Would You Buy A Used Apartment From This University?

The Harvard Real Estate Office is fast gaining a reputation for causing rude awakenings. Take, for instance, May 9, the day after the Harvard Corporation finalized plans to establish a Real Estate Corporation. On that morning, Joe B. Wyatt, vice president for administration, informed eight real estate officials that their jobs would no longer exist under the new organization. Wyatt told them they could reapply for positions in the new firm, but talk to a few of these officials and the general consensus is that somebody is trying to get rid of them. Or, as one member of the department expressed it, "If you're a paranoid person, there might be a lot here to be paranoid about."

Then consider the day that a tenant at 58 Garfield St., in a Harvard-owned building, awoke to find her apartment filled with "visitors" from Harvard's child day care center. They inspected the paint chips for lead poisoning, the closets for possible reconstruction, and informed her that her home might be converted to a day care center. She first thought their pronouncement was an unfounded rumor, until Harvard phoned to apologize for the oversight in the lack of notice, and verified the news.

These are the kinds of stories that leave Harvard administrators and tenants feeling uncertain about their futures. Changes are kept secret, until they are finalized and then presented as a fait accompli. But like any other story, there are two sides to explain the new Harvard Real Estate Corporation. Wyatt declines to say that Harvard has managed its real estate holdings poorly, accumulating large deficits and creating communication problems with tenants. He does says that a corporation, a centralized bureaucracy, can better deal with the unique kinds of problems which arise in the real estate business. Wyatt explains that the corporation's purpose is to give a smaller group of people within the University a clear view of the problems and potential solutions.

When Joe Wyatt became Harvard's vice president for administration in 1976, one of the first things he noticed was the disorganized state of Harvards holdings. The cause for his concern was a group of married students up in arms over proposed renovations for Holden Green, a housing community for about 100 families which Harvard has operated for 50 years. The married students' tenants union was protesting the University's plan because they were happy with their two- and three-room apartments the way they were. Renovations only meant rent increases and eviction notices. The conflict between the University and the residents, which a week later resulted in a tenants' victory and a scaled-down renovation plan, leaving out the luxury improvements, started Wyatt thinking that there must be some communications barrier. He wondered why the University was trying to create luxury apartments when the tenants preferred housing they could afford.

Wyatt continued to ask question. As a new administrator who was partially responsible for real estate, he talked to graduate students living in Peabody Terrace, who recounted horrors about the cockroaches, the garbage and heating systems in that housing facility. A number of deans also had something to say about real estate; there wasn't enough of it for Harvard professors to rent, or buy, in Cambridge. The situation in the early '70s was ironic. Harvard could barely find enough residents to occupy Peabody Terrace, but at the same time, there were many people who wanted to live in Cambridge, but could not find the space. Adding to the problem's complexity is the fact that while the University manages the graduate student housing, the Hunneman Real Estate Co. maintains and markets the University's 100 open housing apartment buildings. These are rented by non-Harvard people, like the tenants at 58 Garfield St. But the biggest problem Wyatt sees is that no one University official seems to know just who owns which pieces of property, who is in charge of maintenance, or which types of residents inhabit which buildings.

Wyatt's sense that Harvard's real estate management was verging on chaos prompted him to begin an inventory last July. Sally Zeckhouser, now a board member and the operations director of the Harvard Real Estate Corporation, directed the study and the 10,000 page report which is now being xeroxed and bound. "It seemed appropriate to do this kind of analysis for all Harvard properties and it has told us a lot about the kinds of improvements we can make," Wyatt says.

The report apparently found that Harvard already owns property that could appeal to faculty, or provide sites for multi-family housing. In addition, the investigation turned up different accounting systems for all the properties which differed substantially from the rest of the University's accounting systems, Zeckhouser says. In real estate management, the books include complicated figures for overhead pricing, marketing, depreciation of land values and maintenance expenses. According to Zeckhouser and Wyatt, the Corporation will facilitate financial management of properties now conducted through Harvard's own treasurer's office. Thomas O'Brien, Harvard's financial vice president, agrees with this assessment and hopes that the corporation will enable Harvard "to achieve a decent return" on its properties.

