We see from a note by Jeffrey P. Meuler at Baird Research that Grand Canyon University decided NOT to accept the campus in Mass. that was offered to it as reported earlier. Meuler took it as a show of “management’s disciplined approach” to the opportunity. He doesn’t expect a material change in the stock price and he maintains his rating target of $26 per share. Meuler writes:
LOPE has decided not to accept Northfield Mount Hermon’s Northfield Campus, according to an 8-K filed by the company today after market close.
- LOPE was previously selected to receive the campus for free, as announced on September 21. Northfield Mount Hermon’s Northfield Campus consists of 217 acres with 43 historical buildings totaling ~500k square feet in Northfield, MA. The campus was expected to be gifted toScholarships for GCU Students (a non-profit) by its current owners Hobby Lobby Stores, Inc., and then leased to Grand Canyon University.
- Decision appears to have been influenced by some resistance from the city of Northfield. LOPE CEO Brian Mueller is quoted in an article referencing resistance and lack of support/financial assistance from the city of Northfield, MA.
- Believe strategy of online offering built around significant traditional ground campus presence is unchanged. We believe LOPE may still be interested in pursuing a second traditional ground campus, should the right opportunity present itself. We also believe that the company would consider expanding its Phoenix, AZ ground campus beyond the currently stated targets of 12,000 undergrad and 3,000 graduate enrollment.
- Further, we expect LOPE to continue to achieve fundamental outperformance vs. peers given its differentiated positioning and strong execution.
Five weeks after accepting a free, 217-acre campus in western Massachusetts, a for-profit Christian university has walked away from the gift.
Grand Canyon University of Phoenix, Ariz. faced millions in unanticipated costs as it moved to open its first East Coast campus in Northfield, Mass., according to GCU President Brian Mueller. So rather than complete a property transfer from the billionaire Green family of Oklahoma, GCU decided to dissolve the deal.
“We were willing to make a $150 million investment, but we really had trouble with the city of Northfield,” Mueller said. “Northfield was concerned that growing the campus to 5,000 students would alter the basic culture and the basic feel of the area.”
… But GCU got little local cooperation, Mueller said. Not only would the town not help cover $30 million in sewer and road upgrades, but it also reportedly called on GCU to conduct an environmental impact study at the university’s expense. “We were ending up having to cover the burden of all of that,” Mueller said. “It started to get overwhelming.”