The new university that wants to change everything
The financial challenges of setting up a private university were what bred the most skeptics of Strangway’s dream. Universities, even small ones, are very expensive undertakings. In need of some $120 million and with no public money, Strangway designed Quest’s business model around a real estate scheme, similar to what had been a great success during his UBC days. Strangway set up a development company called U.B.C. Real Estate Corp. to develop a condo project that generated a profit of $85 million for UBC’s endowment fund. One need not look further than the dozen cranes and the new condos built or being built on the University Endowment Lands surrounding UBC to see evidence of the continued execution of Strangway’s initial idea.
This time around, the plan was that Squamish, eager for the financial benefits of a university after a devastating saw mill closure, would grant Quest zoning concessions that would in turn attract development partners to build the campus and develop surrounding property. The presence of a university would raise the value of the adjacent land; the university would benefit from that increase in value. The hope was that the profits would cover half of the school’s price tag and tuition revenue would support operating costs and a mortgage for the rest.
The plan looked promising, but it hardly guaranteed success. A 2001 National Post Business article took a look at the university’s business plan, and found that “even a cursory analysis makes [Quest] look like a long shot.” The article noted that in order to generate the $60 million in profits, around $400 million worth of property would have to be developed. This would be no small feat in a town that on average developed just $26 million a year in the 1990s, before Quest’s entrance.
“Market housing is basically the driver for this whole system,” Strangway acknowledged in a January 2006 interview with Maclean’s. At that time, Squamish had given Quest the right to develop 960 units. The first phase with 200 units had already been sold to a developer and a second 260-unit phase was expected to sell that summer.
Quest declined to provide updated financial information, including whether the second parcel of land was sold in the summer of 2006. But the softening housing market can’t be good news for Quest. According to the B.C. Real Estate Association, the average home price in B.C. during September was down 7.4 per cent over the previous year.
Nevertheless, Strangway says that Quest is set to make it through year two although “there will still be some breath holding.” Given the current softness in the economy and global real estate markets, there are real questions about Quest’s real estate-based business model. The school says it is also in talks with the organizers of the Vancouver Olympics to rent out the campus for the duration of the 2010 Games. That could provide a substantial, one-time cash injection. But absent major sources of outside funding, Quest is likely to be more dependent on tuition dollars to fund its operations. And that makes the task of convincing students that a Quest education is worth the cost and risk even more crucial to the school’s survival.