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Grand Canyon University Submits
Application to Return to Non-Profit Status -- Possibility Being Looked at to
Ensure Long-Term Stability, Legacy of Institution
Contact: Bob Romantic,
Grand Canyon University,
PHOENIX, Jan. 5, 2018 /Christian
Newswire/ -- Grand Canyon University, a comprehensive regionally accredited
university owned and operated by Grand Canyon Education, Inc. (GCE), has
submitted an updated application to the Higher Learning Commission to
re-establish the institution as a non-profit university upon its purchase of
certain academic-related assets from GCE. Following the sale, GCE would operate
as a for-profit third-party provider of educational and related services to GCU
and potentially, in the future, to other universities. GCE filed an 8-K with the
Securities and Exchange Commission to this effect today and is meeting with all
employees to discuss the proposed transaction. The HLC could act on this
application as soon as the next HLC Board meeting in February.
Brian Mueller, president and CEO of GCU, issued the following statement
regarding that decision:
Cautionary Statement Regarding Forward-Looking Statements
"The Board of Directors of GCE, together with the Board of
Trustees of GCU, are again considering the possibility of returning the
university to its historical non-profit status, which it held from
1949-2004. We believe this development would be in the best long-term
interests of our students, faculty and staff, the community and our
investors, in that it would:
Provide faculty and students equitable opportunities
to participate in academic and co-curricular opportunities with our peer
institutions without being segregated based on tax status.
Open up the world of non-profit philanthropic giving, grant writing and
Better enable the University to continue to hold the line on tuition –
which has been frozen on the ground campus for 10 years – and keep
higher education affordable for all socioeconomic classes of Americans.
Allow the university to continue to invest in infrastructure and
maximize opportunities for faculty/staff growth.
Maximize opportunities for continued investments in the community.
Provide the opportunity for the University to become a full voting
member of the NCAA.
Allow GCE to continue as a publicly traded educational services company
that has the potential to provide services to other institutions in
addition to GCU.
"In short, this return to our historical non-profit status
would convey an accurate reflection of who GCU is today and will be in the
future, and brings the University full circle as it continues its transition
into one of the driving forces in higher education today.
"GCU was a small non-profit private university for 55 years, but in 2004
found itself $20 million in debt and about to close its doors. Without a
large donor base to turn to or the ability to rely on tax dollars, the
University remained afloat by becoming a for-profit institution, securing
investor funding and adding an online component to its academic offerings.
In 2008, in order to develop a state-of-the-art online learning system, grow
out the ground campus and ensure long-term stability, GCU went to the public
markets for an infusion of capital to invest into the university. As a
result of those investments, GCU today has a strong hybrid campus model that
has enabled it to grow enrollment on the ground campus from less than 1,000
in 2004 to approximately 19,000 today, and create an online campus that now
has more than 70,000 students, with more than half of those studying at the
"That growth has also had a huge impact on our community. A 2015 study
performed by Elliott Pollack & Company found that, from 2010-2019, GCU will:
Generate an estimated $450 million in city, county and
state tax revenue, in addition to an estimated $650 million in federal
Generate an average of 10,490 jobs on an annual basis, with wages
totaling $487.7 million.
Provide an economic impact of $11.1 billion to the Phoenix area.
"GCU has further distinguished its innovative approach to
higher education in that it has never paid a dividend to its shareholders
since becoming a publicly traded institution in 2008. Those shareholders
have received a return on their investment via increases in the value of the
stock price that are a result of the University's continued success.
Further, GCU has invested more into its campus infrastructure and technology
-- $1 billion over a 10-year period – than it has made in after-tax profits
during that time. No other university has used a publicly traded for-profit
business model to develop a hybrid university with both ground and online
campuses. In addition to investing in its outstanding academic programs, the
University has developed all of the trappings of a traditional university,
including music, dance, theater, debate, intramural and club sports, and a
Division I athletic program.
"Today, GCU has a very strong financial model and there is no need to go
back to the public markets for further capital. The current proposal to the
HLC provides the best of both worlds by re-establishing a non-profit
regionally accredited university that can continue to grow and meet the
demand of families interested in affordable, private Christian education,
while allowing GCE to continue as a tax-paying, multi-billion dollar market
cap, publicly traded company in the fast-growing educational service market
industry, with its headquarters in Phoenix.
