Securing property and expanding Elon University often comes with a hefty price tag. Elon continually finds itself paying hundreds of thousands of dollars more than a property’s assessed value.
A review of Elon’s property records, which were retrieved by Alamance County’s Real Estate Tax System, found 20 cases of Elon paying more than a property’s assessed value. Elon paid at least $100,000 higher than assessed value in 11 of those 20 cases.
In 2015, the university purchased 305 and 317 W. Haggard Ave. for twice as much as their assessed value. The properties sold for $825,000 but were worth just $395,575.
Gerald Whittington, senior vice president of the Office of Business, Finance and Technology, declined to speak on this specific acquisition but said there are three main factors Elon considers when deciding whether to buy property.
If a piece of land is needed immediately, needed in the future or poses a threat to the university’s strategic visions, Elon will strongly consider buying it. Sales price and deed restrictions ultimately determine whether the university buys property or passes on it.
“There are some parcels that are of obvious interest to the university,” Whittington said. “What would those things look like? Things that touch the university’s borders right now . . . That is the principal driver.”
Jay DeVaney, a member of major regional commercial law firm Nexsen Pruet, sold the 305 and 317 W. Haggard Ave. properties to Elon. DeVaney said he could not provide information on any specific sales, but he did explain some of the causes of a high difference between sale price and assessed value.
“A piece of property may be strategically located with respect to the buyer, and it may be integral to other plans that they have — or it may be that the county simply undervalued the property,” Devaney said.
To understand Elon’s land acquisition strategy and the high costs, it is important to distinguish between fair market and assessed value.
Alamance County assigns property values every eight years. This figure is the assessed value and is determined by a range of factors, including location, historical sales and value of adjoining properties. It is particularly difficult for the county to determine assessed property values in the Elon area.
“The challenge with Elon property, for us, is that the university will tend to pay more than most other buyers because its value to the university tends to be superior than its value to other users,” said Jeremy Akins, Alamance County tax administrator.
Fair market value is essentially whatever a buyer is willing to pay a seller for a piece of property. According to Jeremy Akins, Alamance County tax administrator, one of the first lessons realtors are taught is that fair market value is always higher than assessed value.
But in practice, fair market value and assessed should be the same at the time a property is evaluated. For example, if Alamance County valued a property at $200,000 in 2009, that $200,000 should also be its fair market value for 2009.
Because of the housing crash after the 2009 evaluation period, properties’ fair market values were likely lower than their assessed values. But as time progresses fair market value is generally higher than assessed value.
“Under normal conditions, the property values will grow during the eight-year cycle, while our values don’t grow,” Akins said. “So late in the cycle, we’re pretty much invariably low.”
There were 14 cases where the assessed property values were higher than the amount Elon paid for it. When Elon acquires property under its assessed value, it tends to be for a large amount. In two cases, Elon made deals that netted it millions of dollars. Still, these scenarios are few and far between.
The university is fairly private about how it goes about acquiring property, but Whittington said it tries to build up property and enhance its existing land rather than expand outward past the main hub of campus.
Susan Kirkland, assistant vice president for Business and Finance, works with Whittington to research potential properties of interest to the university.
Though Elon does search for properties on its own, Whittington said one-third of sellers reach out to the university directly.
Elon President Leo Lambert or the Board of Trustees have the final stamp of approval. In general, both groups follow Whittington’s recommendation. If a property sells for less than $500,000, Lambert will usually approve it. If it is worth more than $500,000, the Board of Trustees will typically make the final decision.
Elon’s plans for expansion are not stopping anytime soon.
With the Residential Campus Initiative setting a goal for the university to house three-fourths of its students, there is a need for Elon to grow.
“We need to build more residence halls so that more than 60 percent can live on the campus because right now it’s 62 percent,” Whittington said. “In order to build more space today, we can’t build a student a tiny 8-by-10 cell and call it good like they could when I went to college.”