Finally, after months of uncertainty and seemingly few promising prospects, Birmingham-Southern College (BSC) has entered into a purchase agreement for the sale of “The Hilltop” campus in West Birmingham to Miles College.
At last, BSC has a buyer.
But a purchase agreement, while legally binding, is ultimately subject to the buyer coming up with the cash sum for the seller. It is not complete until funds are transferred at closing. If the buyer cannot pay at the closing, a purchase agreement is ultimately nothing but a pointless piece of paper and a waste of everyone’s time.
While Miles or BSC have not yet announced a purchase price, the Hilltop property, which includes buildings, land, and equipment, was valued at approximately $65 million in 2023.
Meanwhile, Miles College’s endowment, in its own words (listed on Miles College’s website), is a modest $27 million. Even if Miles was willing to drain its entire endowment to meet BSC’s valuated benchmark of $65 million, that wouldn’t account for even half of the cost.
According to Miles’s Form 990 from 2023, the institution recorded expenses of $33 million with revenue of $34 million, resulting in a net revenue of $1 million on the year.
Besides not being a financially well-endowed college, additional barriers exist to Miles receiving adequate funding. According to U.S. News and World Report, Miles College is ranked #70-77 nationally among Historically Black Colleges and Universities (HBCU), well below every other Alabama HBCU except Stillman College. Like BSC, Miles suffers from low enrollment (roughly 1,200 students.) Unlike BSC, however, the average ACT score of a Miles College student is 16, with a high school GPA of 2.5. Miles’s six-year graduation rate is roughly 25%.
Assuming BSC’s goal is to get as much cash as possible by selling its property, Miles’ offer must be substantially stronger than A&M’s multiple offers of $52 million and $65 million earlier this year.
According to 2023 tax forms, BSC is strapped with nearly $36 million in debt. ServisFirst Bank, BSC’s principal creditor, is first in line for proceeds from the proposed sale. Assuming BSC wishes to break even on the sale to satisfy its roughly $36 million in debt obligations (and forgo netting a profit from the sale), Miles will need to at least meet that price.
Miles College’s President, Bobbie Knight, stated that Miles has “secured partners to join us in creating a consortium for Centers of Excellence” and is “pursuing partnerships including with the City of Birmingham to frame the best possible outcomes for all involved.”
“Securing partners” means Miles cannot complete this purchase on its own and needs assistance from other parties. “Pursuing partnerships” means Miles does not have the cash on hand ready to pull the trigger on the purchase. It is clear Miles will need to bootstrap more financial firepower before closing.
Even though Miles does not have the capital on hand to complete a swift purchase of BSC’s property, it makes sense why BSC has signed a purchase agreement with Miles. After the initial interest from Alabama A&M and Miles in May, BSC engaged a NYC-based brokerage firm to generate interest from national buyers. But no such interest existed, leaving BSC to return to one of the two interested parties who showed up to the dance at the beginning of the sale process.
BSC’s tragic closure shows that private institutions cannot rely on state funding for support during crucial times. The State of Alabama would not bail out financially imperiled BSC, so it’s doubtful they will supply Miles with any considerable financial support for its proposed purchase.
If Miles IS successful in closing the deal, BSC can settle with its creditors, wind down its business, and put itself to bed. But if Miles cannot close, BSC will be forced back to the drawing board to look for a capable buyer or declare bankruptcy in order to discharge its weighty debt obligations.
Whatever happens, the clock is ticking for BSC as its nearly $40 million in debt obligations plods forward to its terminal maturity date.
Conner (CR) Hayes is a small business owner based in Nashville, Tennessee. He is a 2017 alum of Birmingham-Southern College and a screenwriter, novelist, and poet. CR Hayes is published in various mediums, including academic articles, journalism, prose, and poetry.
The views and opinions expressed here are those of the author and do not necessarily reflect the policy or position of 1819 News. To comment, please send an email with your name and contact information to Commentary@1819news.com.
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