By Todd Cohen
RALEIGH, N.C. — William Peace University in Raleigh says its planned purchase of a nearby retail center and surrounding properties — a deal for which it reportedly will spend $20.75 million from its $33 million endowment — will not change the projected rate of return on the investment of its endowment assets.
“The University’s projected return on its endowment is 5.5% over a rolling three-year period, which reflects the long-term investment objective of the fund,” Julie E. Ricciardi, vice president in the Office of Engagement at Peace, says in a September 13 letter to fundholders. “The 5.5% objective is the same as before and after the Seaboard Station purchase.”
The letter does not give details of revenue Peace expects to generate from the retail center and other sources to achieve its projected rate of return on its endowment once the bulk of current endowment assets are used to buy the new properties.
Ricciardi did not return phone calls on Monday and Tuesday.
A bankruptcy court judge in August okayed the purchase, which has sparked fears among some tenants and residents of nearby neighborhoods that Peace might close the retail center and use the land for university purposes, according to a newspaper report.
Some university donors and alumnae worry that such a big investment from the school’s endowment in a single project is risky, but Peace has said it plans to keep the retail space, the newspaper report said.
The letter to fundholders characterizes the endowment as a “pooled income fund” that includes funds created by fundholders and is “invested in a number of things.”
Some part of the endowment “may be used to permit the acquisition” of Seaboard Station and nearby properties “if the purchase is completed,” the letter says.
As of the date of the letter, it says, the purchase had not been completed.
“After careful consideration, the Board of Trustees determined that investment of the endowment funds in the Seaboard Station property is in the best interests of the University and is a prudent investment,” the letter says.
“The annual income from your fund, determined based upon the collective returns of the endowment fund, must be used to provide scholarships, etc. and the nature of the underlying endowment will not change that purpose,” it says.
The endowment principal “will always be calculated upon its share of the endowment fund’s value,” the letter says.
“The fund is valued each year based upon its earnings and the fair market value of the investments held,” it says.
“The then current fair market value of real property investments, such as Seaboard Station, will be determined each year and the value will be reported on the annual information return that the endowment fund files with the IRS,” the letter says. “The return is made publicly available. That has not changed.”
The value of endowment assets invested in Seaboard Station “will reflect the market value of the property,” the letter says. “It is premature to state what that market value is as the property is currently being valued.”