A meeting of the Physical Facilities Committee of the Board of Trustees convened at 9:19 a.m. on Friday, April 12, 2019, at Purdue Polytechnic Anderson, 1920 Purdue Parkway, in Anderson, Indiana.

All committee members were present: Gary Lehman, chair; Sonny Beck; Michael Klipsch; and Daniel Romary. All other trustees were also present: Michael Berghoff; JoAnn Brouillette; Vanessa Castagna; Malcolm DeKryger; Thomas Spurgeon; and Don Thompson.

Officers and administrators in attendance were: Mitch Daniels, president; Frank Dooley, senior vice provost for teaching and learning; Bill Sullivan, treasurer and chief financial officer; Jim Almond, senior vice president, assistant treasurer, and assistant secretary; Steve Schultz, general counsel; Janice Indrutz, corporate secretary and senior executive assistant to the Board; Ron Elsenbaumer, chancellor of Purdue University Fort Wayne; and Tom Keon; chancellor of Purdue University Northwest.

I. APPROVAL OF MINUTES

Upon proper motion duly made and seconded, the Physical Facilities Committee voted unanimously to approve the minutes of its last meeting held on February 8, 2019.

II. APPROVAL TO EXECUTE GROUND LEASE AND STEAM PURCHASE AGREEMENT WITH DUKE ENERGY INDIANA, LLC AND TO PLAN, FINANCE, CONSTRUCT AND AWARD CONSTRUCTION CONTRACT FOR WADE UTILITY PLANT CONNECTION TO EXTERNAL CHP PLANT

Mr. Michael Cline, senior vice president for administrative operations, requested approval for the treasurer to execute a project with the following three components: (1) the lease of one acre of land immediately west of the Wade Utility Plant to Duke Energy Indiana, LLC for a term of 35 years to allow Duke Energy Indiana to build, own, and operate a new combined heat and power (CHP) plant; (2) an agreement with Duke Energy Indiana for the university to purchase steam produced by the new CHP plant; and (3) the planning, financing, constructing, and awarding of the construction contract to connect the Wade Utility Plant to the new Duke Energy Indiana CHP plant. Mr. Cline outlined the project’s financial and operational benefits and indicated that Duke Energy Indiana would pursue the necessary approval from the Indiana Regulatory Commission to build the new CHP Plant. He estimated that the university’s cost to connect the Wade Utility Plant to the new Duke Energy plant would be $6,500,000; the connection would then allow the university to use steam from the new plant via the purchase agreement.

In response to questions from the Committee and other members of the Board, Mr. Cline estimated the net present value to the university would be $28,000,000, and he explained how the university would use the steam to heat buildings and generate electricity to run the chillers. Trustee Beck expressed his appreciation for using steam versus fossil fuels.

Upon proper motion duly made and seconded, the Physical Facilities Committee voted unanimously to recommend full Board approval of the project. Supporting documents were filed with the minutes.

III. APPROVAL TO PURCHASE FORMER STATE FARM BUILDING

Mr. Cline requested approval for the treasurer to negotiate final terms of an agreement to purchase the former State Farm building located at 2550 Northwestern Avenue in West Lafayette for the purchase price of $6,700,000. He explained that the State Farm insurance company had used the building as its regional headquarters which made it an appropriate building to provide near-campus space for virtually all operations reporting to the treasurer. He added that an estimated $8,400,000 would be needed for repair and rehabilitation expenses in order to ready the facility for use by roughly 1,000 university employees.

To begin discussion, Trustee Lehman emphasized that the approval requested by Mr. Cline was not to finalize the purchase of the building; rather, it was approval to give the treasurer authority to perform the necessary due diligence to ensure it would be a sound purchase and to negotiate final terms. In response to a question from Trustee Lehman, Mr. Sullivan explained that many administrative functions had resided in Freehafer Hall until it was demolished as part of the State Street project. He said these functions then had to be spread across campus, but, because the operations worked “hand in glove” on a daily basis, relocating them back together in the former State Farm building would recover efficiencies. Mr. Sullivan noted that the cost to build a new building for this purpose would be over $300 per square foot versus $95 per square foot for the State Farm building, and he said the building would provide extra space which could be used as swing space while other projects were underway. He expressed his belief that this purchase was a good opportunity for the university.

Trustee Lehman reiterated that the due diligence must be favorable in order to move forward with the purchase and noted that the university’s purchase of the iconic building would also be great for the West Lafayette community because the building would not sit empty for years. Trustee Brouillette felt it was important to disclose her family’s ownership in a commercial office building located in the Purdue Research Park which leased space to Purdue. While the purchase of the State Farm building would have a negative impact on her family investment, Trustee Brouillette said she fully supported the acquisition as being a fiscally prudent decision for Purdue. Chairman Berghoff recognized the opportunity to bring the administrative functions back together in one building, and President Daniels remarked that relocating everyone to the State Farm building would accommodate the strong enrollment growth by freeing up space needed on campus for classrooms, student activities, etc. Trustee Romary offered that, though off-campus, the renovated building would be a great environment in which to work. Trustee Lehman remarked that it had been a good discussion.

Upon proper motion duly made and seconded, the Physical Facilities Committee voted unanimously to recommend full Board approval of the purchase pending favorable due diligence. Supporting documents were filed with the minutes.

IV. APPROVAL TO EXECUTE LEASE FOR PORTION OF ASPIRE IN DISCOVERY PARK DISTRICT

Mr. Cline requested approval for the treasurer to lease 86 apartments in the new Aspire at Discovery Park housing complex, a Purdue Research Foundation development located on West State Street in the university’s Discovery Park District. He informed the Committee that the lease would provide additional student housing for the 2019-2020 academic year to help address the increased student enrollment on the West Lafayette campus.

Trustee Lehman expressed his excitement about the opportunity to provide an additional 340 beds for students in a new, state-of-the art facility, saying it was a great solution, and he called upon Dr. Beth McCuskey, vice provost for student life, to comment and answer questions from the Committee and other members of the Board. Chairman Berghoff noted that Aspire would be located directly across the street from First Street Towers and, essentially, could be considered on-campus housing.

Upon proper motion duly made and seconded, the Physical Facilities Committee voted unanimously to recommend full Board approval of the lease. Supporting documents were filed with the minutes.

V. ADJOURNMENT

By consent, the meeting adjourned at 9:43 a.m.