Posted Monday, May 30, 11:44 p.m. When George Washington bequeathed his 50 shares of the Potomac Company toward the creation of a D.C. university, he did not foresee an institution that would one day be the largest private landowner in the nation’s capital.
With three campuses and a number of real-estate holdings outside the Foggy Bottom area, GW has become the premier property holder in D.C., second only to the federal government. But in one of the hottest real estate markets around, the University’s growing realty investments are not always for an academic purpose.
Ownership of buildings such as the 2000 Penn mall and office complex, One Washington Circle and the vast tract of land under an F Street International Monetary Fund building are part of GW’s off-campus real-estate investments, which were valued at $270 million in 2002. With additional holdings in Columbia Plaza, the George Washington University Inn, a parking lot at 10th and K streets and several buildings along Pennsylvania Avenue, the University generates a significant source of income from its commercial real-estate investments.
According to its 2003-2004 financial report, GW earned more than $43 million in revenue from off-campus properties last year. In 2003, GW took home $31 million from these investments.
While most off-campus facilities are not used for education, the University’s non-profit status exempts it from paying an income tax on revenues generated in some buildings, said Louis Katz, executive vice president and treasurer. For-profit investors would ordinarily have to pay the tax.
“(The revenue) comes in terms of rental purposes,” Katz said, adding that GW’s commercial income is used to “help operate the University.” He noted that the University still has to pay real-estate taxes.
Since the 1970s the University has actively expanded its land assets to accommodate its growing student population. In 1999 GW purchased Mount Vernon College as a satellite campus and acquired its 23 acres of land in Northwest D.C. The University also has a third campus in Loudoun, Va., that sits on 90 acres.
“GW happens to be in the best real-estate market in the country,” said Jim Meisel, a District real-estate broker with Advantis. “Real estate has become more valuable around some college campuses, and (schools) like to capitalize on that,” he said, naming Yale and Stanford University as other big educational institutions doubling as big property investors.
Former University President Lloyd Elliott, whose tenure lasted from 1965 to 1988, presided over the beginnings of GW’s real-estate boom. He said the University often purchases property in anticipation of long-term academic use.
“The University may not need these all properties for an academic purpose for some years to come,” Elliott, the namesake of the international affairs school, said. “Therefore, the University develops property for income purposes while it awaits the time for academics.”
Elliott added that during his presidency, he heard a rumor that GW was once offered the first option to purchase the land that the Watergate Complex now sits on, but officials expressed no interest in the land at that time.
“The University could have bought all that land at a premium price, but they never assumed it would grow to (its current) size,” he said.
GW holds the option of re-buying the IMF building at 1900 F St., space that it sold to the financial organization in the 1970s. Katz said repurchasing the on-campus building – located across from Thurston Hall –
in 20 to 30 years when the IMF’s lease expires is an attractive option because it would give the University “further room for growth.”
While University officials said the school is benefiting from land growth, some local residents feel that its real estate ventures are harmful to the community.
“GW is a corporate developer first, not an educational facility,” said Ron Cocome, president of the Foggy Bottom Association. “The University is a corporation fixated on growing; it becomes their purpose in life.”
Cocome said that GW’s non-profit status gives it an unfair tax advantage over D.C.’s business community. GW can build and purchase property at lower rate of interest than other commercial investors, and Cocome added that students displace working residents who pay taxes to the city.
Katz said the University would most likely not make any real estate purchases in the near future, because it “has a lot of property already.”
“If we acquired something in D.C., it would have a programmatic purpose for it,” he said. “And we’re not looking actively at anything right now.”