Paying off the Campus Debt
Dear Dr. Winter,
I believe that I am finally hearing you talk seriously about paying off the $8 million and not just keeping up with the rent (interest payments are only payments to rent money).
The wonderful man who wrote this letter represents the 40th family to join the One Third Times Three group (see previous page). His letter raises some interesting issues, and my answer to him may be of interest to other readers.
Are we really mainly paying "rent" in our series of $300,000 campus payments? This is a fair question and requires an honest answer. I'll call this man Jerry for our purposes here.
Here is what I wrote to him:
I am delighted to know of your concern that we be "serious" about the debt we face. As you say, we have inaugurated our new "One Third Times Three" plan, and your suggested variation of it (to be written up in the next issue of Mission Frontiers) will be helpful too. Surely we want to pay off this place as fast as possible, in order to cut down the interest we are paying¬
It boils down to the following possibilities:
- If a lot of people see their way clear to try the One Third Times Three plan, that will mean we can stay on schedule and pay the balloon payment next year on October 1st If that happens, we will only pay $128,000 more in interest before the campus is paid for. (The housing pays its own way. It doesn't cost us anything to own since the rental income not only covers payments but also taxes, maintenance, materials, etc.).
- But suppose a lot of people do in fact come into the One Third Times Three plan but we do not have enough money to pay off the balloon payment We will try to anticipate the situation if this should happen and, if possible, get enough co signers to float a loan that will enable us to spread the payments out a little further.
Now let's supose that, without a balloon payment, we can "average" $600,000 payments each quarter (instead of our present $300,000). I have calculated what would happen in that case. It would take us two and a half years to pay off the campus, with a little over $800,000 going to interest. Since you asked about rent, that would mean we would be paying an average of a little less than 9 cents per rentable square foot during that time.
- It is conceivable that we can refinance everything here again with the help of a lot of cosigners and get the interest down from 12 1/2 percent to, say, 9 percent. In that case the interest will only be $570,000, or 6 cents per square foot "rent." That's not bad, is it?
Another reassuring thing is that even the interest we are paying is not exactly rent. If we were merely renting these properties, the gradual "appreciation" (increase of value) of the property would not come to us, but to the owner. We are the owners, however, and so we are realizing the appreciated value. This means that our "rent" is, in this sense, a payment on principal, and not rent at a]]
Finally, unlike "rent," our interest payments are getting smaller all the time, while money gets less valuable all the time. Ordinary rents go up to account for inflation and appreciation of the property being rented. In our case our "rent" goes down, and what we pay buys us the appreciated value as well!
Of course, our campus debt of roughly $5 million is not all we have to pay. But the off campus housing already more than pays for its own interest, and once we pay off the campus and turn all our attention to the remaining debt on the housing, we will be home free very shortly.
I don't want you to think I am trying to take away all alarm, but I did want to give a bit of encouragement about the "monumental debt" we still face.
If your "transition" plan helps a lot more people get into heavy giving to missions, we can pay everything off a lot sooner, of course.
But I would like you to consider perfonning a valuable, multiplying service. Would you be willing to counsel people who are considering a One Third Times Three decision or your variation of it? This could be of tremendous assistance! If a few people who asked us for advice were to be referred to you, would that be okay?
Thank you for writing.