Oberlin College and the Oberlin Student Co-op Association (OSCA) have been negotiating a long-term lease for 18 months. The resulting five-year commercial lease adopts a new fee structure to provide OSCA a sustainable financial model and the College with a revenue neutral model. The underlying hope is the lease helps OSCA thrive and supports a mutually beneficial partnership.
- OSCA is a non-profit organization that operates independently of the College.
- The College historically granted OSCA a three-year lease that included a flat rate for each year.
- The former approach contained two significant shortcomings: (1) heavy programmatic intermingling that created potential legal exposure and (2) the prior leases did not account for OSCA’s full financial impact on the College.
- The most recent flat rate lease required OSCA to pay $1.9 million in rent, which failed to cover the College’s per-student revenue expectations for OSCA’s membership or the College’s ownership costs associated with the leased commercial kitchens and residence halls.
- The College estimates its total annual losses associated with OSCA at about $3.6 million per year.
College Objectives for a Sustainable OSCA
- Provide conditions under which OSCA could sustainably operate and thrive.
- Ensure OSCA’s membership remains in line with historical capacities.
- Provide flexibility to avoid undue pressures linked to smaller membership.
- Consider new approaches to calculating revenue that was fair to the College and to OSCA.
Goals for the New Lease
Within negotiations, the College established the following goals aligned with the One Oberlin report:
- Close financial shortfalls. The College sought to have OSCA lease buildings and kitchens at a rent commensurate with what students enrolled in traditional ResEd programs would pay.
- Ensure facilities leased to OSCA are efficiently utilized.
- Separate the programmatic intermingling between the two organizations.
Elements of the New Lease
- Equalizes the rent disparity between OSCA members and students in ResEd.
- Makes OSCA a revenue-neutral program based upon a new, per-student assessment.
- Provides OSCA significant autonomy to run its program at current membership sizes.
Rather than a flat rate, OSCA’s rent will flex, according to the number of ResEd exemptions it chooses to purchase based on membership. This eliminates the pressures of meeting a flat rate rent figure.
For each ResEd exemption, OSCA will pay a set percentage of ResEd’s published rates:
Table 1: ResEd Exemptions Exemption Type Percentage of Published ResEd Rates Dining 42% of Gold Plan rate Housing 89% of standard room rate
The percentages meet the College’s net revenue expectations for each student in a ResEd dining and housing contract. The dining percentage represents expected net revenue per student in the Gold Plan. With housing, the percentage represents the net revenue the College expects minus costs associated with cleaning, as OSCA students will perform this service.
The new exemption fee does not represent a significant increase for dining. The College has historically forgone notable housing revenue under prior leases, so the increase there is more significant.
Table 2: Per Student Revenue Received by College Exemption Fee Type Under 2019 Lease Under new Lease (using 2020 ResEd rates) Dining $2,522 $3,050 Housing $2,595 $7,430
Should OSCA maintain its current membership size of 748, the College will net an additional $1.2 million revenue from the co-op membership to support student aid, academic programs, faculty salaries, etc. The new Lease does not, however, account for the ownership costs associated with the residence halls and commercial kitchens.
- OSCA will have the ability to maintain its current membership size of 565 dining, 183 housing.
- The College will offer marketing support to OSCA for three years to help build membership.
- The Lease carries a five-year term, 66% longer than prior leases, providing more stability to OSCA.
- OSCA gains complete control over the programmatic aspects of its dining and housing programs.
- If OSCA has membership to support the facilities, the organization will have access to the same real estate footprint, with the exception of one kitchen.
- The College has recognized the value of OSCA’s “one-sitting” dining model.
- The College will continue to maintain the facilities