Liberty University Chancellor Jerry Falwell Jr. is a man on a mission. Building endowment for the 36-year-old Lynchburg, Va., school is at the top of his to-do list.
Armed with $29 million in proceeds paid from a life insurance policy on his late father, LU founder the Rev. Jerry Falwell, he is in position to pay off all of the school’s current debt.
“Dad thought that Liberty would be more likely to fulfill its mission if it didn’t have financial pressures,” Falwell Jr. said. “He wanted to put Liberty in a position that it would not have to compromise its core beliefs at any time in the future.”
LU is the world’s largest private evangelical Christian university. Falwell Jr. is using a multi-pronged approach to building endowment, which essentially would give the school a golden financial nest egg. Many more-established schools have money set aside specifically to invest and draw interest to offset year-to-year operating expenses.
Land Could Provide Spark
LU’s ownership of about 5,000 acres of land in Lynchburg’s primary growth sector is a key part of its strategy in endowment building.
Falwell Jr. has a signed contract with a major developer who wants to purchase 186 acres of land adjacent to LU Campus East for a new open-air shopping mall, which would likely become the primary retail hub for Lynchburg and surrounding counties.
He’s also considering using matching grants to entice contributors to make donations to LU’s fledgling endowment program.
All that comes at a time when LU is experiencing record growth.
This fall’s residential student population is on the doorstep of the 10,500 mark.
The school’s distance learning program will include about 27,000 students by the time the school year ends.
Insurance Initial Building Block
The proceeds from the Rev. Falwell’s life insurance gave the endowment program a significant jump-start.
The school had been carrying between $20 million and $25 million in debt over the past 10 years.
If that debt were paid off today, LU would still have more than $7 million it could apply toward endowment because of the proceeds from Falwell Sr.’s life insurance.
Falwell Sr. knew the university’s financial health would be essential to its survival.
While some of the life insurance was bought a decade or more ago, about $21 million worth was purchased in 2003 when Falwell Sr. turned 70.
The life insurance premiums cost about $1 million per year.
“A lot of people were surprised that we could buy that much life insurance at that age for that price,” Falwell Jr. said. “It worked out well for the university.”
That was a small price to pay given the fact that Falwell Sr. had set a goal of building LU’s endowment to $1 billion over the next 10 years.
He was the school’s chief fundraiser and chief recruiter, who built the school from scratch and watched it survive a rocky transition from its dependence on donated television ministry money to standing as an independent institution flourishing financially on its own tuition and fees.
Other Donations in Play
Because of LU’s current clean bill of financial health, it has begun receiving other large donations for its endowment.
Sherwin Cook, a Madison Heights, Va., businessman, recently gave $2 million and 101-year-old Oliver Durbin, who lives in Nebraska, made LU the benefactor of most of his $1.5 million estate.
The university’s estate planning department has reached agreements for $4.8 million of gifts this year compared with $900,000 in gifts at the same point last year.
“It was extremely generous and completely unexpected,” Falwell Jr. said. “We have the beginning of a good size endowment fund. We think now that we have an endowment it will encourage others to give to the endowment.”
Cook said he began planning his gift two or three years ago. He was impressed by Liberty’s Christian mission and its strong financial position.
“The university reaches a lot of people in many aspects of life,” he said. “It reaches throughout the world as more and more alumni go out into the world. I can see great potential in what they are doing. There is a great need for more of it.”
Cook said he hopes his gift will spark others to give.
“Liberty is at the point now that it is out of debt,” he said. “Personally, I think Liberty needs an endowment program. They have thousands and thousands of alumni out there that I’m sure would contribute to it. There are friends of Liberty and of Thomas Road [Baptist Church] who will be willing to contribute. The school now does not have to worry about paying off the bills.”
The Plaza Donation Offers Possibility
In September, the university became the recipient of an $11.7 million gift from a Scottsdale, Ariz., real estate development firm.
The gift from Sandor Development came in the form of the buildings and land of Lynchburg’s The Plaza shopping center and could help ease pressure for construction of new classroom buildings on LU’s main campus.
Falwell Jr. said some offices, such as those associated with the Distance Learning Program, could be transferred to The Plaza with very little impact to the workings of the main LU campus.
The Plaza is located on a 42-acre site and includes 467,000 square feet of buildings. Currently, less than half of The Plaza’s floor space is occupied by tenants.
“The value of the gift is the vacant space, really,” Falwell Jr. said. “It gives us space to house some of the offices that don’t have to be here on campus. Any space we free up on campus can be used for faculty offices and classrooms. It just means that we can accommodate more students, and we have more space before we will have to build new classroom buildings. That’s the real benefit of the gift.”
The gift, which the Rev. Jerry Falwell learned about the night before his death, includes the shopping center and all its out parcels, including buildings that house a movie theater, a McDonald’s and a 73,000-square-foot building that formerly housed a Rose’s department store.
Falwell said the university will continue to lease the shopping center to its current tenants.
“We intend to honor all the leases that are already in place,” he said. “It appears there is enough income there to cover all the costs.”
As the Distance Learning Program grows, more employees and more space will be needed. “The Distance Learning Program is quickly outgrowing the space it has now,” Falwell Jr. said.
Land Gifts Have Been Key
The Plaza gift is the second major land contribution in Lynchburg to benefit the university in the past several years.
In 2004, Hobby Lobby, an Oklahoma City-based arts and crafts firm, donated an 888,000-square-foot Lynchburg Ericsson plant to Thomas Road Baptist Church, which in turn leased it to LU on a 99-year lease for a nominal amount.That plant now serves as LU’s Campus North.
“It seems that Liberty always receives real estate gifts,” Falwell Jr. said.
Even a $5 million contribution received from Sodexho, the University’s food service provider, is earmarked for real estate improvements.The contribution was presented to Falwell Jr. in the form of a check on Sept. 7.
The proceeds are being used to renovate the Reber-Thomas Dining Hall, the Campus North Food Court and to construct a new Sodexho food service facility known as Doc’s Diner. The Campus East diner will be open to the public as well as to students who will be able to obtain meals as part of their campus meal plan.
The newly renovated Food Court at Campus North includes a Chick-fil-A restaurant and a Sushi Bar. Truett Cathy, founder of Chick-fil-A, visited Lynchburg in September to participate in a ribbon-cutting ceremony commemorating the opening of the company’s campus restaurant.