Indiana University students have a piece of an island they want to sell you. If all goes well, they'll make the university
millions of dollars--and learn a bundle about real-world business along the way.
Kelley School of Business students will market and sell five lots along a strip of white sandy beach on secluded Dog Island, Fla., as a class project that likely will span several semesters.
Whatever the students get for the land will be all profit. The roughly one acre of ocean-front land--now valued at $1.95 million--was given to the university this month by Stanley Benecki, an Atlanta-based developer who earned a bachelor's degree in real estate from IU in 1981.
"I thought this would be great for students," said Benecki, who believes that, with a savvy plan for marketing and developing the property, the university could double its value. "Students never get to deal with real, tangible things. So this is a real-life project."
Benecki owns land in Florida and elsewhere in the Southeast. His company, Atlanta-based Benecki Fine Homes, does $50 million in projects annually, mostly high-end homes.
He's had the Dog Island property several years, holding onto it in hopes its value would increase.
But when IU sent out fund-raising feelers recently, Benecki thought donating the lots would be a unique way to give back to his alma mater.
"I get to work with the students and thought it would be fun," said Benecki, who will serve as an adviser on the project. Proceeds from the project will help fund the school's Center for Real Estate Studies.
"We've never done anything like this," said Jeffrey Fisher, director for the center, which will be renamed the Benecki Center for Real Estate Studies. A professorship and scholarship also will be named for him.
"Usually, projects involve more traditional real estate investments, like analyzing an apartment building in Bloomington," Fisher said.
A road trip will be in order because students will have to get a feel for who is buying property on the island, Fisher said.
"Clearly, they're wealthy and their egos are involved," he added.
Newer homes on the island are worth about $3 million, Benecki said.
The 8-mile-by-3-mile island sits 3 miles off the northern Florida panhandle. It lacks paved roads, but does have landline phone service, as well as electricity and cable hookups. Only five families live there year-round, while about 100 others have vacation properties.
Eighty percent of the island is owned by The Nature Conservancy. Remains of shipwrecks rest on the bottom of the island's coves.
One of the options the class will consider is marketing the property as a corporate retreat. Because the five lots are contiguous, that might make an ideal development, Fisher said.
"The market is a little soft now because of Katrina," Fisher said, referring to the hurricane that ravaged the coast in the fall of 2005. Dog Island, which is adjacent to St. George Island, was in Katrina's path and gained beachfront as a result.
"But people tend to forget about that," Fisher said.
Fisher said it's possible that Tallahassee Regional Airport could become an international airport. That would provide greater access and increase land values on Dog Island.
While Benecki's property on Dog Island is an unusual example, donating real estate is gaining popularity in philanthropic circles, said Bryan Clontz, president of Atlanta-based Charitable Solutions LLC, a charity consulting firm whose clients include the University of California at San Francisco and Georgia State University.
Rising property values are creating large capital-gains taxes for sellers, so giving is appealing, Clotz said. By giving, property owners avoid capital gains while recording an income tax deduction. Owners also can donate a home and continue living in it while receiving annuity income from the charity.
In the past, most universities shied away from real estate donations, in part because of tax issues, the burden of managing property, and the potential liability from environmental problems, Clontz said.
But for universities, the potential payoff has become too big to ignore.
"They're forced to look at different kinds of gifts because they've got a gigantic number to hit," Clontz said. "Universities have a brand to protect and their reputation is often contingent on hitting that number."
IU Bloomington, for instance, is in the early stages of a campaign to raise nearly $1.1 billion.
From 2000 to 2006, the IU Foundation received 40 real estate gifts valued at $12 million, said Barbara Coffman, executive director of strategic planning for the Bloomington campus. During the same period, the school sold 51 donated real estate properties for $12 million.
"We've been given shopping centers and office buildings," Coffman said. "But this is the most interesting piece of property we've received." The gift is also on the high end in terms of value of all real estate gifts to the university, she said.
Real estate donations to the university are "definitely increasing," said John Wilhite, executive director of personal property, real estate and insurance for IU.
At any one time, the IU Foundation owns up to 150 pieces of property worth close to $100 million, Coffman said. That's roughly 5 percent of the foundation's assets. Most property is sold so the money can be used for the donor's purpose.
Purdue University also is seeing a big upturn in real estate gifts. Since 2000, the Purdue Research Foundation has received 35 real estate gifts worth $43 million, including two collectively valued at $31 million, said Greg Kapp, associate vice president for advancement. That's significantly more than half of the $75 million in real estate gifts to the school over the last 28 years.
In December, Purdue hit its current fund-raising campaign goal of $1.5 billion six months early.
"We're not too squeamish about taking real estate," Kapp said.
One of Purdue's most unusual gifts was $21 million of hardwood timber forest in several states and in New Zealand. The school has since sold the land.
Concordia College in Moorhead, Minn., was given a side of a mountain in the Great Smoky Mountains of Tennessee.
The school held onto the property for 10 years before selling it, said Margaret Tungseth, a deferred-gifts accountant with the Liberal Arts school.
"We've had some unusual gifts, but that was the most interesting," said Tungseth, whose college doesn't shy away from real estate.
"A gift is still a gift," she said.