Some interesting articles below on how we are and how we should be valuing educational institutions.


How do we value universities?

The Conversation – Article source, follow the link for the full article

We have become accustomed to hearing the benefits of higher education measured in economic terms. But is this the only way we value them?

The economic and individual value
Universities Australia (the peak body for the sector) points to the value of universities as producers of both the knowledgeable workers and the research that will lead to economic growth. Publicly funded university research, they argue, offers an excellent rate of return on investment.

Higher education is one of the nation’s top exports. As the “Keep It Clever” campaign outlines:

Our universities attract over one million students, employ over 120,000 staff and directly contribute $24 billion to GDP. At around $16 billion each year, international education is Australia’s largest export earner after resources, and it builds vital links with the world.

Graduates are worth A$198 billion a year to the economy and pay over A$32 billion annually in tax.

While the sector speaks of itself in dollar terms, universities are keen to emphasise the economic benefits of study to individual students. Graduates, according to Adelaide University, are more likely to get a job. Those with a degree also receive a “substantial wage premium over non-graduates”.

Advertisements like the “Self Made” campaign from RMIT place the individual student at the centre of the story. They portray study as a personal investment of time and money, the benefits of which accrue to the individual. The consequence of this is that – factoring in all costs, loan repayments and interest rate rises – it is possible to calculate the net monetary benefit of higher education to an individual over a lifetime. The Grattan Institute puts it at about A$100,000.

These measures of the value of universities are economic and individual. They envision higher education as a marketplace. Paying students choose between the offerings of competing universities which attempt to highlight their individual selling points, be they old buildings, accessible campuses or “employability”.

In all this talk, it is usually presumed that the benefits from a degree come from learning the course content. The notion that a large part of the value of education lies in the experience of meeting and sharing ideas with people who are different to you, playing with them on the sports fields, drinking with them in the bar and engaging in a host of “extra-curricular” activities, is rarely heard.

Universities as public institutions
This is not the only way of valuing higher education. For most of the 20th century universities were seen in terms of their public role. They were understood as valuable because they strengthened democracy. By offering students the opportunity to engage in robust, thoughtful and informed discussion, universities produced responsible and engaged citizens.

They also trained students to fill roles that were key to the community. As doctors, lawyers, priests, architects, teachers, nurses and in many other capacities, university graduates provided the professional services that served members of the public.

When governments began to support university research, they did so because of its potential social benefit. Universities were seen to be valuable public institutions despite the fact that, for much of the 20th century, they were far from accessible to most of the population. Undoubtedly graduates individually profited from their university education, but the private benefit they derived was generally framed within this broader notion of their public role.

The money that governments gave to universities was thought to pay off in ways that weren’t just economic. It was an investment in democracy, public services and knowledge industries that would grow with graduates throughout their careers. It had a public benefit that was measured over the long term.

The shift in the way higher education is valued reflects the much bigger processes that have been reshaping global economies since the 1980s. Universities have needed to adapt to new funding arrangements and regulations, to new global markets and to radical changes in technology and the way we receive and impart information. The new ways they present themselves are part of their attempt to adjust to these economic and political changes.

But we should reflect a little more deeply on the extent to which these new ways of valuing the university reflect our actual knowledge and experiences of them.


Higher education is clearly valued by individuals, by employers and by the public in ways that extend far beyond economic measures. But our language of valuation is out of step with our experience.

Learning is never the work of individuals alone. Ideas are always produced collectively: in institutions that pool resources, in research teams that bring together different forms of expertise, and in conversations that engage past and present thinkers.

Universities do need to make their sums add up, but they also need to do much more than this. As key institutions of our civil society, their role is to hold the market and the state to account, even as they serve them. As institutions dedicated to learning, they are working with a time scale that is much longer than that of quarterly reports and three-yearly election cycles.

And because so much about the future, our world and what it is to be human is messy and unknown, the role of universities is to deal with uncertainty as much as it is to build knowledge and train experts.

These are qualities that fit awkwardly in a world where value is marketised and individualised, priced and preferably tradeable. It is precisely because of this that universities are so important.

When we speak of universities primarily in monetary terms, we fail to recognise that we actually value them in these other ways too.

