The final chapter of Dowling College begins with the April 4 auction of 25 acres of the bankrupt school’s main campus in Oakdale, bringing the potential for change to the area unlike any in the last half-century.
The impact touches a broad group, from banks that lent the school tens of millions of dollars, to staff claiming back wages, to residents of the hamlet where the liberal arts school has been the anchoring presence since 1968.
So much is uncertain, they say: the future of the prime property, with its immense former Vanderbilt mansion, which is to be auctioned, and more than 30 other college-owned buildings and parcels that dot the streets near campus but are not included in the auction.
“We just want to maintain the community and what it was,” longtime resident Kathleen Baron said. “It’s a family community.”
It is unusual for a nonprofit four-year college to go belly-up. Dowling, which struggled for years with high debt, declining enrollment and unstable leadership, succumbed last year, officially closing on Aug. 31 and filing for Chapter 11 protection in U.S. Bankruptcy Court in November.
The bankruptcy petition includes more than 626 claims totaling $65.8 million, filed by creditors, vendors, college officials, faculty and staff who have a stake in the liquidation of the shuttered institution.
“It is sad. I feel badly that it has come to this,” said chief restructuring officer Robert Rosenfeld, whose Manhattan-based firm RSR Consulting is managing the dissolution of the Dowling College estate. “But now the main goal is to enhance the value of the property and pay the creditors.”
Michael Puorro, who was chairman of Dowling’s board of trustees when it closed, did not respond to a request for comment.
The deadline for sealed bids for 25 acres of the main campus, once known as the “Idle Hour” estate, is Wednesday. The auction is set for April 4.
“Several competing bids are expected at the live auction event, with strong interest in the Oakdale campus being expressed from both developers and educational users, including for-profit and nonprofit end-users,” said a release Friday from a communications firm representing A & G Realty Partners and Madison Hawk Partners, the real estate brokerage firms retained to manage sale of the property. “The highest and best offer is expected to be approved by the bankruptcy court on April 10.”
Judge Robert E. Grossman of federal bankruptcy court in Central Islip is overseeing Dowling’s case and approved the hiring of RSR Consulting, A & G Realty and Madison Hawk, as well as the bidding procedures and deadlines.
The Oakdale campus, located in the Town of Islip, operated under a special permit that allowed both an educational and residential use.
Rosenfeld, who was not involved in the school’s closure and began handling Dowling’s affairs in October, said there “is a lot of oversight,” with various government agencies making sure the bankruptcy proceedings are on schedule.
Seven months ago, Dowling became Long Island’s first fully accredited nonprofit college in recent history to close.
College administrators shocked the campus community in first announcing the closure on May 31, quickly laying off the majority of its employees and causing chaos among its student body. College officials then reversed the decision to continue negotiating a partnership with Global University Systems, or GUS, a for-profit educational investment firm based in the United Kingdom.
For weeks last summer, with its accreditation by the Middle States Commission on Higher Education in jeopardy, the college’s fate was uncertain. Students weighed their options on whether to stay and finish their degrees or transfer to other colleges, faulting the school for the disruption in their education.
Negotiations with GUS and attempts at alumni fundraising failed. About 1,700 students, bereft of their planned education, went in other directions — transferring to other schools or reconsidering their schooling. By early June, more than 450 faculty and staff were laid off.
Dowling, carrying $54 million in long-term debt, lost its accreditation on Aug. 31 and officially closed. It was the only institution among more than 500 that Middle States accredits — in New York, the mid-Atlantic states, the District of Columbia, Puerto Rico and the U.S. Virgin Islands — to have that designation withdrawn during 2016, agency spokesman Richard Pokrass said.
With the prospect of the auction, the process of settling the school’s debt draws nearer.
Of the 626 claims against the institution recorded in its bankruptcy petition, 562 were not secured by real estate. The claims, some of which are marked as being disputed, are unreconciled and their validity will be determined by the Bankruptcy Court judge.
Secured claims total $61.3 million and unsecured claims total $4.5 million, according to the court papers. Secured claims will be paid out first, followed by unsecured claims in the order of priority, Rosenfeld said.
In addition to banks with mortgage liens on Dowling properties, local and national vendors such as Absolute Plumbing of Long Island Inc., based in Bohemia, and the Carrier Corp. in Cleveland, Ohio, have claims.
