Date: May 13, 1992
Title: Real Estate/How Princeton University Became a Land Giant
Author: Mukul Pandya
Subject: The first part of a series on the real estate policies that have helped shape the region over two centuries
The first space that Princeton University, then the College of New Jersey, ever occupied was a room in the Elizabethtown county courthouse. This was during the 1740s. Before that students met in the homes of their teachers. The courthouse room was located above the local jail, and the school”s trustees were understandably unhappy with the location. So they decided to look for a place that was more sheltered, as they said, “from the various temptations attending a promiscuous converse with the world, that theatre of folly and dissipation.”
In January 1753, the school received 4.5 acres in Princeton, then Princetown, from Nathaniel FitzRandolph, a wealthy landowner–and over the next two centuries it never looked back. Today Princeton University is a real estate giant, perhaps the largest landholder in Central New Jersey. Its holdings in seven towns and boroughs sprawl across more than 4,000 acres, including 400 acres of the main campus, the Princeton Forrestal Center, a 1,700-acre mixed-use office park, and the Princeton Forrestal Village, an office and retail complex on Route 1. Other real estate holdings include a 500-acre tract in South Brunswick and Plainsboro that the university bought from Princeton Nurseries, open fields that border Route 1 and Washington Road, Carnegie Lake on Route 27, as well as more than 100 houses scattered around Princeton Borough and Township. The university is also Princeton”s biggest downtown landlord. Before it sold Palmer Square, the hub of Princeton”s retail district, to Arthur Collins, a developer in 1981, experts reckon it owned more than three-fourths of downtown Princeton.
As an institution that controls so much land and property, Princeton University has had a profound impact on real estate in the region. Over the course of this century, and particularly during the past two decades, its policies have shaped and transformed Central New Jersey. But despite this powerful influence, the university”s real estate philosophy is an enigma even to old-timers in real estate. Asked what they think of the university”s real estate outlook, most shrug and say, “I wish I knew what it is.” Many say the university plays its policies “close to the vest.” Complains one broker: “The university is private and paranoid about its policies.”
The story of the unraveling of the university”s real estate policies is also the story of the emergence of the Route 1 Corridor, of the transformation of this region from a bucolic academic enclave into a corporate powerhouse. In this series, BUSINESS will outline the impact the university”s real estate policies have had on Central New Jersey. The series will look at real estate decisions that were brilliantly successful, and others that dragged the university into controversy before they were abandoned. Finally, the series will try to probe the future of the university”s real estate program.
One reason why observers find Princeton University”s real estate outlook hard to discern is because the policies are fluid, responding to changing markets, the university”s financial condition and the priorities of various administrations. Another reason is that the policies are not made by a single decision-maker. Rather, they emerge from exchanges between at least three different entities, each of which works at a part of the process (see box). But one broad theme unites the working of this complex process: the university approaches real estate with greater patience and a longer-term vision than an average developer can afford to take. Says architect J. Robert Hillier of The Hillier Group: “The university is not an aggressive developer. It is a caretaker, a trustee of the land. If you have been around for more than 200 years, and are going to be around for the next 250, you can afford to let nature take its course.”
For all its farsightedness and vision, the university has usually been exceptionally canny about real estate. In a landmark study of the university”s land policies, Gerald Breese, a former professor of sociology at Princeton, recounts that when the College of New Jersey first began to look for land to move from its jailhouse room, it was courted by Newark, New Brunswick and Princetown. The school”s trustees responded with an understanding of realpolitik that would put today”s corporate leaders to shame. “The Trustees astutely bided their time and played off one town against the other. As a college would bring trade and enhance real estate values, they thought it only fair that the people of the favored place should contribute 1,000 pounds New Jersey money, 10 acres of land for the campus, and 200 acres of wood to provide fuel.” Princeton won the bidding war, thanks largely to four men–Nathaniel FitzRandolph, Thomas Leonard, John Stockton and John Horner. “These four gentlemen were large landholders in Princeton, and they had the foresight to anticipate the benefit that would enure to them, in the rise of the value of their land.”
