AZCENTRAL: GCU non-profit would break new ground, enrich execs

Career College Central Summary:

  • It's a short walk from the new dormitories at one end of Grand Canyon University's west Phoenix campus to the arena that is home to its chapel services and many of the NCAA Division I sports played there.
  • In between are new buildings, from a fitness center so new the university's president still hadn't been inside it two weeks ago, to classrooms that feature what the school bills as state-of-the-art facilities for GCU's many nursing students.
  • Construction cranes dotting the edges of the school's compact but growing campus suggest that GCU is changing. But the biggest overhaul is quietly underway in talks with lawyers, bankers and prospective benefactors who could help convert the publicly traded company into a non-profit organization more like traditional colleges.
  • GCU's proposed switch appears unprecedented in the business world — a surprising, tantalizing option others might envy but few could follow.
  • For now, officials at the Phoenix-based company give themselves a 50 percent chance of pulling off the move first announced in October.
  • A conversion would serve as the dramatic capstone to GCU's transformation, first from a struggling Christiannon-profit on the verge of bankruptcy a decade ago to a good stock shining in a suddenly struggling industry, then back to a non-profit on firmer financial footing.
  • Brian Mueller, the president and CEO of GCU since 2008, said he always thought he could pull the school from the brink.
  • "We believed we could do it," he said. "Of course, we knew there was significant risk. We just didn't know we could do it this quickly."
  • A conversion could help the school escape the federal regulations so unpopular in the for-profit education industry and save it tens of millions of dollars in taxes. It also eventually could help reduce tuition costs for GCU students, many of whom study business or scientific disciplines.
  • Haley Dorrel, a junior from Kansas City, Mo., majoring in Christian studies, said students haven't really discussed the potential change and she isn't troubled by the school's business dealings.
  • "It's cheaper for me to fly here than it is to go to school in Missouri. I'm getting everything I need here," she said. "We're benefiting from their business decisions."
  • Since the proposal was made public, investors have kept the stock at near-record highs even as its days on the Nasdaq exchange may be numbered. Those investors will be looking for more clues about the company's near-term future when it publicly discusses its latest quarterly results next month.
  • Grand Canyon Education joined the stock market in November 2008, when the economy was in free fall and its campus enrollment was less than 1,000. Today, the school has $2 billion from investors and 11,000 students on its west Phoenix campus.
  • Mueller said the company is lining up about $2 billion in loans and seeking another $500 million in donations to buy out shareholders. If they can settle on a fair price, a new non-profit will acquire the school. The deal would offload tens of millions in future annual tax bills for the company and reap almost as many millions for Mueller and his executive team, all of whom have major stakes in the company. A conversion also would allow the school to escape the more-stringent student financial-aid rules that challenge many education companies.

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AZCENTRAL

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