[Elisa] Stephens has plenty to celebrate. Since taking over as president of the family-owned Academy of Art University more than two decades ago, she’s transformed the 86-year-old for-profit institution from a regional operation into America’s largest private art university. Under her watch enrollment has skyrocketed from 2,200 to 16,000, generating an estimated $300 million in annual revenues, heavily subsidized by federal student loans. The Stephens family has turned that pile of art-school tuition into one of the largest real estate empires in San Francisco, with more than 40 properties in prime areas, including a historic former cannery on Fisherman’s Wharf and a 138,000-square-foot office building steps from City Hall. In all, the real estate is worth an estimated $420 million, net of debt, and the family pulls in tens of millions of dollars each year leasing these buildings back to the Academy of Art for classrooms and dorms.
Thanks to the university’s financial success, Stephens, her younger brother, Scott, and her parents, Richard and Susanne, are worth an estimated $800 million. A fixture in San Francisco’s society pages, Elisa, her husband, Ed Conlon, a vice president at a California construction firm, and their 10-year-old son live in a five-story $6.1 million home nicknamed the “Jewel Box” in ritzy Nob Hill. Recently she paid $3.3 million in cash to expand her estate in a gated Phoenix golf community. The family also owns a $13.4 million mansion in a posh San Francisco suburb, getaways in Pebble Beach and Lake Tahoe, a corporate jet and a yacht named Elisa. Plus a collection of 250 classic cars worth around $70 million, which Elisa often drives in city parades, to the opera or when heading to lunch.
But behind the shiny façade is a less than lustrous business: luring starry-eyed art students into taking on massive amounts of debt based on the “revolutionary principle” (Stephens’ phrase) that anyone can make a career as a professional artist. No observable talent is required to gain admission to AAU. The school will accept anyone who has a high school diploma and is willing to pay the $22,000 annual tuition (excluding room and board), no art portfolio required. It would be easy to accuse AAU of being a diploma mill, except the school doesn’t manufacture many diplomas. Just 32% of full-time students graduate in six years, versus 59% for colleges nationally, and that rate drops to 6% for online-only students and 3% for part-time students. (Selective art schools like the Rhode Island School of Design and Parsons graduate 90% of their students; see “Why Art School Can Be A Smart Career Move.”) The few AAU students who manage to collect a degree are often left to their own devices in finding employment in a related field. In marketing itself to dreamy prospects, the school touts its success at placing students at Pixar, Apple and Electronic Arts. But the morning shift at the local Starbucks is just as likely for some students. That and a mountain of debt. In the 2013-14 academic year 55% of the school’s roughly 10,700 undergraduates had federal student loans totaling $45 million.
Slowly, the illusion is starting to unravel. Enrollment is down 2,000 from its peak in 2011. Estimated profit margins have shrunk from double digits a decade ago to likely single digits; Stephens says the university is profitable but won’t name a figure. The school faces serious code violations on three-quarters of its buildings (see “The For-Profit University That Flouts San Francisco’s Land-Use Laws”). Its abysmal graduation rates have recently drawn scrutiny from its accreditor. Many of AAU’s programs risk losing federal aid eligibility, after tough new regulations governing for-profit colleges went into effect in July. And the school is fighting a whistle-blower suit by former recruiters who say they were paid more, illegally, if they enrolled more students.
The Academy of Art University may still be a long way from its “final final,” but Stephens is clearly having to work harder than ever to keep the party going.
Elisa’s grandfather Richard S. Stephens, a painter and art director for Sunset magazine, the glossy 117-year-old West Coast lifestyle publication, founded the art school with his wife, Clara, during the Great Depression. From a two-room loft in downtown San Francisco, their Academie of Advertising Art trained 45 students a year for jobs at ad agencies. After World War II enrollment grew to 250 and the school added classes in fashion illustration, fine arts and cartooning.
In 1951 the founders’ son, Richard A. Stephens, took over. A Stanford grad, he was gregarious and plainspoken, with a penchant for flashy cars. Over the next few decades, Stephens expanded the curriculum to include photography and fashion. Realizing that rising rents could put the school out of business, he bought its first five buildings.
“The Princess,” as Elisa’s father calls her, started tagging along to work with him while growing up in Hillsborough, a wealthy suburb south of San Francisco. After graduating with a political science degree from Vassar in 1981, she took classes at the family’s university for a year, then got a law degree from the University of San Francisco (on the strength of her J.D. she now asks to be called “Doctor”). Stephens worked as a lawyer for cellphone network operator General Cellular before joining AAU as in-house counsel in 1988.
By then her father had become chairman and handed off daily operations to outsiders. When she decided to take the helm, he spent two years training her. That included a lot of business breakfasts, lunches and dinners.”He taught me to do as much as you can face-to-face,” she says. “See and be seen.”
Elisa became president in 1992; the school then had 2,200 students and $8 million in revenues. From the beginning her philosophy was “bigger is better.” To give the school a competitive edge, one of her first moves was to spend $1 million–some 12% of revenues–outfitting classrooms with the latest Macintoshes. In 2002 she launched online programs, which along with increased marketing and expansions in federal aid dramatically boosted enrollment. Stephens also went on a real estate shopping spree, buying 11 buildings in the 1990s and another 17 the following decade. The family leases all of them to the school.