Quest, the Sea to Sky Foundation, and the true costs of building a school
By Ian Greer and Elijah Cetas
During a public meeting in January (this issue), President George Iwama stated that Quest currently faces the next, and near-last, payment on its startup loans: a roughly $20-million debt owed to a number of foundations affiliated with former Quest Board member Blake Bromley. According to the Board members present, the payment of the loan, which is due November 2019, may signal the end of a phase of financial insecurity that has troubled the university since its early years.
Eschewing public donations, the founders of Quest relied upon a number of private donors to cover the costs of the campus and its operations. A separate charitable entity, the Sea to Sky Foundation, handled these donations, paid for the cost of development, and held the mortgage on the campus. To pay back loans, they put up for sale roughly three-quarters of a 256-acre endowment land, much of which has now been purchased by charity foundations and real estate developers. As of this year, the university holds 72 acres from this original land purchase.
At the January meeting, the three Quest board members in attendance stressed that the university did not intend to sell any more of its land.
“We need more residences […] we certainly need affordable housing for faculty and staff,” said Iwama about Quest’s development goals.
Quest’s inability to profit from its residences continues to put significant financial stress on the school. The administration has made clear their intent to only develop future residences on land the university owns. Ossa and Red Tusk, which were built in 2014 in partnership with now-Board member Michael Hutchison, were the first step toward the university having its own residences.
Why Quest did not employ this approach when constructing the other residence buildings—North and South Village, Riverside, and Swift Creek—has never been entirely clear.
Students and administrators have often been critical of Quest’s development history, suggesting that the university was irresponsible in its initial approach to land management. Some of these criticisms obfuscate the fact that, for many years, Quest did not have control over its endowment lands. Instead, Quest’s lands were managed by the Sea to Sky Foundation—a reality that only changed after the Foundation wrapped up in mid-2012. For a while, however, the Sea to Sky Foundation’s management of the lands—and ownership of the $65-million mortgage on them—allowed Quest, the institution, to open debt-free.
The Mark has compiled research over several months that nuance the relationship between Quest, the Sea to Sky Foundation, and the various donor groups and foundations that purchased and developed the endowment lands.
A BRIEF HISTORY OF QUEST’S ENDOWMENT LAND
The Sea to Sky Foundation (SSF) registered with the Canadian government in 1999. In 2002, its three directors, David Strangway, Peter Ufford, and Blake Bromley, became the founding members of the charity that that would come to be named Quest University Canada.
Starting in 2005, as the campus was being developed, the boards of the SSF and Quest took on new members. As this happened, the two entities’ interests began to diverge. The SSF primarily concerned itself with selling land and paying off loans, while Quest focused on developing its curriculum and institutional practices.
The only member to serve on both Boards after 2005 was Quest’s founder and first president, David Strangway.
The Sea to Sky University Sub-Area Plan, originally penned in 1998, describes the land around Quest as an endowment to “assist in offsetting the significant capital and operational costs” of the school. It also states that the neighbourhood would, in part, serve as housing for Quest’s faculty and staff.
Between 2005 and 2011, the SSF sold nearly two hundred acres of its endowment lands to a small number of charity foundations and real estate developers. After paying back most of the loans it had used to fund campus development, the SSF officially revoked its charity status in late 2012, and donated the remaining land—and the mortgage held on it—to Quest.
The SSF sold the portion of land that became University Heights on July 15, 2005, to the University Heights Development Corporation, a development company with ties to one of the three founding members of Quest, Peter Ufford.
In 2007, the SSF sold the land beneath North and South to the Wall Financial Corporation (WFC), a real estate company based in Vancouver. SSF Board member Peter Ufford also sat on the board of WFC at this time.
The land beneath Riverside, Swift Creek, and Aristotle Drive was sold in 2008 to Theanon Foundation. Theanon is chaired by Blake Bromley, a charity lawyer from Vancouver and one of the original three members of both the Sea to Sky Foundation and Quest’s Board of Governors.