On Wednesday, a committee that represents the unsecured creditors, which includes professors, staff members and other vendors, filed a request to depose the accounting firm KPMG, which conducted the 2014 audit of Dowling.
A spokeswoman for KPMG declined to comment, citing client confidentiality requirements.
Lori Zaikowski, a chemistry professor and current president of Dowling’s 46-member faculty union, which continues to exist despite the college’s closure, is one of three people on the unsecured creditors’ committee. She declined to comment, citing a confidentiality agreement.
The unsecured creditors’ committee could be looking for a better picture of Dowling’s finances before it closed, said bankruptcy attorney Marc Hamroff, whose Garden City law firm Moritt Hock & Hamroff is not involved in the Dowling case. He teaches creditors’ rights at Hofstra University’s law school.
Mathematics professor John Vargas is among the employees with a pending claim of $195,000 for deferred wages and contributions to his pension.
“Faculty and staff did everything humanly possible to help keep the school afloat over the last few years,” said Vargas, 69, of Floral Park. “We took cuts to our salaries, stopped paying our pensions. We wanted the students to be treated fairly.”
Faculty with the most success at finding new full-time employment after Dowling’s closure were those who left the state. Vargas, with 45 years of teaching experience, has pieced together adjunct positions at Adelphi University, Molloy College and SUNY Old Westbury, but is earning less than one-third of his former Dowling salary, which was $120,000, he said.
“Yes, schools close and people move on. But the reality is it’s not that easy,” he said. “Now we are all wrapped up in this bankruptcy.”
Dowling’s assets are reported as being worth about $109 million, with most of the value in its land.
The Oakdale campus — with its 11 acres of waterfront on the Connetquot River and the 110-room mansion, the former estate of William K. Vanderbilt — was valued at $52.3 million.
The 104-acre Brookhaven campus, located off William Floyd Parkway in Shirley and abutting Brookhaven Calabro Airport, was valued at $42.7 million. Home to Dowling’s aviation program, the property also has an athletic complex, a two-story residence hall and a 10,000-square-foot airplane hangar. That property will be auctioned off separately on a date yet to be announced, real estate agents said.
The college also owns 32 residential properties near the main campus that are part of the bankruptcy but are not included in the auction. They are being sold by local real estate agents.
Many of those still are occupied by tenants who are unaffiliated with the college. Steve Hanna and his family are among that group.
“All the tenants have been . . . left in the dark,” said Hanna, 51, who has rented a Dowling-owned home for about 18 months.
Aside from a letter that informed him of the bankruptcy, he said, there has been little communication with tenants. In recent months, Dowling hadn’t been maintaining the properties well, he said.
“All along the homes were being neglected,” he said. “They were neglected in many ways. There were leaks and just rental issues with some of the homes, and they were ignored.”
Eight other properties are being marketed by Douglas Elliman. Two of those are suitable for commercial use with a special permit and are visible from heavily traveled Montauk Highway. Six others that were used as administrative offices and are located on Idle Hour Boulevard, across from the mansion, could be converted back to residences.
“Those properties are generating a lot of interest,” said Michael Murphy, executive vice president and head of operations for Douglas Elliman. Murphy, who said he has been marketing the commercial properties, said there are several offers on the two closest to Montauk Highway.
The others, he said, are so much a part of the residential community that they would need to be converted back to single-family dwellings.
“Those residential houses could be very dependent on what’s put into the main campus,” Murphy said.
Howard and Kathleen Baron, who have lived near the Oakdale campus for 37 years, share the sentiments of many Dowling neighbors who are worried about what might replace the college.
The couple were outside Dowling’s vacant visual arts center one recent afternoon, rearranging misplaced slate tiles on the ground. They spoke of how new owners could add condominiums, senior housing or other facilities that could flood the community with traffic.
Kathleen Baron pointed out that some of the area’s homes belonged to an historic artists’ colony, and that the couple’s home was built in 1890.
“We don’t want any big corporation coming in and just buying this,” she said, “and making this a horrible building and not caring about anything.”
