By Kristina Michel
The University of Houston System has more than 2,400 acres of campus land holdings. That’s enough land to fit 55 NRG Stadiums with room to spare. And last year, the System added to that total when it acquired 46 acres for a future campus in Katy.
So how did the UH System evolve from its humble beginnings as a junior college in 1927 to the fourth-largest university system in Texas? While several key factors contributed to this evolution, fundamentally, it starts with buying property, which is one of the key responsibilities of the Office of Real Estate Services.
“We purchase a piece of land where there will be a building that will be filled with students,” said Ashlee Ross, director of Real Estate Services. “Inside that building, students will learn, they’ll research, and maybe they’ll have that ‘eureka’ moment and change things for the better. We help make that happen by laying the foundations. We’re part of something that’s much bigger than us.”
Beginning the Purchase Process
Buying property for the UH System is not as simple as buying a house in the suburbs. In addition to Real Estate Services, a number of groups and entities are involved in the purchasing process. Several things have to happen before the office can even proceed with a land acquisition deal. First and foremost, the System has to secure the funding to do it.
“It’s largely controlled by the Texas legislature and the funding allocated to each campus,” said Ross. “When UHS purchased the land in Katy, it received legislative approval.”
“The Office of Real Estate Services is not the starting point of a land search. Prior to our office getting involved, there may have been years of meetings and extensive research by other UH departments to help determine a location,” said Jason Trippier, director of UH System Properties.
Once funding is secured, the System researches available properties for sale. To help narrow down the list, the System enlists the help of real estate brokers from two local companies. The main brokers involved are all graduates of the University of Houston.
“Without a doubt, they’ve been immensely helpful to our office,” said Trippier. “We don’t have enough time in the day to do all the things required in terms of searches. Plus we don’t have access to a lot of that information. They have allowed us to do our jobs more efficiently.”
Starting the Negotiations
When Real Estate Services does receive approval to purchase a property, the office oversees creating and processing sales contracts, negotiations with the property owner and communications with the title company – the company that makes sure the title, or deed, to a piece of real estate is legitimate. Title companies also issue insurance to protect property owners against lawsuits or claims against property.
The initial planning, funding and scouting period can take years. The Katy campus expansion project had been in the works as far back as 2014 before it landed in Real Estate Services’ hands in 2016. Once Real Estate Services does find a suitable property to buy, the process is broken down into three main stages: appraisal of the property and negotiating transaction terms, due diligence and finally closing.
Real Estate Services creates an outline of the property selected for potential purchase and what it will be used for, which is presented to the Board of Regents for approval. As part of the outline, Real Estate Services generally must include two appraisals of the property. This helps to ensure that the System is paying fair market value for the property.
Generally, Real Estate Services presents a letter of intent to the property owners. The letter of intent comprises the terms of the transaction, including a proposed purchase price, room for due diligence and a set closing date. When the property owner accepts the letter of intent, Real Estate Services moves into the contract negotiations and due diligence phase.
Due diligence, also known as a feasibility study, involves assessing a property for potential risks or hazards, as well as reviewing documents and procuring insurance. Essentially, it’s doing homework on the land before signing on the dotted line.
“Due diligence is probably the most important thing that we do,” said Ross. “It matters so that we know what we’re purchasing and any potential pitfalls. We want to make sure we’re securing the best value for the University and by the time a transaction closes, we feel like we know the property quite well.”
During due diligence, Real Estate Services works with Facilities, Planning and Construction and Environmental Health and Life Safety, as well as the individuals involved in the transaction, to thoroughly review the property. They order environmental assessments of the property to check for chemical hazards or contaminants that might prevent construction. They have to verify the service providers of any utility lines (water, electricity, gas, etc.).
If there is a building already on the land, Real Estate Services works with engineers from Facilities to assess the foundation, the plumbing and other aspects of the building to ensure it is structurally sound. They also check for any restrictions and easements on the property and verify with all parties these are acceptable to how UHS will use the land.
“Deed restrictions transfer with ownership,” said Trippier, “so when you buy something, you have to buy it based on those restrictions, or you elect not to purchase it. Removing or changing those restrictions is a very difficult process.”
If Real Estate Services encounters a problem with the property during due diligence that requires extra work to fix, they can add it to the conditions of the sales contract. They can require the owner to fix the problem or ask the owner to lower the price of the property so that the System has room in the budget to fix the problem itself. If they find too many problems or risks associated with the property, they can walk away from the purchase altogether.
Outlines and Approval
As critical as the due diligence period is, Real Estate Services cannot take too long to complete it. Once the closing date for a property purchase is set, they have to stick to that date. It cannot be altered except in rare instances. They also have to keep in mind that all legal documentation on the property and any changes or additions to the sales contract must be processed via the Office of Contracts Administration within the Office of General Counsel. Genille Rampersad, real estate coordinator within Real Estate Services, works closely with the Office of Contracts Administration.
“There’s a lot of checks and balances to go through before the final sales contract gets signed,” said Rampersad. “We have the opportunity to work across campuses with Environmental Health and Life Safety, risk management and the Office of Contracts Administration, the department that reviews all of the System’s contracts and legally binding documents.”
Ross says that to help move the process along, Real Estate Services adds in smaller deadlines before the hard deadline of the closing date.
“We put all our deadlines down on paper so we can plan how we’ll meet the closing date,” said Ross. “There are many moving pieces, many talented people we get to work with, in and outside of Administration and Finance, to close a transaction. All of the deadlines are within the contract, such as, ‘Within 20 days of signing the contract, you’ll give us the title commitment. We’ll respond to you with our objections to the title commitment within 30 days after receipt. Then, we’ll do our due diligence and wrap up the inspection period on this date.’ A timeframe is set forth within the sales contract.”
Closing the Deal
When the closing date finally arrives, Real Estate Services either couriers or brings the signed sales agreement to the title company and works with the treasurer’s office to arrange the wire transfer of funds to formally buy the property. It reviews all the final sales documents before the closing date and prepares them for execution by UHS.
Ross says that as important as the closing date is for her and her employees, the process itself is hardly ever formal. She recalls one closing where she and others were at the title company building gathered around a little counter exchanging documents.
“We were all standing around this narrow counter with a laminate top. We didn’t even sit down!” said Ross. “You would think there’d be more of a formality, like when you buy your house, but that’s not usually how it happens. Most of the time, closing is very unglamorous.”
As unglamorous as it can be, Ross and her team treasure each closing, and they celebrate whenever they can.
“A lot of work goes into even the littlest real estate transactions,” said Trippier. “Even closing on the small transactions reflects a lot of hard work and research. So we try to celebrate our success whenever we can.”
Growing the System
Though the entire process of buying property for the UH System can be long, complicated and even stressful at times, the knowledge that every new property will help to grow the System and improve student success keeps the Real Estate Services team motivated.
“I’m currently enrolled at UH-Downtown, and I get to see it progress from behind the scenes,” said Rampersad. “I see the land that’s going to grow and improve the campus before anything’s even built on it. It’s really interesting.”
“I’m really fortunate to work in a department with people with so many unique talents both inside our office and across the System,” said Ross. “It certainly makes our jobs enjoyable.”
To learn more about the Office of Real Estate Services, visit its website.