Higher education is an investment, but it is an investment in a future that we all share. We need to speak about universities in terms that better reflect the roles we need and want them to play.

Valuing Educational Institutions

How To Value A School – It’s An Art, Not A Science!

Article source – Bircham Dyson Bell

This article was written by William Ray. William is a Chartered Surveyor from Gerald Eve specialising in education, healthcare and charity property.

Schools often ask how a valuer values their property assets. The answer is not always straightforward.

The initial questions a valuer asks are what are we valuing and for what purpose? It may be the whole school, surplus property at the periphery or the playing fields. Valuations may be for loan security, financial reporting, acquisition, disposal, Charities Act compliance, rent review or lease renewal, business rates or capital gains tax. The issues that emerge and the valuation approach will be dependent on the individual circumstances. A detailed understanding of the relevant market and complexities of educational assets is key.

Basis Of Valuation
Market Value is the most commonly used basis of valuation. In simple terms, this reflects the realisable price between a willing buyer and a willing seller after a reasonable marketing period. This is used for loan security, acquisition and disposal purposes. For financial reporting purposes, Existing Use Value would be used under UK GAAP accounting requirements and Fair Value under International Financial Reporting Standards (IFRS).

You may hear the term ‘bricks and mortar’ which in effect, is the Market Value with vacant possession, i.e. if the school closed.

Method Of Valuation
In practice there are several methods for valuing a school depending on the circumstances.

Evidence of freehold and leasehold transactions of other schools and similar properties are analysed, adjusted and applied to the subject property. Adjustments would be made to reflect location, quantum, condition, any legal or planning restrictions, and facilities e.g. sports pitches etc.

This particularly applies to independent schools. The valuer’s job is to assess the Fair Maintainable Turnover of the asset, fully equipped, that would be generated by the Reasonably Efficient Operator. The valuer would apply a capitalisation yield to their assessment of Fair Maintainable Operating Profit.

Vacant school assets may be assessed having regard to market demand and pricing for a continuation of their existing use as well as ‘hope value’ for any higher value alternative use and redevelopment potential. The valuer assesses the gross development value from a scheme of realistic redevelopment and deducts development costs. The residual land value is then adjusted for planning and other risks.

School uses are often protected by planning policy as ‘community uses’ and their loss is often resisted. However, through social, economic or demographic change school land becomes surplus and on this basis the Local Authority may consider alternative uses. These matters require detailed investigation and the valuer needs to make a judgement in assessing the likelihood of higher value alternative uses taking account of the risk, costs and delay in gaining planning permission. This is of particular importance when considering charity assets in order to comply with the obligations under the Charities Act 2011 by undertaking pre-sale valuations and advice on strategy and to ensure that best terms are received on a sale.

Used for specialised buildings which rarely or never sell in the market, e.g. often applied to state schools. The approach is based on the current cost of replacing an asset less deductions for physical deterioration, obsolescence and optimisation.

Despite the common misconception, this is for insurance purposes only and is rarely close to the actual market value of the asset.

Demand For D1 Property
Location, location, location – the three most important factors in determining property value also applies to schools! Rents of school premises in Greater London may generally range from c. £15 to £40 per square foot and outside of London may be circa £3 to £15 per square foot. A wide range of issues determining trading potential and value are at play.

In planning terms, day schools fall into Use Class D1 of the Town and Country Planning (Use Classes) Order 1987 (boarding schools Class C2). D1 covers a wide range of different uses including nurseries, clinics and health centres, art galleries, museums, libraries, places of worship and halls, law courts and non-residential education and training centres. When D1 property comes to the market there is often competing interest from a range of users. In and around Central London D1 premises are like ‘gold dust’ given the strength of competing demand attempting to target the level of under-provision.

Outside prime areas, the number of purchasers at any one time and the demand for institutional use is more unpredictable than traditional residential and commercial markets. Outside of London and the Home Counties, particularly in rural areas, the demand for continued D1 use may be limited and alternative use value may prevail.

Leasehold Considerations
When valuing leasehold schools the market rent is often calculated based on comparable transactions or alternatively, a percentage of the operating profit. Again, the valuer would identify comparable transactions and make appropriate adjustments for lease length, user e.g. restricted to a particular school use only or open D1, rent review frequency and basis e.g. reviews to RPI or to open market value, quantum, location etc.