“Our concern is this: Should things turn upside down, what are we going to get here?” Howard Baron said. “It would really be great, if an institution of higher learning could come in here and keep things, maintain it, even though it’s expensive. But all the infrastructure is here. I think that’s an easy, easy switch-over.”
Experts in higher education and real estate, however, said the properties are unlikely to attract other Long Island schools. Many colleges and universities, both public and private, aren’t buying more land or physical campuses. In the last decade, many schools have expanded their online programs.
“It’s a beautiful mansion and a beautiful campus. There are ancillary buildings, dorms and classrooms, and a few smaller buildings as well,” said David Pennetta, executive director of Cushman & Wakefield in Melville, who is not involved in the Dowling property sale. “With something like this, the highest and best value would be to find someone who can use it as a campus again.”
Pennetta sold the 170-acre St. John’s University campus on Montauk Highway in Oakdale. He said there was a lot of interest from buyers abroad to open a physical campus in the United States, particularly in New York.
Amity University, one of the largest multi-campus colleges in India, purchased the waterfront St. John’s property for $22.5 million in September.
The last major property sale between two local colleges was in 2006, when Stony Brook University paid $35 million to purchase the Southampton campus of Long Island University.
If local public or private higher education institutions were looking to expand, experts said they would seek sites abroad to give global education opportunities to domestic students while capturing some of the international student market.
Additionally, private college officials said they face uncertainty over their enrollments. Some are putting capital plans on hold and paring down their operations. Not many are looking to expand, said Mary Beth Labate, president of the Commission on Independent Colleges and Universities, which represents more than 100 private not-for-profit colleges in the state. Labate took over at the commission in January and admitted she was unfamiliar with all the details of Dowling’s demise.
The group, of which Dowling was a member, has aggressively opposed Gov. Andrew M. Cuomo’s Excelsior Scholarship plan to provide free tuition to full-time students from families making less than $125,000 in adjusted gross income. The plan, which gives supplemental tuition assistance for use at schools in the State University of New York and City University of New York systems, threatens to cut into the enrollments of private colleges, Labate said.
“You could see more Dowlings in the future. If you think that’s the saddest higher-education story ever told, there could be more sequels to that if this free tuition plan goes through,” Labate said.
“As residents of towns, private colleges bring jobs and culture and a dynamic environment,” she added. “Often we are the major employer and the anchor tenant.”
Dowling, which had struggled for years with high debt and changes in leadership, suffered major enrollment declines that were accelerated by the Great Recession and a freeze on hiring in local school districts, officials said.
One of the college’s largest programs was its School of Education, which offered undergraduate and doctoral degrees as well as graduate and advanced certificates.
In 2015, Dowling had 1,784 undergraduate and 670 graduate students, according to a Middle States report — a drop of nearly 50 percent from its 4,500 students in 2009.
Albert Inserra, a former superintendent of the Port Washington school district, was named the college’s president in August 2014 — and was its seventh leader since 2005. He had been chairman of Dowling’s doctoral program in educational administration, leadership and technology.
Small private colleges with low endowments and little name recognition have been at-risk for at least the last decade. Moody’s Investors Service, which publishes an annual outlook for the higher-education sector, continues to predict that in 2017 “highly tuition-dependent small colleges will face the greatest challenges, given more limited prospects for tuition revenue growth and a typically more expensive business model.”
“We are hoping it doesn’t get to that point for the other schools,” Labate said.
For Steven Birkeland, 68, and other members of the Oakdale Historical Society, the selling-off of the college also means the possible loss of portions of the community’s very identity. The historical society used to hold its meetings on the campus, and members of the community have enjoyed access to the campus and its waterfront views.
The group has submitted a 2,300-signature petition to the Town of Islip, asking that the former Vanderbilt mansion and several other buildings that were part of the old estate be designated as sites for landmark protection.
They want to be sure any artwork, furniture, documents and letters with historic value are preserved as well. Rosenfeld said each of those items is being evaluated and the Bankruptcy Court judge and/or the state attorney general’s office will determine what happens to them.
“There are so many documents at the library still that go back to the Vanderbilt days. There are many pieces of art that have been loaned to Dowling, and we would like to see those returned to the powers that be,” Birkeland said. “We just can’t get access to it.”
With Michael R. Ebert, Scott Eidler and Dorothy Levin