THE DIFFERENT MISSIONS OF THE SSF AND QUEST
Quest has had to make difficult decisions in order to balance its educational mission against its economic needs. These decisions were borne out most clearly during the years 2002-2012, when Quest’s endowment lands were managed by the Sea to Sky Foundation. We spoke with several members of the University, former members of the Sea to Sky Foundation, and representatives of related foundations who have provided us a number of perspectives on the historical relationship between the two entities.
In an email to the Mark, Blake Bromley said that the task of the SSF was to manage the entire 265-acre lot of Quest’s endowment lands, make sales on housing units, and pay for the costs of building the campus.
“Building a $100 million+ campus for a university that was not even open and therefore had no students was a significant challenge,” Bromley wrote in an email to the Mark. “The majority of the funding came from donations from Dr. Blusson and profits from sale of land purchased by [the] Sea to Sky Foundation (SSF).”
Bromley eventually transferred off of the SSF to in order to focus on academics at the University. “I left the SSF board at the same time that other founding members left the Quest board,” said Bromley. “It became clear that given the precarious financial nature of building Quest, the interests of SSF and its need to find and secure additional funding were potentially in conflict with the interests of [Quest].”
Through his law firm Benefic, Bromley represented a number of the foundations that lent money to the SSF and received parcels of land in return.
According to Bromley, “The intent [of the SSF] was to achieve maximum cash returns by allocating all of the market units to land which was intended to be sold, and have the university preserved as an academic island.” In other words, the SSF attempted to garner as much money as possible as quickly as possible so that they could leave Quest with a fully-developed campus and a relatively small mortgage.
According to a comment Iwama made at the lands meeting in January, one of the loan holders is Bromley himself. Bromley declined to comment in follow-up questions regarding the loan. The Mark has learned that the interest rates on some of Quest’s debts may exceed 15% annual rates.
Bromley’s story suggests that founding members of the Sea to Sky Foundation and newer Quest administrators have different accounts of the intentions the land sales.
Former President Peter Englert, for example, pointed to David Strangway’s public-private development partnership at UBC as the original model for funding the university. In 1989, while Strangway was president, UBC Real Estate Corporation was formed to leverage UBC’s endowment lands. According to their website, they developed 11 new buildings and generated $80-million for academic use.
Notably, Strangway’s model at UBC did not involve selling land. If that had been the intention with Quest, the university might have, for example, entered into trusts with private developers in order to secure loans on land that it would retain ownership over. In absence of this model, the SSF paid for everything using loans they received from private foundations, which they later paid back by selling parcels of the 256-acre endowment lands that had been zoned for housing.
THE MYTH OF THE GIFT
According to Bromley, Quest didn’t always have the loans it needed. Sometimes founding members of Quest and the SSF leveraged prior relationships for funding and support. Bromley described one example from 2007, when the Wall Financial Corporation (WFC), of which founding SSF director Peter Ufford was a board member, agreed to purchase land from the SSF to build North and South. They had no intention to hold onto the residences, so in 2010 a foundation that Blake Bromley personally directed bought the buildings from WFC, taking over the mortgage and its lease agreement with Quest.
A number of the foundations who lent money to Quest are registered with Bromley’s charity law firm, Benefic. Bromley said the foundations lent money at critical ventures to fund operational costs and necessary developments, such as the bridge leading up to the university. Later, the same foundations purchased the land back from the SSF. Bromley said that the foundations sought to “recover their funds by undertaking market transactions”. Many held onto land until the housing market boomed after 2008, and then sold what they had acquired to private developers, who then built housing complexes like Aristotle Drive.
Bromley said Quest’s understanding of the foundations’ relationships to the school eventually became obscured.
“As more time has passed, a mythology seems to have been fostered around foundations which purchased the lands from SSF that they would subsequently donate all the funds earned on subsequent sale back to Quest. There is no basis in truth for this mythology,” he wrote.
