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Policy: IX.D.7

Issued: November 7, 1997

Owner: University of Virginia Investment Management Company (UVIMCO)

Latest Revision:

INVESTMENT GUIDELINES FOR UNIVERSITY ENDOWMENT LOANS TO UNIVERSITY OF VIRGINIA FOUNDATION

1.0 Purpose

This policy describes the investment guidelines for University endowment loans to university of virginia foundation.

2.0 Policy [Top]

2.1 Background

The University of Virginia has advanced funds (Endowment Loans) to the University of Virginia Foundation to acquire strategic real estate assets that have served the financial and programmatic needs of the University of Virginia. In June 1992, the University Real Estate Foundation adopted a policy regarding repayment to the University Endowment which stated that the Endowment Loans would be non-interest bearing. Repayment would be based on the activities of specific assets (in essence, without recourse to the Foundation's other assets or activities), and, after the principal on the loans was repaid, gifts would be made to the endowment.

To achieve a level of independent financial strength for the Foundation to pursue its objectives in serving the University of Virginia, we have adopted the following principles that will serve as guidelines.


2.2 Acquisition of Properties for the University:

  1. Purchase must be approved by the Foundation's Board and the University of Virginia's Executive Vice President and Chief Operating Officer.
  2. Department must provide comfort to the Chief Operating Officer that it has the funds to purchase the property.
  3. The Foundation will assess a 1% acquisition fee, 1% disposition fee, direct expenses associated with acquisition and sale, plus management fees, if necessary.
  4. An interest rate similar to that which the Foundation receives from outside creditors will be assessed. Rental income, if any, will be credited against this expense.


2.3 Gifts of Real Estate:

  1. The Foundation will charge a 1% acquisition fee, a 1% disposition fee (capped at $25,000 for both), direct expenses associated with acquisition and sale, plus management fees, if necessary, against the proceeds of the gift.
  2. The University will provide a $50,000 imprest fund to cover expenses incurred prior to the sale of property.


2.4 Ongoing Operations:

  1. Income will be used first to amortize indebtedness, with parties other than the University, related to improvements and carrying costs for the project.
  2. When feasible, excess income will be used to secure third-party debt to repay the principal on the Endowment Loans. The balance, if any, shall remain with the Foundation.


2.5 Sale of Properties:

Other than properties purchase for a specific department, which will be sold on a fully-cost basis, all properties will be sold at market value based on an MAI appraisal secured by the Foundation. The proceeds will be used as follows:

a. First to repay indebtedness with third parties.
b. Additional proceeds will be used to repay Endowment Loans.
c. Any excess proceeds after "a" and "b" are met, will be allocated 50% to the University of Virginia as a gift and 50% to the Foundation to establish its own capital base.
d. If proceeds are insufficient to accomplish "a" and "b", the unpaid Endowment Loan will be written off on the University's books.


2.6 Other:

The University recognized that the Foundation does not yet have sufficient income to cover its operating costs. As such, the University understands that the Foundation will not begin repaying the Endowment Loans on the Colonnades and Booker House. This exception to the policy will be reviewed in five years.

3.0 Definitions [Top]

4.0 References [Top]

5.0 Approvals and Revisions [Top]


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