A philanthropic foundation in Los Angeles is buying the vast majority of career colleges owned by Education Management Corp., including 31 Art Institute campuses, Argosy University and South University, in a deal announced Friday that underscores the instability of the for-profit education industry.
Education Management (EDMC) was once one of the largest for-profit college chains in the country, with more than 150,000 students studying such fields as culinary arts, health sciences and education at 106 locations in 32 states and Canada. Tepid demand in recent years sank enrollment to 65,000 as of October. By then, the company had announced the closure of 23 of its 26 Brown Mackie College campuses and 19 of its 52 Art Institutes locations.
“We feel the Art Institutes have a good history, despite the last few years, and we’ll be able to turn that back around,” said Randall Barton, managing director of the Dream Center Foundation, the outfit acquiring EDMC’s schools.
The foundation funds programs through the Dream Center Los Angeles that provide job training and free preparation classes for the California high school equivalency exam, as well as a host of services for the homeless, veterans and impoverished children. Barton said acquiring EDMC aligns with the foundation’s desire to use education as a means of transforming lives.
EDMC will retain ownership of 43 Brown Mackie and Art Institute locations where it has stopped enrolling new students and is in the process of “teaching out” those left on campus. The company previously sold three Brown Mackie locations and one Art Institute campus in Vancouver. In the latest deal, the parties gave conflicting accounts of the sale price, pegging it somewhere in the ballpark of $60 million.
Mark McEachen, president and chief executive of EDMC, said the company entertained other suitors, but many wanted to cut costs in a way that would have undermined the classroom experience. The company, he said, was won over by the mission of the Dream Center.
“The passion and commitment that these folks have…only means reinvestment in the classroom, which only means a more motivated faculty and staff, which ultimately leads to what we want–a good student experience,” he said.
In hindsight, McEachen said revamping programs might have helped stave off some of the enrollment decline. The schools the company chose to close, he said, were losing money for years and were never going to be profitable again as enrollment continued to slide. McEachen said he managed to stabilize EDMC after shrinking its footprint, but selling the campuses to a nonprofit foundation that could raise money for scholarships and to improve operations was in the best interests of the students.
The new owner has tapped Brent Richardson, the former chairman of Grand Canyon Education, as chief executive of Dream Center Education Holdings, which will manage university operations. Richardson led the transformation of Grand Canyon University into a for-profit school with a robust online presence, but resigned from his post in January, two years after shareholders made an unsuccessful bid to oust him for not attending enough board meetings.
Read more at Art Institute campuses to be sold to foundation.