One of these myths has been that Quest’s principal donor, Stewart Blusson, would continue to fund the University. But even Blusson, who reportedly donated more than $75-million to build Quest’s campus, eventually received a parcel of the endowment lands. In 2008, land title records show that Quest—not the SSF—transferred a parcel of land worth $15-million to the Stewart and Marilyn Blusson Foundation. Quest received “1$ and other good and valuable consideration” in return for this transfer. According to Bromley, the directors of Quest signed an agreement years ago to never again Blusson ask for money. He declined to give further context for this decision. The Mark contacted Stu Blusson, who declined to comment on the record.
In his email, Bromley also alluded to Quest’s dealings with Michael Hutchison of Bethel Land Corp, the developer who owns and leases Swift Creek and Riverside to Quest. “It is also interesting that this mythology [of continued gifts] is promoted with regard only to foundation landowners,” he said, “whereas it does not seem to apply to for-profit companies, which purchased land from SSF to build for-profit student residences or market housing.”
Iwama echoed Bromley’s sentiment in an interview with the Mark in early February. Key facts from Quest’s early years, he claimed, had been misconstrued and mythologized due to a lack of clarity about Quest’s financial past.
“There’s a lot of, ‘I don’t know, but I heard that,’ or ‘You know, it was supposed to be a gift and it was a loan,’” he said at that meeting. “You have people on the board saying things like that! And you think, how could that even be?”
BETWEEN OPERATING COSTS AND THE MISSION
After the SSF funded the campus, Quest was supposed to be able to pay for its operational costs through enrolment money. According to Bonny Randall, an executive administrator who has worked for Quest since its early years, the original plan foresaw five hundred full-time students enrolled within four years of the university opening. Financial projections suggested that this was the minimum number of students to make Quest self-sustaining.
However, in an interview with the Mark this month, President Iwama noted that this projection assumed that all five hundred students would be paying full tuition. Because Quest subsidized a significant portion of its students’ tuition during this time, the numbers laid out in the projection were never realized, and the university continued to lose money.
“In the early years, the plan was that we would hit that 5-600 people much faster than we did,” said Randall in an interview with the Mark. “But whether there’s a hundred students here, or five hundred, or seven hundred, it costs the same amount to open the doors and heat the buildings and turn on the lights. So there’s a lot of fixed costs that had to be paid for along the way.”
Bromley, who served on Quest’s Board until 2012, lays partial blame for Quest not having paid its mortgage on Quest’s tuition scholarships. “Quest is likely the only university which runs an extremely generous scholarship program when it has almost no scholarship funds,” he wrote.
Bromley pointed to another issue in Quest’s financial model. “One of the reasons that the block program was adopted was so blocks would be offered 12 months a year. Quest’s financial modelling assumed 12 months revenue for its academic program. It is no surprise that having revenue for only 8 months results in repeated annual revenue shortfalls.”
But Quest still needed to entice students to attend, and offering scholarships proved to be an effective means to move towards its enrolment benchmark.
“You don’t want to compromise on the kind of students that come here, because it’s not for everyone, and it’s an environment that calls on certain characteristics for success,” Iwama said in an interview. He stressed that offering scholarships to low-income students will continue to be a priority for university administration.
The Mark reached out to former President David Helfand, and former Vice President Toran Savjord to get a sense of their relationship to the SSF, land sales, and scholarships. Both declined to comment for this article.
At the end of his email, Bromley alluded to the recent land subdivision, “Even if the proceeds are available to solve the university’s operating problems this year, land sales do not serve as a sustainable solution to eliminate its annual deficits. Unless Quest addresses its operating costs and revenues, land proceeds only provide a stop-gap solution.”
Yet Iwama maintained steadfast in his commitment to Quest’s educational values. “We want to get to a cash-neutral, cash-positive position, no doubt. But we don’t want to do it at the expense of the mission.”