Real estate assets in the university endowment portfolio: An analysis of the *acquisition process for selected private institutions

Over the past 25 years, a great deal of scrutiny has focused on fiscal management and reform in higher education. Colleges and universities increasingly face fluctuating enrollments, rising costs of operations, declining governmental assistance, increasing competition, and demands for improved teaching competence. These pressures place increasing emphasis on obtaining and managing new resources, including the effective management of the investment of endowment funds.;Real estate assets are one of the least understood components of the endowment management process. The inclusion of real estate in an endowment portfolio offers an obvious mechanism for diversifying investments beyond cash, stocks, and bonds. If properly acquired and managed, these assets offer institutions portfolio diversification and the opportunity for competitive returns.;The purpose of this research was to understand the process through which four selected private institutions acquired real estate assets for their endowment portfolios. A secondary purpose of the research was to explore the policies and procedures used by those institutions relative to the real estate acquisition process. The design of the research was qualitative using a case study approach. On-site interviews with finance officers along with policies and other documents provided data for case descriptions and for cross-case analyses. The four themes of feasibility, process, accountability, and professional development emerged from the findings.;The conclusions related to these themes are as follows: (1) Real estate is an asset class that should be considered in the development and management of the endowment portfolio. (2) Formal institutional guidelines are essential for real estate asset acquisitions. A process to monitor consistency between the practices of asset acquisition and the policies and procedures that govern this process should be addressed in these guidelines. (3) Relative to asset acquisition and management, colleges and universities have a fiduciary responsibility to the community to promote social and ethical standards. (4) Continuing education opportunities for finance and development officers and collaboration among these individuals should be important if real estate asset acquisitions for endowment portfolios are to be successful.