SFR Talk: Risk Versus Reward

Larry Hinz is the senior vice president of business development for Laureate Education, Inc. He has been one of the principal architects of a proposal for Laureate to lease College of Santa Fe facilities in order to continue arts-based higher education in Santa Fe. The Santa Fe City Council is scheduled to vote on Wednesday, July 29 on whether or not to purchase the college land and lease to Laureate.

*Vice president of corporate communication for Laureate Education, Debra Epstein, was also on the line during SFR's conference call with Hinz.

SFR: What's your exact position with Laureate, Larry?
LH: I am senior VP of business development for Laureate Education.

How many vice presidents do you guys have?
I have no idea.

Why did Laureate's attempt to independently purchase CSF last year fall apart?
We had attempted to negotiate with the college's creditors and, after a few months, it became clear that the creditors preferred, at that point, to pursue the college's assets rather than work on a settlement.

The city structured a deal to pay $19.5 million on CSF's debt of over $30 million. Did creditors refuse to come down that low last year?
Yes.

How was negotiating a lease deal with our small-town city staff for a global dealmaker like yourself? Were they tough or were they pushovers?
I'd say that the city should feel very good about its representation. I'd say the city team has been tough but fair and I was impressed with the depth and knowledge that they had in these kinds of transaction. There were and still are many difficult issues, and it was always a professional person on the other side of the table.

City Councilor Matt Ortiz used the mediator's truism that if each party is a little bit unhappy with the deal, it's probably fair.
I think that would ring true, at least on our side; there are a number of things that we're not entirely overjoyed about, but it's the kind of pain that is just this side of acceptable. I assume the city is also stretching beyond comfort, but I can only speak for myself.

Are you concerned about the accreditation process?
Not really concerned; I wouldn't use that word. There's a final approval that's necessary but I think the [state of New Mexico] Higher Learning Commission has recognized what's going on and they see their role in keeping the college alive. We have had very positive feedback from HLC—which obviously means nothing until we get final approval, but it's a process we've fully engaged and we anticipate a positive outcome.

How many students do you project you'll need on a Santa Fe campus in order to achieve profitability, and what's your timeframe for achieving that?
I'm not sure what our exact forecast for profitability is, but our six-year plan has about 2,000 students. Eventually there may be even more.

How many schools and students operate in the Laureate stables? Or portfolio? Or under your banner? What do you call your schools?
We call it an international universities network. There are 45 institutions in 20 countries, serving about 500,000 students.

Does that include a lot of part-time and night and weekend students? Or online?
Actually about 85 percent of those students are traditional, campus-based students, ages 18 to 24, going to bricks and mortar schools.

Will you be offering graduate degrees at CSF?
Currently we plan to continue with the undergraduate curriculum that was previously offered, but I'm sure we'll be looking at that down the road. Laureate doesn't take one brand and one model and go around the world enforcing that. We look for special, unique universities where we can ensure they keep doing what they do well, connect them to our network and bring in a financial and academic rigor that may not have been there beforehand.

What's one key aspect to Laureate's strategy for attracting students to CSF?
One is a coherent vision and mission. The school has suffered, in our opinion, in the past by having a muddy vision. Having a clear direction and realistic five- to 10-year strategy will help. No. 2 is a serious marketing effort. If you've got something great, and CSF really does, you need to let people know about it in an effective way. We'll identify who the target students are for the mission and vision, make sure they understand what we're offering and continue to improve the product. We'll use direct recruitment, direct mail, web-based advertising, we'll do events, connect with the alumni network, all of that. And, of course, a lot of the students come because of the faculty.

And how will you attract high quality faculty?
Good question. And I think for us it ties into why have a school in Santa Fe? We had a pleasant surprise when we met with existing faculty and found a group of people who are accomplished in their fields, have an absolute passion for education and who really wanted very much to live in Santa Fe. Santa Fe is able to attract people from this kind of intangible gap—if CSF were in X state or city, I don't think there would be the quality that exists and it would be much harder to attract new faculty. Who doesn't want to spend time in Santa Fe? It's not a slam-dunk, but it's a major factor.

What do you think Laureate brings to Santa Fe?
If I'm looking at it from a Santa Fean's perspective, there are a couple different layers. First, we have the experience to bring the discipline, the proven ability to enroll students and to market and to get that institution back to some level of financial stability. The last three or four years, there has just been no way for it to really shine because of its financial situation, and we'll fix that right away. But the city will also have a partner that understands that education is tightly woven into the local communities. Each of our schools has a service mission that is built in. And each of those missions is specific to the unique communities the schools inhabit. But feel free to check it out or call around—You'll find that we have strong community ties and a sense of responsibility to the community, not as an institution that occupies some real estate, but as an active, responsible participant. It's something we take very seriously.

If I'm a Santa Fean, I want 2,000 more young, inquisitive minds in town, walking the streets, sticking around after graduation. That alone is a huge economic boost, especially when you factor in visiting students, parents and faculty from around the world. We'll have much more lively summer programs than have happened in the past, so the campus will be more vibrant in general and more accessible to the community. We know something distinct can be built there, a real center for excellence in arts, creativity and innovation. We see the potential for genuine thought leadership emanating from Santa Fe.

Laureate conducted an informal poll of existing students on other campuses to determine their interest in coming to Santa Fe…
When we were originally looking at the deal, the prospect of what it would mean to the rest of our network was important. I won't claim it was more than it was—just a very informal survey regarding student interest in studying abroad in Santa Fe, but the interest was huge. That doesn't always happen. Of course it wasn't a total surprise; Santa Fe has a global reputation. Students in our Latin American schools were hugely positive about an art school in Santa Fe. And, of course, students at CSF would have the opportunity to study abroad at other schools in the network.

