping it? The Sentinel article on the purchase quotes no one at all as saying the price is "based on the UT Foundation’s outstanding debt minus the amount in reserves, which is not to exceed the fair market value as determined by an independent appraisal." Is the UT Foundation a non-profit? What exactly is it?

Surely UT could anticipate this need for dorm space, so why did they not build a dorm? Are there restrictions that would have been in place had UT built Knoxville Place outright that were circumvented by the UT Foundation building it?

Are organizations like the UT Foundation and The Development Corporation and the Great Schools Initiative useful tools for investing in our communities or just a shadow government free of annoying restraints like fairness, equality and openness? Or, phrased differently, are such foundations the way rich, powerful people have worked around the retarded rigor mortis of our corporatized, two-party campaign clusterfuck?

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Martin Place seems to have

Submitted by jbr on Thu, 2007/09/27 - 10:00am.

Martin Place seems to have gone thru similar process. Not sure how that panned out.

(link...)

Reviews

Submitted by Up Goose Creek on Thu, 2007/09/27 - 7:10am.

The place gets horrible reviews. Perhaps UT can make it get better. It can't get any worse.

(link...)

___________________________________
Less is the new More - Karrie Jacobs

There used to be a beautiful

Submitted by Knoxquerious on Thu, 2007/09/27 - 8:21am.

There used to be a beautiful view of Neyland Stadium on game day at the top of 16th Street and Highland Ave. It was sad seeing another cookie cutter block the mountains and one of the greatest venues in sports.

yep, and based on the number

Submitted by rocketsquirrel on Thu, 2007/09/27 - 8:28am.

yep, and based on the number of students Knoxville Place can house, UT is paying $70,000 PER STUDENT.

$56m divided by 782 students = $71,611.00 per student.

Is UT in the education business, or the property development business?

Where is UT getting the $56m to pay the Foundation off?

"Satan's palace"

Submitted by zoomfactor on Thu, 2007/09/27 - 8:37am.

It really looms over Laurel Avenue, even blocking the light. I don't think anyone realized how tall that godawful building would be.

Those comments that Goosecreek linked to are very telling. Check this comment:

"Someone punched a hole in the wall outside my apartment, which became a chewing tobacco receptacle for residents and guests."

Ewwww. I knew a guy who worked on that building, and he said it was built on the cheap, cheap, cheap. There was mold forming before the first person moved in, and there are no right angles anywhere. The garage is a security nightmare because none of the doors close completely, allowing anyone to come in. The only thing I can figure is that by getting a third party to build it, UT managed to get out of adhering to more restrictive (i.e., expensive) construction requirements. The same mentality that was used to call Glocker a "renovation" in order to get more money from the state (only the front wall of Glocker is original).

Correction...the 16th and

Submitted by Knoxquerious on Thu, 2007/09/27 - 8:56am.

Correction...the 16th and Laurel view.

UT has more students and

Submitted by CBT on Thu, 2007/09/27 - 9:09am.

UT has more students and needs housing. Look at all the apartments near campus apparently being filled up with students. As for on-campaus housing, just where would UT build a large, new dorm?

How does $56M compare to the cost of building a new dorm? I don't know the answer. I'm just asking.

I can't imagine the construction would be much better if UT built it, given the low-bid requirement and all. I believe this same company (not the UT Foundation) built similar apartments for UT Chattanooga and a number of other schools.

I note almost all of the "Fort" area apartments get poor reviews, all but one show less than half recommending. While their opinions have some merit, college students who have never lived anywhere but with mom or are moving from a dorm may have unrealistic expectations. Particularly when all the other tenants are college students who may have issues with 'housekeeping'. Even in college, I was a bit of a neat freak. Most of my 'neighbors' not so much.

"but it is full of students

Submitted by smalc on Thu, 2007/09/27 - 9:09am.

"but it is full of students already and will not be able to hold more students because someone else owns it. Or will they cram them in?"

Isn't it one person per bedroom now? They will probably try to cram two people in each bedroom.

UT Place

Submitted by Mike Cohen on Thu, 2007/09/27 - 9:29am.

