Rhode Island School of Design. Presenters: Caroline Johnson December 18, 2015

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1 Rhode Island School of Design Presenters: Caroline Johnson December 18, 2015 University of Nebraska Medical Center University of Nebraska Omaha University of New Brunswick University of New Hampshire University of New Haven University of New Mexico University of North Texas University of Northern Iowa University of Notre Dame University of Oregon University of Pennsylvania University of Redlands University of Rhode Island University of Rochester University of San Diego University of San Francisco University of Southern Maine University of Southern Mississippi University of St. Thomas University of Tennessee Health Science Center University of Tennessee, Knoxville University of Texas at Dallas University of the Sciences in Philadelphia University of Vermont Vanderbilt University Virginia Commonwealth University Virginia Department of General Services Wagner College Wake Forest University Washburn University Washington University in St. Louis Wellesley College Wesleyan University West Chester University West Liberty University West Virginia Health Science Center West Virginia Institute of Technology West Virginia School of Osteopathic Medicine West Virginia State University West Virginia University Western Connecticut State University Western Oregon University Westfield State University Wheaton College Widener University

2 Who Partners with Sightlines? Robust membership includes colleges, universities, consortiums and state systems Serving the Nation s Leading Institutions: 70% of the Top 20 Colleges* 75% of the Top 20 Universities* 34 Flagship State Universities 13 of the 14 Big 10 Institutions 9 of the 12 Ivy Plus Institutions 8 of 13 Selective Liberal Arts Colleges * U.S. News Rankings Sightlines is proud to announce that: 450 colleges and universities are Sightlines clients including over 325 ROPA members. 93% of ROPA members renewed in 2014 We have clients in 42 states, the District of Columbia and four Canadian provinces More than 100 new institutions became Sightlines members since 2013 Sightlines advises state systems in: Alaska California Connecticut Hawaii Maine Massachusetts Minnesota Mississippi Missouri Nebraska New Hampshire New Jersey Pennsylvania Texas West Virginia 2

3 A Vocabulary for Measurement The Return on Physical Assets ROPA SM The annual investment needed to ensure buildings will properly perform and reach their useful life Keep-Up Costs Annual Stewardship Asset Value Change The accumulation of repair and modernization needs and the definition of resource capacity to correct them Catch-Up Costs Asset Reinvestment Institution Bentley University Berklee College of Music Bowdoin College Brown University California Institute of the Arts Connecticut College The effectiveness of the facilities operating budget, staffing, supervision, and energy management The measure of service process, the maintenance quality of space and systems, and the customers opinion of service delivery Massachusetts College of Art and Design Mount Holyoke College Ithaca College Art Center of Design (in process) Operational Effectiveness Operations Success Service Comparative Considerations Size, technical complexity, region, geographic location, and setting are all factors included in the selection of peer institutions 3

4 Core Comments > Campus was built earlier than the Sightlines database > Sturdy bones but in need of modernization > Smaller, historic buildings place stress on operations > Campus needs are split between Keep Up and Catch Up > RISD s current capital strategy puts pressure on Keep Up funds > Limited funding creates high overall backlog of need > Peer institutions out invest RISD by over $4/GSF annually > FY15 shows a stronger performance but is driven up by the ISB project > Creation of Portfolios will help prioritize funding 4

5 %GSF Putting Your Campus Building Age in Context Pre-War Post-War Modern Complex The campus age drives the overall risk profile Built before 1951 Durable construction Older but typically lasts longer Built from 1951 to 1975 Lower-quality construction Already needing more repairs and renovations Built from 1976 to 1990 Quick-flash construction Low-quality building components Built in 1991 and newer Technically complex spaces Higher-quality, more expensive to maintain & repair 25% 20% Pre-War Post-War Modern Complex Percent of Total Space DB 20% RISD 87% Percent of Total Space DB 36% RISD 7% Percent of Total Space DB 15% RISD 3% Percent of Total Space DB 30% RISD 3% 15% 10% 5% 0% Sightlines Database- Construction Age My Campus 5

6 % GSF A Shifting Campus Age Profile Understanding the Impact of Age on Capital Demands Campus Age by Category 100% 90% 80% 31% 40% 37% 23% 70% 60% 50% High Risk High Risk 36% 16% 18% 27% 40% 27% 30% 20% 17% 38% 35% 10% 0% 23% 16% 10% 6% Peers (45.0) RISD (51.7) RISD FY2020 RISD FY2025 Under to to 50 Over 50 6 New construction : ~100KGSF studio bldg., ~75K GSF Residential bldg. Renos: College, Metcalf, Homer, Nickerson, Barstow, Larned, Thompson & Alumni

