University of North Carolina WilmingtonUniversity of North Carolina Wilmington

October 24, 2013

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University of North Carolina Wilmington

Purchase of Foundation’s College Road Cinema property by the Endowment Fund

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University of North Carolina Wilmington

College Road Cinema Property History Foundation purchased in March 2003 for $1.8M, financed by a bank

promissory note UNCW (State of NC) acquired from Foundation in 2004 for $1.8M Subsequent property purchases by the Foundation in 2006, financed by

bank promissory notes: 720 St. James Place - $430,000 737 St. James Place - $545,000 84 Lumber; 4702 MacMillan Avenue - $1,500,000

College Road Cinema property appraised in late 2004 for $2.8M Property swap executed in August 2006 between UNCW (State of NC) and

the Foundation. UNCW swapped College Road Cinema back to the Foundation for the three properties listed above. The St. James properties would provide much needed office space for

the university. The 84 Lumber site could be used by Facilities. It was believed at the time that placing College Road Cinema back with

the Foundation would enable future development

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University of North Carolina Wilmington

Map of Property

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University of North Carolina Wilmington

Background: Proposed Purchase At the request of Foundation’s Subcommittee for Cash &

Investments, an analysis done for transfer of Foundation’s College Road Cinema property to the BOT of the Endowment Fund of UNCW.

Referenced property being held by Foundation for the sole benefit of the University, which utilizes its parking spaces for students.

Through a Management Services Agreement (MSA) with the University, UNCW’s Parking operation pays monthly rent to Foundation which covers all costs, including note principal and interest, related to the property.

Costs are primarily (2) promissory notes to BB&T which are being amortized through FY 2021 at interest rate of 1 month LIBOR plus 2.05%.

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University of North Carolina Wilmington

Benefits of Property Purchase STRATEGY:Endowment to acquire Foundation property at the outstanding note balances to BB&T of approximately $2,027,504, using unrestricted quasi endowment funds.Because Endowment cannot issue or carry debt, Foundation would use cash proceeds to pay off promissory notes.

BENEFITS OF IMPLEMENTATION:Interest savings of $185,000 to UniversityAdditional savings of $1,480,837 through FY 2021Guaranteed fixed rate of return to Endowment to support spendingAppreciating parcel of real estate, strategically located for future use and development, placed within the Endowment where greatest flexibility can be exercised by management.

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University of North Carolina Wilmington

Quasi Endowment Values

$ 6,060,170 Quasi endowment values prior to property purchase

(2,027,504) Purchase of College Road Cinema

$4,032,666 Quasi endowment values subsequent to purchase

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University of North Carolina Wilmington

Action ItemRequested Approvals:1)Use of unrestricted quasi endowment funds in the amount of $2,027,504 to purchase from the Foundation, property known as College Road Cinema. Proceeds from the sale to be used by the Foundation to pay off outstanding debt.2)Delegation of authority to University management to manage the property and to execute a Management Services Agreement with the UNCW Parking operation.

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University of North Carolina Wilmington

Proforma Savings from Purchase of Property

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X *** Y X - Y

Fiscal YearPrincipal

PaymentsInterest

Payments

PARKING'S CURRENT COSTS TO COVER BANK

LOAN

4.5% Returned Annually to Endowment

Spendable Funds

PARKING'S COSTS TO

COVER ENDOWMENT

SPENDING

NET SAVINGS TO

UNIVERSITY Remaining FY14 179,420$ 32,514$ 211,934$ -$ 211,934$ FY15 243,459 38,972 282,431 91,238 91,238 191,193 FY16 248,978 33,453 282,431 95,343 95,343 187,088 FY17 254,622 27,809 282,431 99,634 99,634 182,797 FY18 260,394 22,037 282,431 104,117 104,117 178,314 FY19 266,297 16,134 282,431 108,803 108,803 173,628 FY20 272,334 10,097 282,431 113,699 113,699 168,732

FY21 * 301,999 3,967 305,967 118,815 118,815 187,152 2,027,504$ 184,982$ 2,212,486$ 731,649$ 731,649$ 1,480,837$

Foundation Bank Notes

* Maturity date of promissory notes

*** Replenishment based on endowment spend rate of 4.5% applied to divesture of $2,027,504. Grows annually by 4.5%.