The deal makes sense to me. UT needs more housing. Who do you think can get it built more quickly, efficiently and cost effectively....the government or the private sector? Let the private sector build it, then UT acquires it. Seems like a pretty good model to me. And the equation of

$56m divided by 782 students = $71,611.00 per student

may be an intersting piece of math, but is in no way reflective of financing, depreciation or the realistic math of whether or not this was a good deal.

Talk to folks at ORNL who had two office buildings go up...one government done, one private sector done. Private sector was finished more quickly and at far less cost.

I have no way of telling how

Submitted by rikki on Thu, 2007/09/27 - 10:58am.

I have no way of telling how good of a deal it is. $72k per student needs to be divided by the lifetime of the building, for one thing. It might be a good deal for the university, but that is not really the point.

Mike, you put UT Foundation in the private sector, but it is not clear to me it belongs there. I'm not sure what it is. Is the foundation making a profit on this sale or just covering costs? If it is truly private sector, any profit would be shared among the principals, right? I doubt that's the case.

There are plenty of anecdotes about things costing more when done by government, but bad deals and poor practices can happen anywhere. There are plenty of examples of government projects getting done early and under budget, often because of incentives written into the contract. It's not as simple as govt=bad, private=good, though that is certainly a mantra of righty idealism.

The reality is that contracts and projects are as good as the people involved, and that is the real issue here: who are the winners and losers? Your build-private-then-sell model sounds like a great way to avoid an open bidding process and quality-control constraints.

Even when the "government"

Submitted by R. Neal on Thu, 2007/09/27 - 11:10am.

Even when the "government" builds something, dont' they usually hire private contractors?

"Even when the "government"

Submitted by Mr. McBeavy on Thu, 2007/09/27 - 11:25am.

"Even when the "government" builds something, dont' they usually hire private contractors?"

Kind of. It is the *low* bidder who actually gets it. And sometimes you find out why they were low.

It is the low bidder who

Submitted by rikki on Thu, 2007/09/27 - 1:03pm.

It is the *low* bidder who actually gets it

That's not strictly true. Some contracts have a qualifications phase where prospective bidders attempt to prove they have the expertise for the task and a reputation for quality work. Complex projects may have formulas for selecting the best bid value rather than just the absolute lowest.

"That's not strictly true.

Submitted by Mr. McBeavy on Thu, 2007/09/27 - 2:31pm.

"That's not strictly true. Some contracts have a qualifications phase where prospective bidders attempt to prove they have the expertise for the task and a reputation for quality work. Complex projects may have formulas for selecting the best bid value rather than just the absolute lowest."

You are correct, however, the operative word is "some". Yes, "some" contracts do have pre-qualification requirements. However, Knoxville Place was hardly a complex project. But when it is all said and done, the low bid almost always wins. Unless there is some real glaring problem with a bidder or its bid, low usually gets it.

knoxnews story

Submitted by bill young on Thu, 2007/09/27 - 9:56am.

I think I read in the newspaper story that Knox Place because it was a private concern was NOT built to state building code specs as would a building built by UT.

Could it be a deal that,if not built by UT..therefore not following the stricter state specs;the cost to build is cheaper & the money made by the Foundation is less than the difference of what the cost to UT would have been if the University had built it themselves?

That could mean the Building is a piece of shit..which the kids say it is & the rent is expensive.

How will it fly as on campus living as opposed to private living..You can party down now..& the kids do.Not sure if these kids will be interested with no drinking & RA's hanging about.

One thing I do like about it..those folks voted last year here in 10-N(Fort)& they voted Ford.

some problems...

Submitted by mbradley on Thu, 2007/09/27 - 10:01am.

I suspect a few of the current "problems" that exist may diminish once the university controls the property. Besides, many of the current tenants will flee to other areas of the fort since alcohol isn't allowed on university property (insert football game day and fraternity park joke here).

The university needs housing and the foundation can probably use the sale to move on to other projects to support the university.

Knoxville Place sure looks

Submitted by bizgrrl on Thu, 2007/09/27 - 10:05am.

Knoxville Place sure looks like a fun place to live. I suppose the rates are competitive considering the amenities and location.

