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HIGH POINT - Think of it as the miracle on Montlieu Avenue.

A relatively small, no-frills school in an aging part of town gets a charismatic new leader who injects big dreams, big money and an even bigger appetite for national recognition.

Next thing you know, newly energized High Point University is sprinting toward the big time with twice as many students, twice as many teachers and a team of aggressive new administrators — all occupying a newly manicured campus more than doubled in size and full of eye-pleasing new buildings.

“I understood immediately the incremental approach would not ensure measurable results,” President Nido Qubein says of HPU’s course since he took the reins in January 2005. “Now we have achieved a five-year threshold that by any honest and objective observer’s definition says High Point has come a long way.”

So far, HPU’s story almost strains credulity. And it might well achieve a fairy tale-like ending with $1.6 billion in proposed new spending that would bring another 50 percent increase in students, more faculty, a new health sciences building, a multimillion-dollar basketball arena, a school of pharmacy and several more residence halls.

But might HPU come to regret its rapid-fire growth in the midst of America’s worst economic crisis in generations? The school is pursuing its agenda with a potentially risky level of high finance not often seen among small private colleges.

Both Moody’s and Standard & Poor’s financial-rating agencies sent up caution flags about HPU in the past 18 months, in part concerned about the heavy long-term borrowing that fueled the school’s growth spurt.

“Total debt outstanding was about $167 million as of December 2009, up 109 percent from $80 million in total debt on May 31, 2008 ...” S&P analysts said in their report late last year. “Projected maximum annual debt service of $19.1 million — including term-loan payments — equaled an exceptionally high 26.6 percent of fiscal 2009 operating expenses.”

HPU leaders say the rating agencies overreacted, pointing out that both groups also said many complimentary things in their reports about the school’s management and its prospects for continued success.

In fact, HPU’s debt never reached the predicted $167 million, but topped out last year at $164.7 million, said William H. Duncan, the school’s chief financial officer. He acknowledged that’s still a big number, but said HPU is working “aggressively” to reduce the debt — now about $160 million.

Scheduled repayments will continue cutting that figure by $4 million a year, Duncan said. But, he said, HPU recently started a series of additional, accelerated paybacks to lower the debt another $46 million over the next five years.

Despite all that, HPU logged an operating surplus of $16.3 million during the 2009 school year and $21.6 million in its 2010 budget. Every cent was reinvested in the school’s academic programs, construction projects, debt reduction, real-estate purchases and other campus needs, Duncan said.

“Cash flow is the key,” he said, predicting the surplus will grow another $6.8 million to $28.4 million in the 2011 budget. “Even though expenses have gone up, they’ve not gone up as much as revenues, given our increasing enrollment.”

Qubein, a nationally known motivational speaker and business expert, said the university is growing so fast it forced him to consider speeding up the construction start for a new residence hall from April 2012 to next spring.

The new hall likely will be needed because HPU’s population of incoming students has been increasing about 22 percent a year, he and other HPU leaders say. That could mean several hundred extra freshmen to house at a time 90 percent of students — including seniors — prefer to keep living on the amenity-laden campus.

“If you take the risk out of life, you take the opportunity out of life,” Qubein said of HPU’s long-term debt, but added he also is committed to bringing it down quickly.

No crash in sight

HPU’s borrowing pattern skirts the norm in American higher education, but there’s nothing obviously inappropriate or unwise about it, said Rick Staisloff, a Maryland expert in educational financing who advises colleges and universities on growth strategies.

“It is not the typical approach in higher education. But it’s an interesting story and it seems like it’s been successful,” said Staisloff, who also does consulting work for the American Association of Governing Boards of Colleges and Universities. “Higher ed tends to be very conservative and risk-averse.”

In fact, there might be a lesson in HPU’s saga for other small universities so wary of financial risk they miss obvious growth opportunities, Staisloff said.

“I do not look at (HPU) and say, 'Oh my God, these guys are crazy because this thing is going to blow up,’” Staisloff said. “It seemed to me S&P was saying to them, 'OK, we get it and you’re well-managed. But boy, you are really heavily leveraged (indebted). ... You might want to slow down a bit.’”

The concept of a substantial slowdown doesn’t appear to be in the energetic, innovative Qubein’s game plan anytime soon.

He recently announced a 10-year plan that will take the total price tag for HPU’s growth to about $2.1 billion, including almost $500 million in additions already made under his administration.

He plans to do it without pushing HPU’s borrowing level to new heights. And if possible, he hopes to complete the additional decade’s worth of projects in seven years, said Qubein, who is paid more than $470,000 a year as president.

On the other side of the ledger, he’s also contributed more than $2 million to HPU, from which he graduated in 1970.

Qubein clearly is the school’s indispensable “X factor,” its most eloquent and persuasive promoter, able to coax alumni, parents of students and corporations into millions of dollars in pledges or outright contributions.

