College Closures Force Bondholders to Bank on Campus Real Estate
Trinity Christian College sold its 60-acre Illinois campus to Chicago Christian Schools in a deal that fully repaid municipal bondholders before the final class graduated in May. Over 50 U.S. colleges have closed or merged since 2020, putting thousands of acres of academic property on the market. About a dozen shuttered campuses remain unsold, according to a Bloomberg analysis. Huron Consulting projects more than 400 private colleges will close or merge over the next decade—over a quarter of all U.S. private institutions.
Campus sales have become the primary way for failed schools to repay bondholders, who increasingly treat the real estate as collateral. Location determines outcomes: Northeastern University absorbed Marymount Manhattan College’s $215 million Upper East Side campus, while Northland College in Ashland, Wisconsin has sat unsold for nearly a year. Bank of America faces losses on Notre Dame College bonds after the Ohio campus sold for $8 million against $17.8 million owed. Cazenovia College bondholders in New York recovered only half their debt when the campus sold at a 60% discount two years after closure.
Municipalities lose economic engines when colleges fold, hitting local businesses that served students and faculty for decades. Palos Heights Mayor Robert Straz said Trinity Christian’s closure affected grocery stores, pizza parlors and coffee shops accustomed to campus traffic over six decades. Opposition from city councils and residents complicates redevelopment, as developer Graham Crain discovered when Boston-area officials rejected his housing plans for Eastern Nazarene College. Successful conversions include Birmingham-Southern College, which sold to the U.S. Coast Guard for $126.5 million to become a training center.
Deferred maintenance and aging infrastructure from the 1970s or earlier diminish campus value for investors. Gabriel Diederich at Baird Asset Management said his firm passes on bond sales when struggling colleges have dated campuses in unattractive locations. Highly customized facilities like chapels—common on nearly every campus broker Anne Rahm has sold—hold little appeal for developers. Municipal bond investors now view higher education debt as a real estate play, with campus sale proceeds determining recovery rates on defaulted obligations.
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