But you don't really have any other art schools currently, right?
We don't currently have dedicated art schools, but we do have 35,000 students studying arts and design programs in 25 of our institutions. We have a school of music, and we have strong programs in fashion and architecture. We have around 130 fields of study in all.

Why is an arts program attractive to Laureate?
I think when you look globally, the US is viewed as a leader in a number of areas including moving image arts, music, visual arts, architecture. When you look at the US as a market, higher education in general is very well served to many students, so we're not coming in with a broad play but with niche creative programs. We own Kendall College in Chicago, a top 10 culinary school, and New School of Architecture and Design in San Diego, for example.

Is former CSF Vice President John Allen heading up arts integration within the Laureate network?
I wouldn't say heading up, but John is working on that effort, and CSF is our number one priority.

Allen negotiated with Laureate on behalf of CSF in a deal that was ultimately unsuccessful. Then he suddenly turned up negotiating with the city of Santa Fe on behalf of Laureate. Tell me why there's no apparent conflict of interest in that scenario.
Yeah, I don't like to comment on individual people, but I can say that John is not on any negotiating team. He's on the academic side, so I don't see any kind of conflict. He just hasn't been at the table in a negotiating capacity, so I can say there is no conflict.

Will other previous administrators be given positions with Laureate? CSF President Dr. Stuart Kirk for example?
It's hard to comment on any future folks coming in. In general, we'd like to retain the best and the brightest that the CSF has. If we get the lease, we'll be looking at all of our options and we'll make those decisions after careful consideration.

What do you say to people who are concerned that the city is jumping into tens of millions of dollars of risk and will be left holding the bag if Laureate turns tail and runs?
No. 1, I understand that concern. I think the dialogue that has gone on so far shows that Santa Fe has a thoughtful City Hall that wants to see a process play out in a way that all voices are considered. But, I would also say there's a danger in focusing too much on a downside without considering the upside. Everything has a risk/return to it. In this case, the return for the city, as I see it, is so tremendous. This is not taking a bet on a big-box retailer bringing in 150 jobs. This is an educational institution with a unique place in history, not only in Santa Fe, but in New Mexico. We were unbelievably disappointed back in November when the first deal fell apart because we could see what a five- to 10-year outcome would be.

There's been a lot of negativity about what happened at CSF and a lot of it is deserved, but it's nothing that needs to prohibit the next chapter in a venerable school's life. It can be a real community education asset and a powerful economic driver. Focus on the risk is appropriate and the city is being responsible, but let's try and make sure that equal measure is given to the reward.

What do you say to previous students of CSF who fear a faceless mega-corporation running their school?
Somewhere in all of this, someone came up with the line, 'keep the College of Santa Fe weird,' and we say 'bring it on.' Art schools and creative practices attract individuals and that's certainly not anything we're going to resist. Every faculty member at CSF is unique in their approach to life and study and teaching, and we know it's their creativity that will build a great program here. The same goes for students. Independent, creative, critical-thinking students will make a successful school. The only thing we're going to do is make that model work financially and that means allowing freedom, not restricting it.

The city is considering a significant redevelopment program for the St. Michael's Drive corridor, which is anchored by the campus. What kind of role might Laureate want to take in such a process?
We're excited about being the anchor for future development of the St. Michael's corridor. We recognize the importance of us being successful. That strategic location will benefit the community. We want to open up the campus to the community in ways that it isn't necessarily open right now. Of course the library, The Screen and other campus facilities, but we'd like to see interconnecting bike paths, public transportation routes, more public events and really bringing the arts community onto the campus and vice versa.

Do you envision more significant relationship with Santa Fe Art Institute than has existed in the past?
Absolutely. That's one of the hidden gems in Santa Fe and the fact that it's right on our campus is amazing. Meeting the artists-in-residence they have there from all over the world has really helped affirm our vision. We've talked at length about cooperation and getting that artificial wall between the entities torn down. The students would benefit so much from what SFAI has to offer—it's just an outstanding asset to Santa Fe and the campus.

Will you be at the July 29 City Council meeting when this deal is decided? And what have you got up your sleeve to convince the council to vote in favor of the deal?
I am planning on attending. But to say we have something up our sleeve is out of character. That's just not how we do it. Just as we've had to assess the risks to our business, our network, our shareholders and have decided the reward is worth it, we hope the city does the same. There's an opportunity here for a fair, co-existing, co-benefitting relationship that I think is pretty unique.

How about promising that despite being a private, for-profit company, you'll hold public board meetings?
Our governance of the college is subject to HLC, the accrediting body and we follow their rules regarding meetings. There certainly will be participation with the community and plenty of opportunity for input. But at the same time, I think everyone would agree that our No. 1 goal is creating a financially stable college and I'm not sure opening up board meetings to public debate would be the most efficient way to do that.

Will you have the students you need to open in a little over a month?
We've moved through some of the more difficult issues, at this point, and the prospects for the college to actually get there are looking very good. So, at this point, we're confident in appealing to parents and students and saying they should consider this to be a real option for the fall. It's not a done deal and we need people to be vocal about their support, but we're reaching out. We're here and if they've been here in the past, we want them to give us a call, take a hard look at what we're offering and think about returning.

Santa Fe Reporter