Harvard's real estate business has a dual nature. The University tries to balance "landbanking" with its efforts to earn revenue, or at least break even, from the rest of its holdings. When Harvard landbanks, it buys property with an eye to razing it, creating a site for construction of new University facilities. Such property is usually permitted to run down, because there's no sense in paying steep maintenance costs if the building will eventually be torn down. Landbanking can potentially turn an owner into a slumlord; the building is only secondary to the property value.

The whole situation calls for experts, and O'Brien hopes the new corporation might attract specialists to Harvard. Four years ago, the University established the Harvard Management Company, a professional firm created exclusively to manage Harvard's investment portfolio. Officials say the new Real Estate Corporation will be organized along roughly similar lines, and hope it will have comparable success in the land business.

In O'Brien's eyes finances are perhaps the most crucial part of the new corporation's business, but for those officials who field complaints from tenants, the property management division, which will be responsible for property maintenance, is equally important. Since Zeckhouser and Wyatt are still figuring out transitional details, it is not yet clear which properties Harvard will take over from their main managers, Hunneman and Co. Real Estate. In a letter sent last week to Richard W. Bland II, vice president and director of Hunneman, the University notified the company of its intentions to renegotiate the contract. Bland says his company's relationship with Harvard is permanently in flux, so the letter was inevitable. He hasn't seen any gross problems with the present management system but agrees that a corporation does offer ideal framework for real estate business. A graduate of Harvard Business School, Class of '71, Bland says he really has mixed views because he has both Harvard's interests and his own firm's business at heart. Hunneman will most likely be losing a little business, but Bland's position is, essentially, that Harvard's move is pragmatic, and he understands the situation. Or, as John Rumley, another associate of Hunneman puts it, "Harvard is our boss, so whatever they want to do...it's up to them."

The Harvard corporation is also planning to assume control of the marketing division of real estate management. Under the current system, the Harvard Housing Office and commercial real estate brokers perform this function. The general consensus in the real estate department is that Harvard could to a better job on the buying and selling scene. "We've been saying for four years that we could be doing a better job," says Raymond T. Miller, manager of acquisitions and marketing. Miller adds that the Corporation will probably be able to straighten out some of the marketing problems, but he is not sure whether this couldn't be done within the current structure.

Two of the main objectives which Wyatt cite as the reasons for forming a corporation are to improve services to students living off campus and to tenants, and to help faculty who wish to live in Cambridge find housing. "We want one office to handle both of these major issues, so that when a new faculty member, student, or prospective tenant comes up to Harvard for the week-end, wishing to settle living arrangements, they will be able to go somewhere where they can find an answer," says Wyatt.

Wyatt hopes a system that integrates all the marketing operations will encourage more Harvard affiliated personnel to live in Cambridge, which might improve faculty-student relations. "If everybody lives in Cambridge, then faculty can have students over to their houses, and we will be able to build a tighter community." Wyatt's words echo the thoughts of former president Nathan M. Pusey '28, who wrote in the late '50s, as Harvard was beginning its expansionist era and purchasing a great deal of property in Cambridge and Boston, that he believed that Harvard's future was closely tied to the concept of creating small communities within the larger community, ensuring Harvard's existence "for a long time to come."

Harvard's expansionist days are numbered, as rents and building material costs rise, making construction an expensive proposition. So Wyatt's main goal for 1978 is to tighten up and straighten out the situation. As of now, he cannot predict how long the transition to the new corporation will take. The first objective is to find a chief executive officer--a real estate professional who will be chosen from either inside or outside the University, who will then choose staffers for the corporation.

Wyatt admits frankly that he himself has no special training in real estate, and says that as president of the board of directors of the corporation, his job will be "to find smart people and listen to what they say." Wyatt adds, "I am about as qualified to manage real estate as I would be to manage the Food Services. I don't have the faintest idea what to do in a kitchen." Zeckhouser shakes her head in the negative as well when professional real estate experience is mentioned.

So far, six University officials have accepted invitations from President Bok to serve on the board, including Edward Lashman, director of external projects, George Putnam Jr. '49, Harvard treasurer, and Robin Schmidt, vice president for government and community affairs, plus Wyatt, Zeckhouser and O'Brien. The board will basically serve as a liason to the University, while the corporation members will be responsible for the actual management, Wyatt says, justifying the fact that none of the board members is specially trained in real estate.

