(Source: AZCentral): Rachel Leingang – Michael Crow’s hand played a big role in finding a new building in the nation’s capital.
Several years ago, the Arizona State University president placed his palm on a map of downtown Washington, D.C., covering the area where he wanted to see the school purchase a space.
The university’s real estate wonks drew a literal circle around it, then they went to work.
They found a historic building within a 10-minute walk to the White House, then secured government-backed bonds to finance it.
The end result: a $35 million ASU outpost, completely renovated inside, near the country’s seats of power.
The purchase puts ASU in league with some of the nation’s most elite universities who have set up shop inside the district and off their main campuses, like Notre Dame, Stanford and Syracuse.
It took multiple years for the ASU Enterprise Partners, a nonprofit group tasked with supporting the university, and its subgroup, University Realty, to complete the project.
The 32,000-square-foot Barrett and O’Connor Center at I Street and 18th Street NW in the district opened in March. It’s named for noteworthy female Republican Arizonans: former Ambassador Barbara Barrett and former U.S. Supreme Court Justice Sandra Day O’Connor.
Its eight stories are now the home for programs in four ASU schools, multiple think tanks, a policy journal, the university’s federal lobbying operations and collaborative ventures with other organizations.
Don’t expect the sleek new digs to land Crow a new gig in the federal government, though. He said he’s not the cabinet-officer type, though he has met with several members of President Donald Trump’s cabinet.
“We’re just humble professors,” he said.
Why did ASU want a building in Washington?
ASU had rented space in the district since the early 2010s for the Walter Cronkite School of Journalism and Mass Communications, the McCain Institute for International Leadership and various smaller programs.
But the new building puts Arizona on the map, literally and figuratively.
Locating the school near the corridors of power will allow its students to access the global organizations that work in Washington, Crow said in a phone interview from the Washington building last week, where he was in town for speaking engagements.
They can get internships at places like the International Monetary Fund or World Bank, which are right down the street from the new building. They can hear from policy experts. They can get more money for research.
Think of it like a “node” of ASU proper, Crow said.
“The purpose of this node is to be plugged into this very important community that’s gathered here in Washington. It’s not about politics, it’s not about advocacy,” he said.
The move also puts ASU closer to one of its major research funders, the federal government.
Rick Shangraw, the chief executive officer of ASU Enterprise Partners, said close to 80 percent of the approximately $600 million in research funds ASU receives comes out Washington, D.C.
Keeping the money ‘in the family’
ASU had paid nearly $243,000 per year to lease a space near Dupont Circle, the university said. ASU also had paid nearly $329,000 per year for the McCain Institute’s former space at the Council on Foreign Relations.
The combined former spaces totaled about 12,500 square feet, while the new building is nearly 23,000 square feet.
Now, the university will pay more than four times as much per year, but will get almost twice as much space.
This year, ASU will pay $2.5 million to rent the entire new building from the ASU Enterprise Partners. The group said it makes no profit off the rental arrangement.
The university paid more than $1.2 million annually in rent for two years while the building was still under construction, ASU said.
For its other operations outside Arizona, the university typically rents space.
For instance, the university rents space for a program in Santa Monica, California, for more than $400,000 per year.
The university wanted to buy a building in the district because its leases limited the school’s ability to do what it wanted, Crow said. One space required all meetings and outside interactions to be approved in advance, which hindered operations, he said.
Plus, Shangraw noted, any asset owned by the ASU Enterprise Partners is considered an asset to the university, so the building’s purchase adds financial value to ASU.
Not taxpayer-funded, but public involvement
Taxpayers didn’t pay for the building or its extensive rebuild, but a government agency did help ASU Enterprise Partners and University Realty secure government-backed bonds.
Tempe’s Industrial Development Authority approved $35 million in bonds in 2014 during a meeting in which they also huddled behind closed doors in executive session to discuss whether they had the authority to do so.
Development authorities typically issue bonds for nonprofit ventures, like hospitals and charter schools, and are meant to boost jobs and economic development in their communities. They have authority under state law to issue bonds, but don’t have money themselves to lend out.
The Industrial Development Authority in essence acts like a co-signer on a loan.
Tempe is not held liable financially if ASU Enterprise Partners were to default on their payments. The ASU group holds the liability.
Tempe Mayor Mark Mitchell said it has no impact on the city’s bond rating and does not affect the taxpayer.
