Indiana University President Michael McRobbie may be an academic, but his plans to launch an aggressive building campaign
takes a page out of Warren Buffet’s playbook.
Investors, Buffet said, “should try to be fearful when others are greedy and greedy when others are fearful.”
McRobbie, in spite of a damaged endowment and falling state funding, is launching a building campaign like IU hasn’t seen in 80 years.
In a speech Tuesday afternoon, McRobbie said IU is gunning to construct at least 12 buildings on its Bloomington and Indianapolis campuses. And it’s likely to be more, as IU tries to connect the IU School of Medicine with its partner Clarian Health and with a life sciences corridor northwest of downtown.
The university is counting on raising $1.1 billion in private funds for additional buildings at IUPUI, and is on pace to have more than half that amount by October.
“We are also moving rapidly to take advantage of the current construction trough to build new facilities at historically low costs,” McRobbie told the IU faculty in his annual State of the University speech. He hopes the building campaign makes IU more competitive against its peers when the recession ends.
McRobbie repeatedly invoked iconic IU President Herman B Wells, who pushed IU to build 10 buildings during the Great Depression. Those facilities, McRobbie said, are still the core of IU's main Bloomington campus.
McRobbie's reasoning is simple. Construction projects largely dried up in the fall of 2008. Construction firms kept busy in 2009 on existing projects. But now that those are drawing to a close, there’s little in the pipeline.
“There’s not a whole lot to build,” said Dennis Sutherland, senior vice president at Cripe Architects & Engineers in Indianapolis. For that reason, he added, “This a terrific time to be bidding projects.”
McRobbie said construction costs for major projects have fallen 24 percent in the past year.
Cuts to state funding and ever-rising benefits and energy costs are forcing IU to trim as much as $118 million, or 4 percent, from its budget. But it can borrow money for building projects by paying incredibly low interest on bonds.
Municipal bond rates for high-quality borrowers are as low as 3 percent on 10-year notes, according to data from Yahoo Finance. Some rates were twice that high roughly a year ago, when the credit crisis caused rates to spike for a time.
IU already is moving forward on three key buildings in Indianapolis:
- The $20 million Glick Eye Institute, funded with money from Eugene and Marilyn Glick, will have nearly 68,000 square feet of research and classroom space. It will be located west of IU Hospital.
- The IU Neurosciences building, at a cost of $53 million, will have 150,000 square feet of research space. It will be adjacent to a new neurosciences building planned by Clarian across West 16th Street from Methodist Hospital.
- The IUPUI Science and Engineering Laboratory Building. Its $45 million first phase will construct 45,000 square feet of research and classroom space. Two adjacent phases are planned for a later time, to be located on the north side of New York street, across from the Herron School of Art.
IU has nine other buildings under construction or in planning. Five of those will be in Bloomington. The others will be on IU’s campuses in Gary, South Bend and New Albany.