This is good news for our friends in Brooklyn Heights. Moody's Investor Service issued a brief report on Brooklyn Law yesterday, affirming the school's Baaa1 bond rating and concluding that the school's outlook is stable notwithstanding the state of legal education. Read all about it here.
One interesting nugget: notwithstanding the shrinking market of applicants, Brooklyn expects to hold its 1L class size steady. It's difficult to imagine that this won't result in a material decline in 1L indicators. It's tough to hold a 159/3.4 in a competitive New York market. At the same time, Brooklyn won't be alone. Not every university is as generous as the University of Minnesota.
I read the report to say "Baa1"
For context, it appears that "Ba1" is "judged to have speculative elements and a significant credit risk."
What a difference one little a can make.
Also, reading "stable" as "good" might be a bit of a mistake, if "stable" means what the rest of the report discloses.
Unlike many other law schools, Brooklyn has valuable real estate and has started to sell off some of it, and reduce its debt. It is also interesting to note that its Part-Time LSAT numbers are actually better than its full time.
If BL has started selling off assets to stay afloat, one wonders how "good" things are.
They have been selling dorms in proportion to the decrease in enrollment. Makes sense to me. Most schools don't have this option.
Most schools have assets.
When a school starts selling off its assets, one wonders how "good" things are.
The fact seems to be that BL doesn't have enough students to fill the dorms, so "they" need to sell these valuable properties with no prospect of recouping the funds to repurchase.
This is a good thing?
BL's operating margin is down to almost zero, and it is selling off property to reduce debt in order to survive.
Perhaps it will make even more sense when it sells the classrooms: that way, overhead will be reduced!
This is just the sort of feel good, positive news story that warms the hearts of legal academia!
Add
The FY 2013 operating margin was 0.8% compared to 10.1% in FY 2009.
I don't think most law schools have dorms in one of the hottest real estate markets. Many law schools which are part of a university may not even clearly own any real estate, and many that do may not be in hot markets. Yes, the 2013 operating margin was down to almost zero, but they have already decreased faculty with buyouts. I am not certain what point you are making — that downsizing is happening (it clearly is) or that the school will not be financially stable.
They sold 6 of their smallest (I might be wrong about the size) residence halls during one of the best markets in NYC history. Brooklyn real estate is literally on fire right now, so I think when you take that and combine it with the fact that they might not need those residence halls you get a sound strategic decision. The fact that the school is struggling is somewhat a given as almost all Law schools outside the top 14 are also facing pressure/struggling.
Matt,
Is Brooklyn real estate really literally on fire right now? I sure hope you called 911.
They should be fine for decades, all they have to do is sell 6 dorm buildings per year indefinitely going forward.
Brooklyn Law School's enrollment went down 110 students this past year. Which is a good thing, seeing how Brooklyn Law School graduated too many students who didn't land full time jobs as attorneys.
Now if this upcoming class goes down another 100 students, Brooklyn's employment score will show it landing sufficient jobs for the number of graduates it is turning out.
No point for a student in graduating from a law school with 200,000 to 300,000 dollars worth of debt and not getting a job as a lawyer.
Roger, not certain how you count down 100 students, their class entering in 2013 was 3 more students than 2012 (according to the ABA data). If you are talking about the entire school (all three years) being down 100, that may be (but I am not certain), but in any event, they appear to have stabilized situation.