Student Housing Business is the voice of the student housing industry.
Issue link: https://studenthousingbusiness.epubxp.com/i/616872
THE SHB INTERVIE W NOVEMBER/DECEMBER 2015 STUDENT HOUSING BUSINESS .COM 88 bottom line. As you probably saw, we also issued equity that same day. The response from investors was overwhelmingly positive because of the positive results that we achieved, and also the positive results that ACC achieved. SHB: You've continued to grow through partnerships with univer- sities. Is that the main goal for EdR's growth in the future? What are the approaches to the growth of the company? Churchey: There is a lot of old, outdated student housing on uni- versity campuses. We — and a few others — have the ability to win those types of RFPs to tear down old student housing on campus and replace with new modern stu- dent housing. The opportunity is vast. Whenever you speak to any- body about this opportunity, they immediately think about their col- lege campus and they go, 'oh yeah, 20 years ago when I was there, this building was terrible and it's still terrible today.' We have a great number of competitive advantag- es over most companies in pursu- ing university partnerships, some of which are: We are the second largest owner of student commu- nities; we have been in the student housing business for more than 50 years; we have the experience of developing, owning and manag- ing on campus; and we are public- ly traded, providing transparency about our fnancial strength his- tory and attributes. There are not a lot of companies that can match those competitive advantages, so universities quickly see that we are one of the top few that they should consider partnering with. SHB: How do you plan to grow the off-campus side of the busi- ness? You mentioned that EdR had made a few acquisitions this year. What are you buying? Churchey: We are always look- ing at new opportunities. We're always looking at assets that we would like to own for the long term, and generally those are larg- er-sized, purpose-built student housing communities that have the amenities students want and are pedestrian to major universi- ties. Today some characteristics of our portfolio are as follows: aver- age age of seven years; average median distance to campus one- tenth of a mile; average full-time enrollment is 27,480 for the uni- versities we serve; and the aver- age rental rate is $725 per month. That's our current portfolio, and those are the types of assets that we are looking to acquire and own today. Will we be a net buyer or net seller at the end of a given year? I don't know. It all revolves around the opportunities. We are in the market trying to sell six assets today. We'll see if we get the appropriate bids from the investor community. We're also looking at many different assets for possible acquisition. Time will tell how suc- cessful we are. SHB: On the on-campus side of the business, EdR announced a new deal recently with Boise State. Can you tell us a little about that? Churchey: At Boise State University we're building a freshman honors community right in the center of their cam- pus. It's a long term partnership with Boise State with a 65-year ground lease. They see that our expertise is building and owning student housing and their exper- tise is educating students. What they want to see is a better qual- ity of life for their students — not just inside the campus, but also outside of the classroom, which greatly depends upon the quality of their student housing. Our part- nership with them is not unique; it's very similar to others that we've done. The university will provide residence life services and we will provide everything else. When we're fnished with build- ing the community, it will be safe, secure, affordable and will have all of the amenities those students expect like bed/bath parity, robust Internet access, etc. The hope and plan is the students will achieve a type of success that we're seeing across the country in other P3s. For example, at the University of Kentucky — which is the largest P3 in the nation — the students' success rates have improved and university enrollment increases are exceeding national averages. All of this points to not only a fnancial success for Kentucky and for us as their partner, but also a success for the university's students. SHB: How is your public-private partnership with the University of Kentucky going? It is a multi-year project. Where are you and how is development coming? Churchey: The frst opening was in 2013, and since then we have opened buildings in 2014 and 2015 and additional buildings are under construction to open in 2016 and 2017. Most likely, there will be an additional phase in 2018. In the end approximately 9,000 new beds will be delivered at the University of Kentucky through ONE Plan — EdR's fnancial program that funds on-campus developments — with our equity while we man- age the property and the univer- sity manages the residence life. It's been an overwhelming success — the higher enrollment trends, retention rates and better grades. SHB: As the largest P3, what is this agreement with the University of Kentucky teaching you at EdR? Churchey: A lot. Before Kentucky, or really before the on-campus ownership model exploded over the last few years, we mainly owned off-campus communities. At our off-campus communi- ties, we provide some residential life services, but on-campus, and working with the university, the amount of services that they pro- vide in the residence life area is higher than what we do off-cam- pus. Students who live on campus desire those types of arrangements. We call it "learning outside of the classroom." Universities provide a variety of seminars based on per- sonal growth and engagement as well as topics of the day, so we've learned from them and added several things at our off-campus properties in different markets. You have to remember that in the off-campus environment some students don't want that, so we do temper it a little bit. The second thing we do is structure transac- tions so that there's a great align- ment of interests between the uni- versity and us. That sounds easy and it sounds like a buzzword, but it is a conscious part of the part- nership structure and moves us forward together throughout the process. Fortunately, because both entities knew that this agreement was for 9,000 beds, we both made this alignment and partnership a priority. We spent a lot of time up front to make sure the partners' interests were aligned, and it has been an essential part of our long- term success. SHB: This fall, you delivered about 3,000 beds. With the size of the company being what it is, how easy or diffcult is that to absorb? Churchey: We've averaged around $250 million per year in new projects for the past four or fve years, so that's kind of our run rate. We can do a little bit more, we can do a little bit less — but The largest public-private partnership in student housing is between the University of Kentucky and EdR. Pictured is a classroom in one of the new residence halls built under the EdR-UK P3.