Details of the HLC proposal
"These FAQs (news.gcu.edu/2018/01/faqs-proposal-re-establish-gcu-non-profit-institution/)
go into greater detail about the structure of the proposed transactions and
its implications. It is important to note that the proposal is NOT being
done to escape current regulations that are imposed only on the for-profit
sector. For example, because GCU maintains affordable tuition, none of its
programs failed the gainful employment regulations. GCU's loan default rate
will be an estimated 6.5% for the most recent cohort – well below federal
guidelines. For the 90/10 rule, GCU sits at 72.3% (and dropping). The
University supports measures that ensure educational institutions are
meeting recognized standards -- particularly as it relates to student
support services, academic integrity and financial transparency – and
believes those measures should apply to all institutions (for-profit and
"GCU also has an exemplary record of regulatory compliance, including visits
from six major accrediting bodies within the past two years. GCU met those
comprehensive reviews with 100 percent compliance, including a visit from
HLC in which the University's accreditation was reaffirmed for an additional
10 years, which is the maximum extension of accreditation the HLC offers. In
addition to the HLC accreditation, GCU recently received the maximum 10-year
accreditation from the Commission on Collegiate Nursing Education; completed
the four-year transition to NCAA Division I athletics; completed a Veterans
Administration audit with no findings; received a 10-year reaccreditation
from the Accreditation Council for Business Schools and Programs; and has
been granted associate membership of the Association of Theological Schools
as it completes the process for full accreditation.
"GCU initially explored reverting to its nonprofit status in 2015-16. That
application was denied by the HLC, in part, based on its view that it did
not have the necessary guidelines in place to evaluate the type of shared
services agreement that GCU proposed. In May 2017, GCU became aware that the
HLC was considering adopting new accreditation guidelines that would allow
HLC-accredited institutions to engage in shared services arrangements.
Following the HLC's adoption of those guidelines in November, GCU submitted
its updated application on Dec. 18, 2017.
"The structure that GCU proposed initially in 2015-16, and again in 2017, is
similar to the proposed structure in which Purdue University hopes to
acquire the education assets of Kaplan University (a for-profit university),
with Kaplan becoming the service company for the new Purdue NewU online
platform. Further, the educational services that GCE would provide to GCU in
the proposed structure would encompass services that are similar to those
that are currently provided in outsourcing agreements that well-known
service companies have in place with hundreds of regionally accredited
universities throughout the country.
"We are hopeful the application will be looked upon favorably and we
continue to review federal and state regulatory issues that could impact the
viability of the proposal. That review is not completed at this time and we
will not enter into any definitive agreements until those issues have been
resolved and any regulatory approvals have been received."
This statement contains "forward-looking statements," including statements
relating to the proposed transaction discussed above. Words such as "may,"
"should," "could," "would," "predicts," "potential," "continue," "expects,"
"anticipates," "future," "intends," "plans," "believes," "estimates" and similar
expressions, as well as statements in future tense, identify forward-looking
statements. Forward-looking statements are based on information available at the
time those statements are made or management's good faith belief as of that time
with respect to future events, and are subject to risks and uncertainties that
could cause actual events to differ materially from those expressed in or
suggested by the forward-looking statements. Important factors that could cause
such differences include, but are not limited to: the failure of the proposed
sale transaction to be approved by the HLC or any of our other regulators or
accreditors; the failure of GCE and New GCU to reach agreement on key terms of
the sale transaction and to execute definitive agreements; the possibility that
any or all of the various conditions to the consummation of the transaction that
may be set forth in definitive agreements may not be satisfied or waived,
including the failure to receive any required regulatory approvals from any
applicable governmental entities (or any conditions, limitations or restrictions
placed on such approvals); the occurrence of any event, change or other
circumstance that could give rise to the termination of any definitive agreement
once executed; the effect of the announcement or pendency of the transactions
contemplated herein on GCE's ability to retain and hire key personnel or its
operating results and business generally; risks related to diverting
management's attention from GCE's ongoing business operations; the risk that
stockholder litigation in connection with the transactions discussed herein may
result in significant costs of defense, indemnification and liability; and other
factors discussed in GCE's reports on file with the Securities and Exchange
Commission. Factors or events that could affect the transactions contemplated
herein or cause GCE's actual results to differ may emerge from time to time, and
it is not possible for GCE to predict all of them. GCE undertakes no obligation
to publicly update or revise any forward-looking statement, whether as a result
of new information, future developments or otherwise, except as may be required
by any applicable securities laws.