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Trusteeship Magazine

Going all in for the Alfond Inn: How One Board Helped Bring a Big Idea to Fruition

By Julie Bourbon
September/October
2014

For an institution to take a successful, calculated risk, all parties—the board, the president, and the administration—must be working in partnership.

A market analysis is key before beginning any new venture. Is there a need for it? Can the institution afford to do it?

During strategic planning, all ideas should be welcome, even if all ideas don’t make it to the final cut.

Colleges and universities, being in the business of education, are sometimes also in the business of managing art galleries, occasionally are in the business of operating hotels, and, more rarely, they do it all simultaneously. That Rollins College is doing all three and doing it well after building an inn and conference center that happens also to house a world-class art collection—the revenue of which is generating student scholarships—is as much a testament to that institution’s willingness to take a chance as it is to the conditions being exactly right. Such a risk required the full support and inventiveness of the college’s board, working in partnership with the president and administration. The results, after one year, are enough to make other institutions take notice and wonder how they can achieve a similar success of their own.

What started as an idea in one quadrant (greatest impact, hardest to achieve) of a brainstorming “matrix” at a board retreat has blossomed into a AAA four-diamond amenity for both the college and the town of Winter Park, Florida, where the small liberal-arts institution is located. From inception to fruition, the process took five years, with no significant bumps along the way. Which makes them lucky, certainly, but even luck without proper preparation can result in plans going awry.

The Rollins board of trustees holds a strategic planning meeting every October. In 2008, the group was focused on one question: What would make Rollins better? Enter the matrix. The ideas flew fast and furious, from their mouths to the scatter board: academic excellence, a capital campaign, improving alumni relations, internationalization (recruiting international students, having students travel abroad, travel opportunities for faculty), a luminary effort (increasing national exposure by bringing dignitaries to the campus). All were ongoing strategic initiatives; all would provide direction going forward for the college over the next 50 years.

But something was missing. Parents and prospective students, as well as other visitors, would find a lovely physical plant but no convenient lodgings on or adjacent to campus. The college is host to a steady stream of alumni weddings on campus, after which the wedding parties inevitably depart to other venues for the receptions. Conference space was also lacking.

“Rollins has a beautiful campus,” said Jeffrey G. Eisenbarth, vice president of business and finance, who was present at the planning meeting, and who recalls the conversation returning to the subject of a college inn. “But there was really no place for anyone to stay when they came to Winter Park, when they came to see the campus. What we really needed was a place for people to stay, to meet.”

The idea of building a new residence hall had already been floated among the board members, but it met with a tepid response from the Harold Alfond Foundation, which had been approached for support. A projected bump in enrollment (that ultimately failed to materialize) was not enough to sell the Alfonds on the residence hall. The family foundation, located in Maine and long a supporter of the college—having already funded an athletic facility, a baseball stadium, and an Olympic-sized outdoor pool, among other things—was more enthusiastic about a college inn. But not just any inn. This one would be home to pieces from the family’s impressive contemporary art collection and, more important, permanently endow a scholarship fund that was started under now-retired president Lewis M. Duncan.

A desirable site in downtown Winter Park, previously the Langford Resort Hotel (Central Florida’s first air-conditioned hotel, and the preferred destination of presidents and movie stars, shuttered in 2000), was available. All the board had to do was bite. An offer was made immediately. Six months after the meeting, the land was theirs.

“I was on the job two months and got the job of hotel developer,” Eisenbarth said with a laugh. “I went back to the office and looked at the job description. I didn’t see ‘hotel developer’ there anywhere. I saw ‘other duties as assigned.’”

Taking Calculated Risks

At the time of the inn decision, Rollins was no stranger to developing property, and developing it quite successfully. Twenty years ago, the college purchased a full city block on Park Avenue, the main thoroughfare in Winter Park that dead-ends into the campus. At the time, the property housed an old elementary school and then a parking lot. Sixteen years ago, the college turned it into SunTrust Plaza, with approximately 30,000 square feet of retail space on the ground floor that is now home to Restoration Hardware, The Gap, and Starbucks, among other vendors. The second and third floors house professional offices, and there is a parking garage in the back. The whole venture brings in about $2 million to $3 million in annual net revenue. The college decided to develop the Sun Trust deal themselves by issuing taxable municipal bonds when they couldn’t find an acceptable partner.

“Our board is not afraid to take calculated risks,” said Allan Keen, a 25-year member of the college’s board of trustees and chair of its real-estate task force. At the same time, though, Keen describes the board as “risk averse,” which is how he would describe its approach to the Alfond Inn deal. Once the 3.3-acre parcel of land was purchased—for $9.9 million in 2009—the next hurdle was finding a developer to invest in the endeavor, as Rollins was not, as previously stated, in the hotel business.

The board formed an Alfond Inn task force, which included Keen and Eisenbarth. The real-estate task force, under whose umbrella the inn task force falls, is staffed by six board members. Both task forces are standing groups but not permanent board committees. Any property purchases must go through the real-estate group, and then on to the full board through the executive committee. There was never any hesitation or skepticism on the part of the board, Keen said, when approaching the inn project, and he gave the board regular updates on the project’s progress.

After more than two years of looking for an appropriate partner, the board kept coming back to the same conclusion: Rollins would be taking all the risks, and the developer would end up controlling the property. At that rate, why not just lend themselves the money? The Alfonds had already committed to putting up $12.5 million for the deal, with one major condition: 100 percent of the net operating income (after expenses) had to go to the Alfond Scholars, a scholarship fund set up by the family to carry on a 2006 bequest of $105 million that established the Cornell Scholarship Fund, a gift of George and Harriet Cornell, who also endowed the college’s art museum.

