Student Housing Business

NOV-DEC 2015

Student Housing Business is the voice of the student housing industry.

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PUBLIC/PRIVATE PARTNERSHIPS NOVEMBER/DECEMBER 2015 STUDENT HOUSING BUSINESS .COM 50 Josh Smith, SVP, Balfour Beatty Campus Solutions: We're seeing a lot larger projects coming into the market with 1,000 to 3,000 beds. You're replacing housing built in the 1950s and the deferred maintenance has just become unbearable and unfxable. You're seeing these large programs and there are effciencies in doing that. You're not going to get as much effciency in operating a 300-bed hall you've built as you are with a larger scale project. Brinkman: I agree. The industry has evolved and the companies within the platform have evolved as well. As the institutions are continuing to look at how they become the campus they want to be, they certainly have to look to the private sector to say, 'We need some help.' It's not to say the public-private solution is for every campus, but by and large there are a lot of boards of directors and CFOs that are really starting to embrace a new delivery model, simply because the one they have on campus may or may not be broken. But it's something that, as they start looking, may become a reality for them to at least consider. Coakley: Ron, with the kind of path that Georgia has decided to go on, I'm sure the Board of Regents and staff had a lot of discussion about fnan- cial issues. Can you tell us about the decision making, the research you did and why you chose a particular fnancial path to go down? Ron Reed, director of Real Estate Ventures- Development and Offce of Real Estate and Facilities, Board of Regents of the University System of Georgia: The primary reasons that we were nudged into the P3 program that is underway today with Corvias Campus Liv- ing are the impact of our current privatized portfolio, the debt capacity for the state of Georgia and our credit rating. That's been a big concern with our lawmakers. We have about $3.8 billion worth of debt currently in our privatized portfolio. The Board of Regents and our campuses can't borrow money. The State of Georgia is the only one who can bor- row money, and the state doesn't fund student housing projects. We're left to fnd ways to fund new construction for student housing and other student life-type projects. The pri- mary way we've done that over the years is to go through our institution foundations. The foundation forms an LLC who is the borrower and owner of the facilities, and we have a rental agreement with those LLCs. The Board of Regents rents those facilities from the LLCs. The credit rating agencies recognize that that is off-balance sheet for the state, but is on credit. They see that as an obligation of the state because of that rental agreement. The P3 has allowed us to look at a different model where we don't have that rental agreement in place. We've been able, with this frst phase, to take some of that $3.8 billion of debt and place it into the hands of our private partner. So we're heading in the right direction according to the credit agencies. They are looking at this move favorably, and our lawmakers are very happy that we're going in this direction. Coakley: Noel, looking at ACC's portfolio, I know you have some facili- ties that are academic-rich, and some that are amenity-rich. Have you noticed any difference in retention or re-lease up? Brinkman: Not necessarily, it's all market by market. The one thing we are starting to see on-campus is the implementation of 'academicize, not amenitize.' We're starting to see a lot more interest from the student con- sumer who is focused on academic success, so we're starting to see a lot more spaces brought in to have a heavy communal fabric where you can actually study and hang out together, rather than the big pools and every- thing. Yes, you'll always have pools in the off-campus market because they're sexy and can market really well, but like Kyle said, students really aren't using those as intended from the front-end. They're continuing to go back to the spaces that are academically oriented to them, the com- munity labs with boards you can work on with a group, and less so the tanning beds. It's market by market, but our business approach is to build for the masses not the classes. As we start looking at opportunities, there's only going to be a certain amount of students who are going to be willing to pay a gazillion dollars in any market. We let whoever wants to build that take those, we would much rather build for the most students that can afford to live there on an ongoing basis. d f t h f i l i t i RON REED Director of Real Estate Ventures-Development & Offce of Real Estate and Facilities, Board of Regents of the University System of Georgia

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