At this time, no officials in the present real estate department have been invited to join the board of directors, says Wyatt. The corporation was Wyatt's idea completely, and he expects that most of the six or seven senior officials in the present real estate department will have the option of joining the corporation. Some of them may prefer to look elsewhere for employment, because the nature of their jobs in the new system will be quite different. "They shouldn't consider the corporation a threat. I had no plans to make anyone feel threatened by the loss of their job," Wyatt says, adding that he doesn't expect that anyone will be sent a notice informing them to leave their offices by a certain date. Wyatt says that he consulted several senior real estate department officials before creating the new corporation, and he does not think the announcement should have surprised anyone.

Although the idea of a corporation may seem logical to Wyatt and other University officials who see it as a better way to manage Harvard's real estate, the proposition still remains a mystery to many within the University and the community. Both Russell E. Hill, director of Real Estate, and Miller decline to comment on specifics concerning the motives for forming the corporation, largely because they don't know them. They say they were kept in the dark throughout Zeckhouser's year-long evaluation. Norman C. Winchester, manager of residential property, also declines to comment, saying, "I really know nothing more than what has already been published." Winchester cites both his present state of ignorance about the proposal, and his intention to apply for a position in the new corporation, as reasons for making no statement at the present time. Several other members of the department could not be reached for comment at all last week. The atmosphere surrounding the announcement is one of shock on the part of others. They are being "temporarily inconvenienced," in the words of one administrator, and say they will be more willing to discuss the situation after they have acquired other jobs.

The community's reaction has also been one of surprise and questioning. Cambridge Mayor Thomas W. Danehy comments, "I remember reading something about it in the newspaper. But tell me, what are they trying to do? Why can't they accomplish the same thing within a department?" Danehy adds that he is probably not the best person to discuss Harvard's landlord practices in Cambridge, because he just doesn't know what's been going on. Cambridge City Councilor David C. Wylie, however, offers both optimistic and pessimistic speculations on what Harvard's new system could mean for the city. "Maybe it will be a good thing to have a central office with which the city can negotiate with Harvard," Wylie says. He adds that all members of the Cambridge City Council seem to believe now that Harvard's expansion in Cambridge should cease. "This could be an era of unprecedented cooperation if this central office is willing to negotiate with us. Perhaps the city could stop viewing Harvard as a necessary evil and Harvard could stop viewing the city as a constant harassment. But if this office views itself as some cold and calculating center, running property for profit, it could be trouble," Wylie adds.

Many Cambridge residents regard the University as being in the real estate business for profit. Although most rents are at the market level, Harvard owns an estimated $8 million worth of tax-exempt property in Cambridge, and makes a $507,000 in-lieu-of-tax payment. The situation in Boston is similar, except that Harvard pays no in-lieu-of-tax payment there and the value of exempt property is twice as high--an estimated $16 million. Harvard has not yet decided whether the corporation will handle Boston properties. The most publicized complaints, from Boston Fair Share and Cambridge community groups, focus on the University's failure to pay taxes. But Harvard's tenants worry about their buildings' maintenance, or about possible eviction should Harvard decide to construct a new building, or convert a house into a day care center.

"Everybody has the feeling that Harvard will take over the whole neighborhood eventually," says Adam Artis, a resident at 9 Sacramento Place, who has lived in his Harvard-owned twofamily house for five years. Lydia Enos, a neighbor of Artis, several years ago refused to sell her house to Harvard buyers. She says she is very fond of her neighborhood, and had no interest in selling, despite the high prices; Harvard offered. Wylie says that Harvard's tenants' fears that their homes were purchased for landbanking purposes is legitimate.

Whether or not the Harvard Real Estate Corporation is planning to deal directly with the community, via a special community relations officer, is still under discussion, Wyatt says. Michael Brewer, director of government relations, expects that his office will continue to field the complaints and community concerns, as it has done over the years. Brewer handled the oversight at 58 Garfield St., and says that similar incidents have occurred in the past, and in all likelihood will occur on occasion again in the future.

At the present time, though, it appears that the Harvard Real Estate Corporation is primarily concerned with cleaning up the financial side of Harvard's real estate business. The accounting office should be established by July 1, and after the dust settle, perhaps other motives for forming the corporation will become clearer.The Harvard property at 58 Garfield St.