Did the foundation ever get over the internal audit issues, i.e. "The internal audit of the university was critical of the UT Foundation, saying if it was not overseen properly the foundation could serve as a "technically legal vehicle to divert public funds and circumvent laws for providing for accountability and control over public finds and assets." ?

What's also interesting is that the foundation was established in September, 2002. They were able to build this apartment complex and sell it to UT in five years. Maybe that was the plan all along.

The sale

Submitted by bill young on Thu, 2007/09/27 - 10:47am.

The bidness,in KnoxPlace,that were selling beer got screwed.They signed a lease..got started..then were told that UT would be buying it & beer could not be sold.

So these foundation folks leased property,that sold beer..got paid rent..knowing full well that..these bidnesses...would be forced out when UT bought it.

Beer Sales

Submitted by Joe328 on Fri, 2007/09/28 - 9:00am.

The lease should have been filed at the court house with the deed, this would require UT to buy the beer business then close it.

21st century

Submitted by bill young on Thu, 2007/09/27 - 11:03am.

Its a 21st century animal house..not that I have a problem with that

Even when the "government"

Submitted by CBT on Thu, 2007/09/27 - 11:27am.

Even when the "government" builds something, dont' they usually hire private contractors?

Yes. And, then this low-bid contractor often submits change orders to increase the bid to the actual cost.

Civil Engineer Barge

Submitted by Mr. McBeavy on Thu, 2007/09/27 - 11:41am.

Civil Engineer- Barge Waggoner Sumner & Cannon
10133 Sherrill Boulevard, Suite 200
Knoxville, TN 37932-3389 (865) 637-2810
(865) 673-8554 FAX Contact:

Construction Manager- Blaine Construction Corp.
P.O. Box 10147
Knoxville, TN 37939-0147 (865) 693-8900

Owner- Place Properties
101 Marietta St #1050
Atlanta, GA 30303 (404) 920-9200

Here is the appropriate information when this project was built.

tax and spend republicans

Submitted by rocketsquirrel on Thu, 2007/09/27 - 12:35pm.

I personally think housing is not a core mission of a modern university. Maybe tax and spend republicans like CBT and Mike Cohen want to waste the valuable resources of a university, but housing is best left to the private sector, not a university. Housing is a commodity, not a core university mission.

Again, where is the $56 million coming from to pay for this fabulous deal? No one has answered that important question...

And Mike, it's not a private sector project because the UT Foundation financed it. I'll bet the plan all along was to let the "private" (wink, wink) foundation build it. That's just off-book accounting if the university ends up with it anyway. Just a public project run through a shell organization to avoid scrutiny and oversight.

Housing is a commodity, not

Submitted by rikki on Thu, 2007/09/27 - 1:09pm.

Housing is a commodity, not a core university mission.

I suspect a lot of parents and faculty would disagree with you. Many people look for a school that provides not just classroom instruction, but a safe and structured place to live for their freshly fledged children.

really, Rikki? Knoxville

Submitted by rocketsquirrel on Thu, 2007/09/27 - 1:24pm.

really, Rikki? Knoxville Place isn't even on campus--it's in the Fort. Your logic is flawed.

The Foundation

Submitted by Mike Cohen on Thu, 2007/09/27 - 1:28pm.

Rikki:

I believe that the Foundation is not an agent of state government, but is independent. That means they can operate under private sector rules, which saves a lot of money. It is why the city and county (and lots of other cities and counties) do major construction projects through Public Building Authorities.

You're dead on about the possibility of bad deals under any circumstances...but building under direct government control generally means a set of rules that end forcing the project to take longer and cost more.

It's one of the crazy things about government. The state sets rule for government handling construction, then passes laws allowing the creation and empowering of Public Building Authorities to get around some of the rules. Go figure.

UT rules

Submitted by rikki on Fri, 2007/09/28 - 8:49am.

What are these government rules that are so problematic? Are PBAs really created to evade rules? If the rules are so bad, why evade them instead of amending them?

Our PBA serves the city and the county, and it seems to me its purpose is to streamline infrastructure operations under one roof. Doesn't it also operate state and federal buildings within the county? Evading redundancy and patronage seems more to the point.

