Quote of the Day

Monday, June 8, 2009

More Debt

It appears the school took out a second mortgage against its Cedar City building on 5/30/07. This was likely used to buy its 520-acre parcel in Monticello, which was acquired between January and June 2007.

Here's what we can surmise so far on this Monticello land. The school paid about $1 million cash, took on another $1 million in debt, and mortgaged its Cedar building for another $125,000, for a total of $2.18 million--all to buy raw land at the top of the market that may now be worth less than $1 million.

How the school expects to develop this land is beyond me. One of the biggest questions marks involves water rights.

I have done an exhaustive search of area water rights, and the school/foundation appears to own none. They own the land, but no water. In Utah, water rights are bought and sold in a way similar to real estate. Water is a requirement for development, especially in a rural area like Monticello.

Buying the Monticello land outright, with not only $1 million cash but over $1 million in debt, appears to have been a major financial blunder for the institution.


James F. said...

"It appears...", "This was likely...", "based on the facts available...", etc. etc.

I know you admit you don't know everything about this. And I realize that you are doing some good investigative reporting. But you seem confident that your conclusions are correct "based on the facts available" while I can see many different possible conclusions based on the same "facts". I mean you might be right...but in my honest personal evaluation of what you have presented on GWU's financial situation, I just don't think I'm seeing enough evidence to fully support your conclusions.

The bit about the water rights is interesting, but I don't understand where you are taking it. I'm not familiar with the water situation they have in Monticello, but there are certainly many possibilities as to why GWU doesn't currently have water rights listed under their name. But you seem to be suggesting that they bought this land (and overpayed) without even thinking about where they were going to get water from. While this is technically a possibility, nothing in the "facts" you present (or the lack thereof) proves or even suggests that this is the case.

The Real George Wythe said...

James F -

I should have clarified in the post that the person who got me onto this water rights issue was someone I corresponded with at the San Juan Record in Monticello, and he turned out to be right. Water rights would play a big role in any development. (The school would either dig its own well water, or buy rights and transfer them to the city.)

Incidentally, I understand some of the city officials are getting anxious about the schools' intentions--they annexed the land into the city, assumed good faith that the school would indeed build a billion-dollar campus, even came up to the school's meetings in SLC.

Another Monticello resident (not with the paper or in the city office) told me that the school bailed on its lease at the Hyland Hotel. I don't know if they actually bailed on a lease, but a second resident confirmed that GW is, indeed, gone from that building. So at this point, it appears the school's only presence in Monticello is a picnic pavilion, surrounded by 520-acres of overpriced land!

To be fair, not many saw the real estate crash coming. Even DeMille admitted he should have seen it coming, given he is so familiar with The Fourth Turning (See "Oliver's Update"). :)

James F. said...

It is obvious that the Monticello plans are on hold. Was it a bad move? With the timing and all, so it seems. But hindsight is 20/20, right?

So what is your point? Pretty much every University in the state (minus BYU) is a bit shell shocked from the financial situation. However you are singling out GWU which is likewise affected by the recession, but saying that there must be some sort of misconduct or deception occurring since their Monticello plans aren't moving forward as planned.

The Real George Wythe said...

You're right, hindsight is 20/20. It appears though, even without hindsight, that the foundation may have been better off using the tried-and-true method of land optioning to lock up the land with minimal cash outlay.

I know they anticipated making money off the house lots they planned on selling, and this very well could have paid off the debt.

I think the Monticello project is essentially a housing development derailed, like so many around the country. When demand for housing dried up, many builders were left with lots of land, high carrying costs, and no buyers.

That the foundation wanted to build a campus seems to be pretty ancillary to the financial picture. I get the sense that they were really counting on those lot sales.

It's not a bad plan in concept, assuming there are enough people willing to snap up the lots and move to Monticello. Doughty had a similar plan with his Meadeau View Institute / Mammoth Valley community. Unfortunately, he too ran into a recession / real estate collapse.

I'm really curious to see how this all plays out, and whether any donors to the Monticello project will be upset if the campus isn't ever built. When Doughty's community collapsed, the Deseret News reported that donors were reluctant to come forward due to inherent distrust for the government. This may be a similar situation.