7 Asset Value Change

8 $ in Millions Total Capital Investment Over Time At RISD, focus has been on existing space $18.0 Total Capital Investment $16.0 $14.0 $ % 61% $10.0 $8.0 $6.0 $4.0 $2.0 $0.0 Average Annual Spending: $7.4M FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 Existing Space Investment New Space Investment Average Spending 8

9 $ in Millions Total Capital Investment- Existing Space Investment levels rise in FY14-15 due to the ISB project $12.0 Total Capital Investment $ % $8.0 61% $6.0 $4.0 Average Annual Spending: $4.5M $2.0 $0.0 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 Existing Space Investment Average Spending 9

10 $/GSF Peers Out Invest RISD $7.00 Total Project Spending into Existing Space RISD FY10-15 Investment Mix 10% 24% $6.00 $5.00 $.52 40% 21% $4.00 $3.00 $2.00 $4.73 $4.63 Building Envelope Building Systems Infrastructure Space Renewal Safety/Code 7% 5% Peer Systems FY10-15 Investment Mix 14% $1.00 $ RISD Peer Group Average 35% 21% 30% 10

11 $/GSF Removing ISB Spending- Gap Widens $7.00 $6.00 Total Project Spending into Existing Space RISD FY10-15 Investment Mix 10% 29% $5.00 $4.00 $3.00 $2.00 $4.73 $2.57 $4.63 $2.92 $2.79 Building Envelope Building Systems Infrastructure Space Renewal Safety/Code 40% 7% 6% 15% Peer Systems FY10-15 Investment Mix 14% $1.00 $ % 30% RISD Peer Group Average 21% 11

12 $ in Millions Investment Strategy Ongoing investment target to maintain steady state operations $25.0 Defining Stewardship Investment Targets RPV: $641.3M $20.0 $15.0 $9.8 Target Need: Discounts for campus modernization and replacement of components before life cycles come due Capital Gap $10.0 $19.2 $3.4 $5.0 $7.5 $5.6 $0.0 3% Replacement Value Life Cycle Need (Equilibrium) $17.3M Envelope/Mechanical Functional Obsolescence (Target) $9.0M Space/Program RISD Annual Funding Level $8.3M Depreciation Model Sightlines Recommendation 12

13 $ in Millions Impact of ISB Projection of Funding level with ISB $25.0 Defining Stewardship Investment Targets RPV: $641.3M $20.0 $15.0 $9.8 Target Need: Discounts for campus modernization and replacement of components before life cycles come due Capital Gap $10.0 $19.2 $5.0 $7.5 $3.4 $2.7 (ISB) $5.6 $5.6 $0.0 3% Replacement Value Life Cycle Need (Equilibrium) $17.3M Envelope/ Mechanical Functional Obsolescence (Target) $9.0M Space/ Program RISD Annual Funding Level $8.3M Depreciation Model Sightlines Recommendation 13

14 $ in Millions Total Capital Investment vs. Funding Target Includes only the investment into existing facilities Total Capital Investment vs. Funding Target $20.0 $18.0 $16.0 Increasing Net Asset Value $14.0 $12.0 Lowering Risk Profile $10.0 $8.0 Increasing Backlog & Risk $6.0 $4.0 $2.0 $ Annual Stewardship Annual Investment Target Life Cycle Need 14

15 $ in Millions Can One-Time Funds Help Close the Gap? Includes only the investment into existing facilities Total Capital Investment vs. Funding Target $20.0 $18.0 $16.0 Increasing Net Asset Value $14.0 $12.0 Lowering Risk Profile $10.0 $8.0 $6.0 $4.0 ISB Drives Investment Increasing Backlog & Risk $2.0 $ Annual Stewardship Annual Investment Target Life Cycle Need 15

16 % of Target Peers Sustaining Value of Campus One-Time funds assist peers in reaching target 100% Peers Total Project Spending vs. Target RISD 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Average Investment With ISB: 55% Average Investment Without ISB: 42% FY10 FY11 FY12 FY13 FY14 FY15 FY10 FY11 FY12 FY13 FY14 FY15 Annual Stewardship Asset Reinvestment Average 16

