CHALLENGE
The University of Phoenix, owned by publicly-traded Apollo Group, is the nation’s largest for-profit university. At its peak enrollment, in 2010, it served 470,000 students. By 2011, however, a host of factors were negatively affecting enrollment across the for-profit education industry, and UOP’s new degreed-enrollments were falling precipitously. Enrollment would eventually reduce to 350,000 students. At the same time, UOP students were increasingly electing to study in UOP’s on-line classes instead of in its classrooms. As a result of these trends, UOP no longer needed its extensive classroom footprint of 227 locations with 5.8 million square feet of space. Significant savings could be had by pruning the portfolio, but deciding where, when and how, and then implementing, would be a complex undertaking.

STRATEGY
In 2011, Bob Cook, now Senior Vice President of Strategic Planning for Colliers International, joined the Apollo Group as Vice President of Real Estate Strategy in order to address the oversupply of space. The strategy was to swiftly achieve significant operational savings by reducing the number of UOP locations, right-sizing remaining locations, and taking the associated restructuring charges – all while not impacting the vast majority of students.

In collaboration with UOP business managers, locations for closure were selected based on an examination of each location’s profitability, enrollment trends, real estate expense, lease expirations, site conditions, location relative to student commute patterns, level of undepreciated assets, and regulatory restrictions. As a result, a portfolio plan was prepared to close 115 of UOP’s 227 locations; Apollo Group announced this to the public in October of 2012. As for the remaining 112 locations, each needed to be evaluated to determine whether it had too many or too few classrooms, taking into account the impact on enrollment of nearby closures. After evaluation, it was decided that the majority of these remaining locations needed to be either relocated, increased in size or decreased in size. Real estate market analysis, space planning, and financial accounting analyses were conducted to prepare a right-sizing plan for each of these locations.

RESULTS
In its announcement of October 2012, Apollo described this “optimization initiative”, stating that it would incur $175 million of restructuring and other charges, principally related to lease exits, but would reap total savings from salaries, real estate and other expenses of at least $300 million annually.

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