Also, our PBA leases buildings to governments, but the UT Foundation is selling Knoxville Place outright. If the foundation was created to assist with projects "beyond the scope of the University's general budget," what has changed in the past few years that moved the building within the scope of that budget?

The Foundation

Submitted by Mike Cohen on Thu, 2007/09/27 - 1:33pm.

From their website:

Welcome to The University of Tennessee Foundation, Inc. (UTF) website.

The mission of the UTF is to support the University of Tennessee's educational, research, and public activities by seeking, receiving, and administering private funds to support programs beyond the scope of the University's general budget.

The UTF, established in 2001, is a non-profit 501(c)(3) organization that receives and administers private support for the University of Tennessee System.

The University of Tennessee is the flagship institution for the state of Tennessee with campuses in Knoxville (including the Institute for Public Service and the Institute for Agriculture), Chattanooga, Tullahoma, Martin, and Memphis. The University provides services in all counties through the state. The Foundation will provide funds that will support all the campuses and institutes.

Rocketsquirrel: Before you start slinging insults at Chad and myself you might consider checking your facts. You might also consider doing what folks like R. Neal, Rikk, CBT and I also do...say who we are.

Mike

Yeah, what Mike

Submitted by CBT on Thu, 2007/09/27 - 1:44pm.

Yeah, what Mike said!

Knoxville Place is directly adjacent to numerous University buildings. It may not be 'on campus' now, but it's a dang sight closer to the center of campus than many of the buildings already 'on' campus.

If the deal goes through, Knoxville Place will be 'on campus' soon enough.

10-N

Submitted by bill young on Thu, 2007/09/27 - 1:50pm.

Clement & Strong Hall vote in the Fort.
Knox Place..Clement..Strong..all turned out & voted for Harold.

Unless there is some real

Submitted by CBT on Thu, 2007/09/27 - 2:59pm.

Unless there is some real glaring problem with a bidder or its bid, low usually gets it.

Some state contractors were particularly adept at having a meeting down in Nashville around bid-letting time and agreeing on what would be 'low' for particular jobs? You get this and I get that...

"Some state contractors were

Submitted by Mr. McBeavy on Thu, 2007/09/27 - 3:50pm.

"Some state contractors were particularly adept at having a meeting down in Nashville"

That particular meeting prior to the lettings does not occur anymore.

Knoxville Place

Submitted by scottfrith on Fri, 2007/09/28 - 9:09am.

Like any apartment building there are plenty of mixed reviews, but I have some friends that lived there through three years of law school and loved it. It's just a great location and the University market is booming as a result of the lottery scholarship and the significant demographic shift in the student population regarding high school gpa and family income.

Rents are rising, Fort Sanders property values are rising, this struck me as a smart move.

the University market is

Submitted by bizgrrl on Fri, 2007/09/28 - 10:28am.

the University market is booming as a result of the lottery scholarship

Enrollment: 26,400 — 20,400 undergrad; 6,000 graduate

UT enrollment has not grown that much over the past 25-30 (or even more) years.

Enrollment increase

Submitted by mjw on Fri, 2007/09/28 - 4:59pm.

Enrollment: 26,400 — 20,400 undergrad; 6,000 graduate

UT enrollment has not grown that much over the past 25-30 (or even more) years.

Actually, including part time students, enrollment is quite a bit higher than that this semester. And even the official number is up maybe 1500 students or so from 3 years ago. Remember that some years ago, UT increased admission standards to stabilize enrollment at around 25000 because we couldn't get capital funds or operating budget increases to provide facilities and faculty to support a higher enrollment.

The lottery scholarships are bringing in students which easily meet the higher admission standards. And the state has provided the needed capital to support the higher enrollment (that part which isn't covered by the increased tuition funds from the new students). As you can tell if you've been on campus lately, you can't walk a block without tripping over some kind of construction.

30K

Submitted by Up Goose Creek on Fri, 2007/09/28 - 11:10am.

The enrollment was around 30K in the early '70s. Lots of fresh new buildings and cheap cheap tuition. I look back and wonder where all the money came from.

____________________________________
Less is the new More - Karrie Jacobs

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