“There’s a whole host of benefits,” Mitchell said about the Washington, D.C., building, adding that he intends to visit it next time he is at the nation’s capital.
The bonds were issued to a subsidiary of University Realty, which then leases the building to ASU, whose rent payments are then used to pay off the bonds.
ASU Enterprise Partners benefits from the arrangement through a 3.5 percent interest rate on a 20-year bond.
ASU is the largest employer in Tempe, Crow said. The city has a strong interest in helping the university succeed, and the Washington building will allow more money through research and investment to head Tempe’s way, he said.
Washington, D.C., isn’t a far-off place for ASU to build a presence, despite its distance from Tempe, Crow said.
“To us, the 2,000 miles mean nothing. This is just an extension of the university. You walk into this building, you turn on a computer, you’re at ASU,” Crow said.
A touch of Arizona in Washington
The building at 1800 I Street NW used to be a walk-up apartment building, made for couches and kitchen tables.
Built in 1915, it was converted to medical offices decades ago, according to ASU Enterprise Partners.
When the group bought the building, it was mostly vacant. The few remaining tenants’ leases were set to expire soon or were short-term. Most moved to an adjacent building, ASU Enterprise Partners said.
Images from Google Street View show the building had a liquor store and Subway restaurant on the street level before renovations started.
Once the university took over, massive construction on the site began. The only remaining parts of the original historic building are its exterior walls.
The entire interior of the building — including floors, inside walls, elevators and stairs — was removed. To hold up the exterior, contractors put up steel beams, some of which were temporary.
Then, floor by floor, the building became new.
All told, the extensive renovations cost 2.5 times more than the building itself.
The $10 million building the group purchased in 2014 is now likely worth more than the purchase price and $25 million in renovations combined, Levin of University Realty said.
“We could have built a building for probably less, but it would not have been in this location and it certainly would not have had the historical value that this building has,” he said.
Donations from Barrett, one of the building’s namesakes, and others helped pay for the fixtures, finishings and technology that topped off the renovation.
Who has space in the building?
The building’s first floor holds a “decision theater,” which takes students through simulations focused on solving complex world issues using visuals and data displayed on screens throughout the theater.
The Cronkite School and McCain Institute are the largest programs in the building, but the Thunderbird School of Global Management and the Sandra Day O’Connor School of Law also have programs inside the building.
The university’s lobbying operations also are based in the building, but Crow said it’s a tiny shop mostly consisting of ASU’s federal lobbyist, Shay Stautz.
The location allows the school to host dignitaries and policy experts, which give students the chance to see how the issues they’re studying play out in the real world, Crow said.
Kyley Schultz, a junior majoring in journalism who is spending the semester in Washington, said the new building feels more professional and is more centrally located than the previous space near Dupont Circle.
“I think because it feels more professional, we’ve gotten a lot of work done,” Schultz said.
She said the building came with more updated technology and is better tied into public transportation, which has improved the Washington experience.
How Tempe’s arrangement compares
ASU has used the Tempe Industrial Development Authority for other past projects such as the Brickyard and Fulton Center.
The Tempe Industrial Development Authority doesn’t typically provide bonds for out-of-state projects, though other cities’ branches more frequently do.
Phoenix’s Industrial Development Authority notes on its website that it can issue most bonds anywhere in the state. It can also issue bonds outside Arizona “if the out-of-state project provides a benefit within the State as determined by the Phoenix IDA’s Board of Directors.”
The Phoenix Industrial Development Authority has issued bonds to projects in Texas, New Mexico, New York, New Jersey, Kentucky, Georgia, Illinois, Indiana, Nevada, South Carolina and Guam.
The Tempe Industrial Development Authority’s outside legal counsel, Mike Cafiso, said the group had issued an out-of-state bond once before in the 1990s, but otherwise its projects have been in the state and largely in Tempe.
Crow: Critics ‘probably don’t like us’
Crow said he has gotten questions from the public about why ASU wanted a building in Washington and how it was paid for. But most of the time, when he described the reasoning and private funding, people understand, he said.
There will always be some detractors, including some members of the Arizona Legislature, who find ASU’s actions objectionable, Crow said, but he struggles to understand what exactly the university could be doing to win over its frequent critics.
“There are a few people who, just to be blunt about it, they just don’t like what we do. They probably don’t like us,” he said.