A private college in Illinois is sweetening its upcoming bond deal by adding a student apartment complex to increase investor protections.
Millikin University, a small school in Decatur that has struggled with declining enrollment, recently boosted the terms of its delayed $49 million deal by including provisions that would give investors the rights to the 600-bed apartment facility called the Woods at Millikin.
That
Investors are growing more skeptical toward private colleges, especially those with smaller endowments located outside of major cities. Millikin, about three hours from Chicago, has a history of falling enrollment and giving out tuition discounts, though its new student population has started to grow, according to S&P Global Ratings, which in June rated the bonds BB-plus, one notch below investment grade.
Originally marketed to price in mid-June, the bond deal was delayed, and the school has since revised the terms in documents for investors released July 9.
"The bond offering remains active, and the university continues to work closely with its advisors throughout the offering process," a spokesperson for the school said in a statement. "The university continues to feel positively about its enrollment momentum, strong fundraising results and progress on its broader plan of finance."
A spokesperson for PNC Bank, the manager on the deal, declined to comment.
Student Housing
Millikin expects to take ownership of the Woods LLC in fiscal 2027 by extinguishing the developer's mortgage through the bond sale. It will also swap farmland currently held in its endowment, and a portion of the ownership in the LLC will be transferred as a gift. The university said in bond documents it expects to provide bondholders with the mortgage by March 2027.
The Woods was supposed to generate revenue, but instead has historically been a financial burden for the school, losing about $10 million in the seven-year period ending June 2026. That's in part because Millikin had agreed to pay the developer for any unoccupied beds up to a 92.5% occupancy rate.
Enrollment declines, fewer international students and more students commuting to college have pressured the occupancy levels of the complex.
Millikin expects acquiring the apartments will generate about $25 million of net revenue over the period ending June 2033, as long as occupancy rates jump about 27% from fall 2026 to fall 2032.
The deal will test muni investors' appetite for private institutions' debt. Miguel Laranjeiro, a portfolio manager at Aberdeen, said he's seen weakness when off-campus, private student housing projects come to the muni market.
"Student housing is the next iteration of the challenges in higher ed," he said, speaking generally about the sector. "If you have a weak local college, then you would expect the student housing to be weak as well."
Turnaround Plan
Millikin is otherwise seeing progress in growing its student population. The school is aiming to boost enrollment to its pre-pandemic level of about 2,000, and is expecting another increase in new undergraduates this fall.
The school has deposits from 457 first-time freshmen for the fall, exceeding its goal by 10%, according to bond documents. It's forecasting 591 new undergraduate students in the fall as of early July.
Millikin has targeted community college students as an area of growth, realizing that it can't rely solely on Illinois' high school graduates. Last fall, transfers represented about one in four incoming students. The school has sought to make it easier for credits to transfer through articulation agreements with nearby institutions.
Molly Berry, vice president of admission and student affairs, said community college students can be an overlooked area within higher ed.
"I'm very hopeful for the efforts that we're putting into thinking outside of the box," she said.
