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October 29, 2014

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Nathan A

(http://www.tjsl.edu/news-media/2014/12735)

SO TJSL is projecting that their declining enrollment will settle down at a steady state of 500 students. So $10,000 ($5M/500) of each student's tuition check will be going towards making rent/bond payments? Had this deal not gone though, $20,000 ($10M/500) of each student's tuition check would have gone towards rent/bond payments? Yeeesh.

confused by your post

The building appraisal I found while sorting through the docs states that the local tax assessor's valuation of the building is $89,605,314 although no taxes are paid due to the school's non-profit status. The appraisal looks like it was ordered by TJSL so its contents should be taken with a grain of salt. The bondholders undoubtedly have their own appraisals. The appraisal adds another hypothetical valuation for the building assuming it was converted to its highest and best use (office space) and a stabilized lease up to tenants achieved. In that case the building would be valued at $63.8M but the appraisal makes clear this would take a while to happen. The bondholders are buying themselves time. They can use that time to plan an exit strategy from the deal which will minimize their losses. They probably book a sizable loss from the settlement this year or next but avoid booking a HUGE loss. Most importantly they hope (probably correctly) that the market for the building will improve in 3-10 years.

The docs include TJSL's pro-forma of income and expenses going forward 10 years which was completed before the debt restructuring settlement. The most pertinent data points to the readers of the FL site on it are the "Personnel Expenses" line items which are:
2013: $16,086,192 (actual)
2014: $13,589,889
2015: $12,073,181
2016: $11,401,811
2017: $10,634,454

The doc to which the pro-forma is attached as an exhibit discusses the proforma. It states that "...further job cuts must be implemented to achieve these revenue projections."

Now read a couple of the FAQ's that TJSL put out along with its press release regarding the settlement:

"Q. You had extensive cuts in staff the end of 2013; do you expect to have similar cuts this year?

A. We do not anticipate a reduction in the number of staff as a result of the restructuring.

Q. With the reduction in student enrollment, do you expect a reduction in the number of faculty?

A. We have a highly respected faculty. A primary goal of the law school is to maintain that quality. The media have widely reported that higher education in general and law schools must deal with how to reduce the size of the faculty as enrollments have declined. TJSL will continue to analyze our need for any change. Our hope is that reductions will occur through attrition. As has become a national trend, the law school has offered a retirement incentive program to its faculty. Decisions about what other steps are necessary will be made after we see the response to that program."

I will leave it to the readers of the FL to predict what happens next to the faculty at TJSL.

anon

Yeah. They're doing great. Nothing here to be concerned about.

Everything's fine. Really.

The clever Dean (whose bio surely includes a long history financial education, training and experience?) effected single-handedly a deal that was pure genius, scoring a huge victory for the brilliant faculty of TJSL! Victory!

And, in the final analysis, who benefits more than the students, yes, the precious students for whom all these efforts make perfect sense.

twbb

So they now have a $40 million dollar mortgage on nothing?

Anon123

Yes, they now have a $40M debt with no assets. The lenders have all the upside. If the real estate market picks up, they can terminate the lease with TJSL and look for commercial tenants. TJSL's ability to further reduce costs is limited. Even if they reduce their space, their lease payments can not decrease to below $4M per year. If TJSL can stop enrollment loss, they may stabilize. Who knows what will happen, but the current financial problems cannot help enrollment issues.

anon

If there was any justice in this world, TJLS's debts would be non-dischargable.

Just like their students' debts.

JillyfromPhilly

"So now they have a $40 million dollar mortgage on nothing."

Sounds like they're becoming a super sized version of their graduates.

anon

I don't think that anyone looking at the TJLS placement numbers - even if this "deal" has been a "victory" in the financial sense - should consider the deal anything but a "victory" for the greed and naked self interest of the TJLS staff and faculty, possible only because the ABA has lost any pretense of meaningful oversight (talk about losing "faculty governance" !!!)

But, this hasn't been a "victory" even in the financial sense. That so many in the FL are so quick to jump on this news as some great positive development - just as many jumped on the S&M report - is telling. It bespeaks of the same sorry absence of any business acumen, training in economics, and common sense. For the same reason, crowing about the "Dean" accomplishing this deal is risible.

Yes, let's now be sure to remind the unemployed TJLS grads that their law degree is worth a "million dollars" and let's rent a big advertising platform to tell young people that NOW IS THE TIME TO ENROLL IN TJLS, because in a few years, the employment market for lawyers will be BEGGING them to take high paying employment in JD required positions.

Is there no shame? At long last, no shame?

What is wrong with this bunch? Why so oblivious? Why so reluctant to look at this situation for what it truly is: a miserable deal, detrimental to the interests of a law school that had no choice and had to make a bad decision to save the hides of its staff and faculty, without a whit of concern, it seems to this observer, for the students who suffer and will suffer even more as a result of debt they have incurred and will incur to attend a law school with such abysmal results and prospects.

Victory, indeed.

anon

BTW, the document linked above is not the settlement agreement. That interim agreement, bad for TJLS as it appears to me to be, only took them to October 17.

See, Para 4a.

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