17 $ in Millions Projected 2025 Target Funding Level Future target levels continue to rise due to building backlog increase Total Capital Investment vs. Funding Target $30.0 Increasing Net Asset Value $ : Addition of New Studio and New Res Hall $20.0 Lowering Risk Profile $15.0 $10.0 Increasing Backlog & Risk $5.0 $ Annual Stewardship Annual Investment Target Life Cycle Need 17

18 ROPA+ Prediction Slides

19 Dollars in Millions ROPA+ Prediction: Predictive Investment Model Dollars in Millions $200 Asset Reinvestment Need $30 10 Year Capital Forecast $180 $160 $25 $140 $120 $73 $20 $100 $15 $80 $60 $53 $10 $40 $20 $47 $5 $0 Asset Reinvestment Need $0 Current Need Renewal Need Modernization & Infrastructure 19

20 Dollars in Millions Projected Investment vs. 10 Year Needs Dollars in Millions $200 $180 $160 Asset Reinvestment Need $30 $25 10 Year Capital Forecast Projected funding will NOT address all the existing needs over the next 10 years. Prioritizing buildings needs is critical $140 $73 $20 $120 $100 $15 $80 $60 $53 $10 $40 $20 $47 $78 $5 $0 Asset Reinvestment Need Projected Investment $0 Current Need Renewal Need Modernization & Infrastructure Projected Investment 20

21 Memorial Benefit St. Garage Chace Center 15 Westminster Carr House Fire House Cable Car Page Bldg Tanner Bldg Bank Bldg Dunnell House East Hall 161 S. Main Colonial Apts Dwight House Woods-Gerry Mason Bldg Fletcher Bldg President's House Congdon House South Hall Radeke What Cheer Garage Central Power Plant Plantations 1 Prov. Wash. Farago Wing Benson Hall Plantations Barn Bldg Design Center ISB Fones Cottage Plantations 2 Alumni House Ewing Center Auditorium College Bldg BEB CPM Tillinghast Estate Market House Waterman Bldg Larned House Nightingale House Dexter House Pardon Miller House Barstow House Carpenter House Nickerson hall Metcalf Bldg Homer Hall Refectory Pendelton House Thompson House Plantations 3 NAV RISD Buildings Are Not Created Equal Defining Funding Strategies 100% 90% 80% 70% X 60% 50% 40% 30% 20% 10% Net Asset Value = Replacement Value Backlog Replacement Value 0% "Keep Up" Stage Balanced Profile "Catch Up" Stage Transitional/Gut Renovation/ Demo Stage 21

22 Alumni House Barstow House College Building Larned House Thompson House Nickerson hall Metcalf Building Homer Hall Memorial Hall 187 Benefit St. Garage Carr House New Res Hall Central Power Plant 15 Westminster New Studio East Hall Chace Center Ewing Center CPM Tillinghast Estate Cable Car Fire House Tanner Building Page Building Bank Building South Hall Carpenter House Dexter House Dunnell House Pardon Miller House Nightingale House Fones Cottage Woods-Gerry Prov. Wash. Benson Hall What Cheer Garage Farago Wing Design Center 161 S. Main Fletcher Building I.S.B. (Illustration Studies Building) Radeke Museum Auditorium Colonial Apartments Mason Building (CIT) Dwight House President's House Plantations 1 Congdon House Plantations 2 B.E.B. (Bayard Ewing Building) Refectory Waterman Building Market House Pendelton House Plantations Barn Building Plantations 3 NAV RISD NAV 2025 Projections Do renovations offset campus NAV? 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% X Net Asset Value = Replacement Value Backlog Replacement Value "Keep Up" Stage Balanced Profile "Catch Up" Stage Transitional/Gut Renovation/ Demo Stage 22

23 Program Value Match Program Value to Campus Need Not all buildings on campus are created equal Poor Building Condition, High Program Value Excellent Building Condition, High Program Value Major Capital Renovations Stewardship Transitional Buildings Maintain/Repurpose Poor Building Condition, Low Program Value Excellent Building Condition, Low Program Value 23

24 RISD Program Value & Building Condition 24

25 Concluding Recommendations > Ideally RISD would increase internal funding OR focus the existing resources to keep up initiatives only, while securing external catch up funding (bonds, fundraising) to tackle deferred maintenance across campus > Given the limited resources at RISD, focusing on the highest ROI projects by matching building need with program value will help to drive the Net Asset Value of campus in a positive direction > As RISD looks to reset the (age) clock on various buildings, strong Preventative Maintenance initiatives will help to secure building systems while promoting good building health, which ultimately will free up daily resources to be reinvested back into the capital/operational budget 25