Valuing school property is a complex subject. Through greater understanding of your property assets and the way in which the market would analyse these, schools can ensure that value of their estate can be maximised now and for the future.


School Valuation; it’s all about the bricks and mortar – isn’t it? – Tom Robinson –  Harrison Clark Rickerbys

Property has come to mean different things to different people in the last two decades; be it an investment vehicle for capital growth, somewhere a business trades from or simply a home. Whatever your understanding of property is, many believe the role of surveyors and valuers is simply to focus on the quality and value of bricks and mortar; but is it this simple?

Schools are generally accepted to be asset heavy with an intrinsic need for a large amount of space including classroom facilities, science blocks, sports facilities, ancillary areas, dormitory accommodation and all manner of associated buildings. As a consequence estate management should never be far from the day to day thoughts of bursars and other members of the management team.

As specialist surveyors within the education sector, many of our conversations with successful schools centre around growth plans. Historically a fairly simple means to raise funds for new classrooms or sports facilities has been to raise debt against some or all of the physical assets held by the school.

In years gone by this meant lenders would simply ask us to value the bricks and mortar over which a charge would be taken, but in today’s economic world where the prospects for independent schools are less certain, a more cohesive assessment is required. It is important to educate management teams, lenders and other key parties of the importance of considering both the value of the buildings and, in many cases more importantly, the actual commercial enterprise which takes place within. After all it is the business which services the debt, not the building.

So when carrying out valuation work for independent schools why is it important to consider bricks and mortar values as well as the business activity within?

Partly because the prime lenders to the education sector are rightfully focused on debt serviceability in the current economic climate, but also because after many years of our “banging the drum”, operators now agree that the provision of outstanding buildings and facilities is only part of the mix required to create a top-quality long term educational establishment. If the school as a business is trading its socks off then the lender should have a full understanding of this, whilst conversely the opposite is also important.

Perhaps the best way to illustrate this point is to look at a typical valuation report we would undertake for one of the key lenders to the education market. Our hypothetical independent school has been established for a century and has fared well in recent times, maintaining occupancy and retaining key members of the management and teaching team. A new sports hall is proposed as well as improvements to existing facilities and we are working on the instructions of the lender to consider the scheme.

Our remit tends to be fairly wide, but the three most important elements we would report on are:

The value of the existing buildings

Commentary surrounding the proposed scheme (including development costs and likely value of the facilities once complete)

Valuation and analysis of the school as a trading business including income profiling, cost benchmarking, profitability trends and commentary surrounding the long term commercial outlook for the sector as a whole.

It is this third and final element that in more prosperous economic times, when few businesses were failing and Middle England had more money in its purse, often went unconsidered.

Some have suggested that appraising the trading value of an independent school is somewhat irrelevant as such properties are seldom bought and sold as trading businesses (bar limited examples within the corporate arena), but this overlooks how specialist valuers asses the value of the trading business. In simple terms when we value the school as a trading entity, we spend time analysing the business performance, and comparing and contrasting actual performance to potential performance. In many ways, the actual value of the trading school is of less importance than the analysis of the business which is sustainable over the medium term.

The importance of analysing the business and providing commentary on trading activity is not simply to massage the ego of the school, neither is it to attack their methods, but rather it is to provide the key parties involved with some useful tools; providing the bank with reassurance that existing or future cash flows will be sufficient to service debt and providing the management team with something that is fairly rare in this sector, a third party, impartial assessment of the performance of the business, normally complete with consideration of where improvements could be made. Whilst we are working on the instructions of a lender in most cases, the time we spend looking at any given school as a trading business can have tangible benefits for the management team, providing an opportunity to reflect on future strategies.

Not all projects require such breadth of consideration and we would not advocate the need to undertake a full commercial review of a school if the only debt being sought was to rebuild the school gates for example, but also it is important for management teams to recognise that schools are all too often inward looking and there are seldom opportunities to compare trading performance with their peers and the wider market. Why not rely on the experience of specialist education advisors to do so on your behalf?

So next time you are seeking advice surrounding property within a school, whether you are the management team or the lender, do consider the potential benefits of an expanded remit looking beyond the bricks and mortar and focus on the more important consideration of what actually goes on within.