The college then decided that its best partner was, once again, going to be itself. The institution committed $20 million, loaned out of the college’s reserves, to be paid back with interest (4.5 percent over 25 years) once the inn opened and started generating revenue.

“When you build something for cash, you almost can’t lose money,” said Keen. “When you don’t have debt, you don’t have to worry about making payments. It’s a very safe structure. The only question was how much operating income would be left after paying expenses.”

The board has what it calls an “enterprise fund,” which includes all of the property the college owns. That includes SunTrust Plaza, as well as the 40,000-square-foot office building adjacent to it, the Lawrence Center, that is being rented out to private businesses but could become Rollins offices if the college wants to expand. Both make substantial contributions to the college’s operating budget. A 12,000-square-foot building houses the college’s Hamilton Holt School, its equivalent of a city college. The real-estate task force is also eyeing the local library, a 45,000-square-foot building adjacent to the Alfond Inn that may someday be available if the city moves ahead with plans to build a new library.

All of these parcels “are strategically located,” said Keen, and having so many options is beneficial to the institution. “It creates a lot of room on campus to move things around.”

Funding Art and Future Scholars

The Alfond family has a definite soft spot for Rollins College. The late Harold Alfond, family patriarch, shoe magnate, and a former co-owner of the Boston Red Sox, served as a trustee in the 1970s and ’80s and established the Alfond Athletic Scholarship, having been an athlete himself in his youth. He received an honorary doctorate from the institution in 1997; two of his sons are alumni, as is at least one grandchild. Son Theodore B. (Ted) Alfond (class of ’68) is a current Rollins trustee and on the board of the family foundation, and his wife, Barbara Lawrence Alfond (also class of ’68) is a former trustee of the college.

In addition to their passion for academics, Ted and Barbara have amassed an outstanding contemporary art collection, and the inn has provided an excellent opportunity to make available to the public in a new way additional pieces that they had already donated to the college’s Cornell Fine Arts Museum. The more than 100 pieces on display make up the Alfond Collection of Contemporary Art. It includes works by Thomas Scheibitz, Philip-Lorca di Corcia, and Albelardo Morell, among others, as well as a collection of Tiffany glass. It is most definitely not, as Keen points out, “hotel art.”

The Alfond Scholars Fund picks up on an existing scholarship fund for students who excel in academics and show great leadership ability, said Ted Alfond. “When Lewis [Duncan, former president] and I were having a discussion about approaching the foundation and what would make them interested in giving a large gift to the college—and knowing my dad was an entrepreneur and liked challenges—the idea that if a hotel could be built and generate so much income, we thought, wouldn’t it be a wonderful way to take this initiative that Lewis had started and, over the years, take on the burden?”

The scholarships to be funded by the inn will cover tuition, room, and board for Alfond Scholars. The gift agreement stipulates that as the endowment grows—for 25 years or up to $50 million, whichever comes later—more scholarships will be awarded. The endowment will ultimately fund 10 scholarships per class per year, for a total of 40 scholarship students at any given time, said Eisenbarth.

The elder Alfond, who died in 2007, was passionate about education, said his son, although he never went to college. “He was a very generous person, and he believed in education. He did not have it himself, but he was one of the lucky people who became successful in his lifetime, and he was a person who gave back,” said Ted Alfond. Harold Alfond’s connection to Rollins began when his two sons attended, and his philanthropy in Maine, the family’s home base, goes back even further. Institutions such as Colby College, the University of Maine, the University of New England, and Thomas College have all been recipients of the foundation’s largesse.

Members of the Alfond family have been guests at the inn that bears their family name several times already in the year since it opened. “It has just been a spectacular addition to the college,” said Ted Alfond. He reflected on the circumstances that allowed the board and administration to collaborate so successfully on the project. “We were just in the right place at the right time,” he said, then gave all due credit to Rollins’s recently retired president. “It was first of all the leadership of the president, Lewis Duncan. He was a fabulous thinker. I could give him 80 percent of the credit and the board 20 percent for going along with it. If it wasn’t for his leadership, it wasn’t done.”

A Banner First Year

The Alfond Inn opened in August 2013. After one year, the confidence of the Rollins board in the project seems to have been very well placed indeed. With an average occupancy rate of 88.6 percent (versus the industry standard of 64 percent), the 112-room boutique hotel is attracting guests at a faster pace than hoped or expected for a new venture.

The projections for the first year—kept at modest levels, so as not to set expectations that couldn’t be met—have been exceeded. Net operating income for calendar year 2014 was forecast to be $1.9 million; it is expected to exceed $4.3 million. At that rate, $3.2 million will be designated for the scholarship endowment, which is funding seven full scholarships this school year.

After one year in the hotel business, what lessons has the Rollins experience taught the board, and what advice would they pass along to other boards considering risky or bold projects?

Keen is momentarily stumped when asked how to apply their success to other situations. He referred to what he called the “greater fool theory”—the confidence that, having succeeded once (in this case, with the SunTrust Plaza endeavor), they could succeed again. “As I said, we’re entrepreneurial, but we’re not crazy. We’re pretty conservative,” he said. “To do this did take some courage, but I think the ingredients were right, the timing was right.”

For Eisenbarth, who previously worked at Berea College in Kentucky, which runs a historic college inn and restaurant, it’s about two things: having a board that works together well and knowing your market. Of the board’s process, he said, “It was an open, dynamic planning process led by a member, not the president or chair, so it didn’t feel like it was coming from the top down. There were no bad ideas. All ideas were accepted.” Of the market, “You can’t just build it and they will come,” he said. “We knew we had a very strong demand in the Winter Park area for a hotel with meeting space. We went into this knowing that we had a pretty high probability of success. But it’s been much more successful than we even thought it would be.”

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