Repository: UIHistories Project: Board of Trustees Minutes - 1940 [PAGE 643]

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640

BOARD OF TRUSTEES

[October 20

proposals based on the completion of a hall by September, 1940. T w o of the proposals were for bond issues and two for mortgages. In the consideration of the matter it became clear that it would not be possible at this late date to undertake the construction of such a building with a view to having it ready for occupancy at the time originally contemplated. We also reached the conclusion that it would be distinctly unwise to open a hall of this kind at any time other than at the beginning of the school year. Consequently, with your concurrence, we advised the parties concerned that it had become necessary to revise our schedule in such a way that the construction of the building would be started about May or June, 1940, with a view to completing it and making it ready for occupancy in the summer or fall of 1941. All parties accepted this revision and submitted revised proposals. The party representing one bond issue proposal was obliged to materially alter his offer, requiring that the entire issue be taken up at once, instead of at intervals during construction. T h e new mortgage proposals are along substantially the same lines as originally suggested, the terms in some cases being somewhat better than first proposed. Each party offers to lend $600,000 for the construction and equipment of a building to house about 315 men students, providing both residence and dining facilities. All proposals provide for the amortization of the loan through approximately equal annual payments to cover both principal and interest in a 20-year period. An interest rate of i^/2 per cent without commission is offered in one case, 4J4 per cent with commission in two cases, and 4 per cent with commission in one case. All plans provide that the net income, both from the proposed hall and from the present women's residence halls, be pledged to the payment of the loan. The various plans offered are detailed in the attached memorandum. Consideration was first given to the question of the relative advantage of a bond issue and a mortgage. T h e bond issue requires the conveyance and encumbering of only the land necessary for the erection of the proposed hall. The mortgage plan requires the conveyance and encumbering of the entire tract bounded by Gregory Drive, Fourth Street, Stadium Drive, and First Street. In this respect the bond plan is decidedly advantageous. However, both of the mortgage plans provide for the release of areas that might be needed for the construction of additional residence halls, and it appears that this is the only probable use that would be made of any part of this area for building purposes within a 20-year period. T h e bond issue plan is considerably more expensive than the mortgage plan, makes less money available for construction, involves the preparation of rather complicated legal instruments, and presents uncertainties as to whether all legal requirements can be met. All things considered, therefore, we believe the mortgage plan is preferable. The next consideration, then, would be to determine which of the two proposed mortgage plans is more satisfactory to the University. T h e interest rate on the two proposals is the same. T h e National Life proposal involves monthly payments which would result in a small saving of interest as compared with the quarterly payment plan offered by Connecticut Mutual. The commission in both cases is the same. Legal expense would be involved in the case of the National Life which is not involved in the case of Connecticut Mutual, making the latter somewhat less costly. Both companies require the pledging of all residence hall income and provide for the release of certain tracts when substantial payments have been made, the amount of which is in excess of the regular amortization. However, Connecticut Mutual offers to release sufficient ground to build an additional residence hall, in the event the University secures a grant or a gift for that purpose, without requiring any principal payments in excess of regular amortization. Connecticut Mutual and their agents, Cooper, Kanaley, & Co., have made loans on the Old Union property and on the New Mini Union Building. They are entirely familiar with our set-up and are ready to follow the procedure which has been established for the new Union Building loan, whereas the other parties would have to examine and approve the procedure. It is our opinion, therefore, that the offer of Cooper, Kanaley, & Co. for a loan with the Connecticut Mutual Life Insurance Company should be accepted if the project is undertaken.