Without his promotional genius, would the campus have its “director of WOW,” the administrator whose job is to make campus more inviting by developing such perks as a free car wash for student vehicles when the campus is clouded in construction dust?

Or how about the on-campus 1924 Prime Steak House where etiquette is taught? The roving ice cream truck that occasionally dispenses free treats?

Would any of that have happened without Qubein? Not on your life.

In search of space

But HPU faces the difficult challenge of being closely surrounded by established neighborhoods, which adds significantly to the cost and complexity of any major expansion.

Just within the past 18 months, the university spent about $18 million for properties that include more than 70 houses in low-to-middle income areas, as well as much of the Wesleyan retirement complex on North College Drive.

“They called and said, 'We see the house is empty, would you be willing to sell it?’ ” recalled Laurie Lenker, a Jamestown resident who sold HPU a rental house in the 900 block of North Centennial Street for about $65,000 this summer.

“I just threw out a number (as an asking price) and the next thing I knew, they said, 'OK.’ They wanted the house and were willing to pay a reasonable price.”

This steady accumulation of property has enlarged the campus from 91 acres when Qubein arrived to 230 acres now. Much of it is already in use for such projects as The Village at HPU, which opened on North College in 2008 — a satellite “mini-campus” housing 450 students on 13.5 acres featuring a swimming pool, basketball and volleyball courts, a dining hall and campus police station.

A “Greek Village” is taking shape on what used to be two square blocks of moderate-income housing. The village will host a dozen fraternity and sorority houses along with a commons building.

The school initially drew heated protests from neighbors on all sides when it began the growth spurt several years ago.

But after city government convened a university-area planning process to make it more clear where and how HPU could grow, people became more accepting, said High Point City Councilwoman Bernita Sims, who represents the district that includes HPU and its environs.

“I think it got off to a little rocky start,” Sims said. “I don’t think there was as much transparency or a lot of disclosure to the community in the early stages.”

But school officials became more open “with encouragement from the City Council,” she said.

City government’s plan emerged from numerous public meetings to outline likely growth areas for HPU and suggest such guidelines as discouraging the university from demolishing any houses that it buys until the land beneath them is actually needed for something.

City officials also urged HPU to update the school’s 1992 master plan to more clearly specify where and what it hoped to build in the years ahead.

HPU can’t do that right now because its growth depends on too many variables, including whether it can buy sufficient land in any one spot, Qubein said.

He fields three to five calls every week from people who want to sell nearby houses to the school, he said. But most don’t fit into the university’s near-term needs, he said.

“We have been attacking this thing from 30 different directions at the same time,” he said of HPU’s growth needs. “I can’t look you eyeball to eyeball and tell you I know exactly where we are going.”

The bottom line

HPU has disposable income to buy real estate because of the growing number of students enrolled, which more than doubled to about 3,300 on Qubein’s watch.

Ultimately, the school expects to host 4,500 to 5,000, a number more than sufficient to ensure long-term financial viability, the HPU president said.

Students pay “comprehensive” fees of $35,400 for a year’s tuition, room, board and all other fees except books.

HPU retains a larger percentage of its income than most other private schools of its size, which return an average of 40 percent or more to their students in scholarships and other, direct financial aid.

HPU’s comparable “discount rate” is less than 16 percent or about $14.7 million overall, yet it is enrolling record numbers of freshmen whose families are willing to bear the cost.

And those students are increasingly competitive: Average SAT scores for incoming freshmen rose almost 9 percent since 2006, from 1004 to 1092 this year.

On the other end of the line, the school’s career services program helps students develop job-seeking skills, including real-world internships in their fields of study. Roughly 86 percent of HPU grads are either employed or working toward an advanced degree within six months of getting their diploma.

Many HPU freshmen are drawn to the school, at least initially, by the “cool” factor. They see a fancy, new campus with such extra amenities as the five-star steakhouse in the new $68 million University Center where everyone gets to dine once a week; more than $50 million in new technology that includes state-of-the-art broadcast facilities; and such course offerings as a degree program in interactive media that includes designing computer games.

Parents like Methodist-affiliated HPU’s emphasis on family values, self-sufficiency and life-skills training for the world beyond the school’s attractive brick and wrought-iron fencing.

And who could miss HPU’s recent $500,000 advertising campaign that included day after day of full-page ads in North Carolina’s major newspapers and the equally ubiquitous TV commercials produced by students and faculty touting HPU’s “extraordinary education in an inspiring environment with caring people?”

The net result is more feet on the ground: A school that used to be happy if 30 people showed up for one of its visiting days for prospective students now must enforce a cap of 600 to prevent an unmanageable glut of interested kids and their folks, Qubein said.

“Debt? We have debt, absolutely, I’m aware of it,” he said. “I’m today more confident than ever that High Point is on solid ground and marching forward with greater resources than ever before.”

Contact Taft Wireback at 373-7100 or taft.wireback@news-record.com

Contact Jonnelle Davis at 373-7080 or jonnelle.davis@news-record.com