Over the years, the university added to its holdings through acquisitions as well as gifts. Land acquisition was relatively slow during the first 100 years, though between 1869 and 1888, during the McCosh administration, 33 parcels of land were bought. In 1864, more than a century after the school moved to Princeton, it owned just 21 acres. The first major increase came in 1888, when the university bought the 155-acre Potter Farm in Princeton, quadrupling the size of its campus. The growth continued after the College of New Jersey was renamed Princeton University in 1896. When Woodrow Wilson became the university”s president in 1902, the university owned about 200 acres.
The university obtained Lake Carnegie in 1906, during Wilson”s tenure. The idea was suggested to Andrew Carnegie by Howard Butler, a university student, while he was painting the steel magnate”s portrait in his library. Carnegie, much to Butler”s surprise, was very interested, and asked him to find out how much it would cost. Butler and some friends hired James J.R. Croes, a New York engineer, to do the surveys and come up with an estimate. The number he arrived at was $118,000.
The idea took shape at a meeting between Carnegie, Wilson and Butler. Wilson wanted Carnegie to make a contribution to the school. “When President Wilson prepared to make his request,” Butler wrote later, “Mr. Carnegie stopped him, and turning to me, he said ”Butler, give me those papers.” He waved them in his left hand in front of Dr. Wilson. ”I am going to give a great gift to Princeton University,” he said. ”It”s a lake.”” Wilson was disappointed, but said “Mr. Carnegie, it is a fine gift, and in behalf of the University, I accept it.” Wilson later told an alumni dinner: “We went to Andrew Carnegie to ask bread, and he gave us cake.”
Butler and his associates got to work, buying swampland from farmers for the 400-acre lake. They initially tried to purchase the land quietly for about $20 per acre, but unfortunately, the New York Sun broke the story about Carnegie”s involvement. When local landowners heard that Carnegie”s fortune was behind the project, they jacked up prices. The lake eventually cost four times the original estimate, souring Carnegie”s relations with Butler. Wrote Butler: “[My] interviews with Mr. Carnegie were far from agreeable…”You got me into all that trouble at Princeton…[Carnegie said]. It was the worst thing I ever got into. It cost me $450,000 when you said $134,000.””
The university continued to acquire land under other presidents, although the pace slowed during the Great Depression. The most dramatic extension of its holdings came in 1951, when the University bought 825 acres across Route 1 in Plainsboro that belonged to the Rockefeller Institute for Medical Research. When the university bought the land, it renamed the property the Forrestal Campus in honor of James Forrestal, a 1915 alumnus. This became the site for the university”s Plasma Physics laboratory, and eventually, for the Princeton Forrestal Center.
The idea to develop the Forrestal Center took off in 1972. One reason, according to Grant “Dick” Green, then the university”s director of real estate, was that the university faced a budget deficit in the early 1970s and wanted to find ways to generate an income from its land. The university hired K.S. Sweet, a real estate consulting firm, and Sasaki Associates, an architecture firm, to do the planning. K. S. Sweet suggested that before the plans could be implemented, the university needed to acquire more land. “K.S. Sweet helped the university acquire 1,000 more acres, and then the Princeton Forrestal Center was born,” says Robert Wolfe, a university alumnus who heads K.S. Sweet in Plainsboro.
Besides the need for using its land, the university had two other reasons for developing the Forrestal Center. Says Wolfe: “This area was already in the path of development between New York and Philadelphia. The university was concerned about the quality of growth. We felt the best way was to create a large, pre-planned mixed-use development.” He also adds, “We wanted to show other developers that quality development was a good investment.”
The Forrestal Center soon attracted major corporations. Most recently, it scored a hit when Bristol-Myers Squibb decided to build its U.S. pharmaceutical division headquarters there. Wolfe says four main parcels remain to be developed, with roughly 200 acres of land.
The Forrestal Center”s major contribution to the area has been to set the standard for later development along Route 1. Says Roger Steinhardt of Carnegie Center: “If it were not for the Forrestal Center, the development of the Princeton office and research market would not have happened. It was the Forrestal Center that kicked off the Princeton market phenomenon and the Route 1 Corridor.” u
The Decision Makers
Who formulates Princeton University”s real estate policy? The process is complex. A triangular structure oversees decisions, though the final say remains with the president and the trustees. The Princeton Investment Management Company (Princo) manages the university”s $3 billion-plus endowment.K.S. Sweet, a real estate consultant, runs the Princeton Forrestal Center. University officials handle all other facilities, and also supervise a mortgage program for faculty and students.