Moravian University’s Haupert Union Building (HUB) is getting a major facelift come January 2024.
Heralded as “a student union for the future,” the new and improved space, boasting a multitude of new accommodations designed to enhance both the aesthetics of the campus and functionality of the student union building, is slated to reopen in time for the start of the Fall 2025 semester. The impetus behind the renovation is a desire to make the campus more attractive and appealing to prospective students. With the estimated total cost of the project itself at $40 million, the renovation of the HUB is a very large investment – and one that the Moravian administration believes will pay off.
Here’s a look at the numbers:
The University puts the cost of the renovation at $40 million. $33 million of that goes toward the demolition and construction of the building; the remaining $7 million accounts for payments to architects, legal contracts, technologies, furniture and design, and the creation of swing spaces or temporary locations for dislocated staff, administrators, and faculty during the HUB’s demo and reconstruction.
Those are big numbers, particularly with Moravian currently looking to address a $3 million debt and lacking the outright capital to cover a $40 million renovation.
That leaves the University with two methods of financing the endeavor: fundraising and borrowing.
Mark Reed, the University’s chief financial officer, estimates that as of October 2023 the University has raised over $3 million on-hand via cash and pledges from Lighting the Way for the renovation. He said there is no reason to believe the University goal of $12 million. However, Reed doesn’t expect that the University will be able to cover the entire cost of the renovation through fundraising alone.
The HUB is not an academic space and it is therefore “less salable” to alumni and donors, according to Reed. In addition, the building will not bring in what is called a “third stream of revenue” to finance it. “If you’re building a residence hall, for example, yes, you’re borrowing the money to build it,” said Reed. “But you’re creating a revenue stream for the paperwork: students will pay for the room. The renovation doesn’t have that. People aren’t going to pay more just because we have a nice student union building.”
This leaves the University short a total of $28 million, which it must borrow from the bank. However, Moravian will need to pay back both the loan and the interest, which together comprise the “annual debt service.” Reed estimates that the renovation’s annual debt service will be $1.8 million per year over the course of 30 years. While Reed explained that it’s common to “refinance this borrowing at some future date when interest rates decline,” he says it’s impossible to know if rates will actually drop.
Assuming there is no decrease in interest rates, Reed calculates that the total debt service over the life of the loan will run to $54 million. If fundraising directs $12 million toward the renovation and the loan/ debt servicing adds another $54, the total cost of renovating the HUB then comes to $66 million.
While there is concession and loss in the name of this project, Reed contends the renovation is the best move for the campus and institution as a whole, arguing that the projected increase in the size of the student population will eventually pay for the cost of the investment. “We show a business plan of our growth over the next five years that can afford to pay for it,” he said. “This is the right thing to do. What you hope comes out of this is the old expression, ‘All ships rise in rising waters.’”
According to Moravian’s 2021-2024 Strategic Plan, the University is hoping to bring in between 2,000- 2,200 undergraduates and 1,000-1,500 graduate students by 2024. To reach those numbers, Moravian will have to increase the size of the current undergraduate population by some 10% to 20%, and more than double the number of graduate students (on the higher end).
Evoking the spirit of the phrase, “If you build it, they will come,” Reed said the renovation of the HUB is a smart move that will pay off. “[It] will undoubtedly make Moravian University more attractive to prospective students and their families,” he said, “and it will have a transformative effect for the students who are already here.”
