Student Housing Business

JAN-FEB 2017

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

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VIE W FROM THE ACADEME January/February 2017 StudentHousingBusiness.com 36 require going over 8 percent, the board of trustees would have to approve that. We're looking at pub- lic-private partnerships to preserve our financing and debt capacity for academic buildings that aren't rev- enue generating, and utilize P3s as an innovative tool to finance these projects through revenue bonds. It only works for a project that is self-sustaining. SHB: Tell us about the public-pri- vate partnership UMass has with Capstone to build housing on the Boston campus. How did that begin? Filippone: We established as part of the Building Authority Board a public-private partnership commit- tee, which established a public pro- curement process to provide hous- ing. The first project that we looked into was the residence halls on the Boston campus. Through our P3 committee, we determined certain goals that must be met in order for the project to work for the univer- sity: We did not want the project to negatively impact our debt ser- vice ratios or our credit ratings; and we wanted the deal structure to design, build, construct, finance and operate the asset through a ground lease. The ground lease would be for 40 years, and would continue 10 years after the debt is actually paid off. The project was evaluated by two rating agencies, S&P; and Moody's, and got invest- ment grade ratings, which is the best rating you can get for a project that hasn't even begun. We went to market at the end of October 2016, and closed on those bonds on November 8. We financed $139 million to build this 1,087-bed resi- dence hall facility for the Boston campus. As you mentioned, it is being developed by Capstone, selected through an RFP process. They partnered with a sister com- pany called Capstone On-Campus Management (COCM). UMBA has a 15-year operating agreement with COCM to manage the resi- dence hall. We hired Provident as a 501 (c)(3) non-profit entity; and created a Massachusetts company called Provident Commonwealth Education Resources Inc., which is a 501(c)(3) entity, which will be utilized by the University of Massachusetts to issue the debt and own and operate this housing facility for the next 40 years. At the end of the 40 years, the asset will be transferred back to the uni- versity. There are covenants within the agreement where they have to maintain the asset, and there's an operating committee and a board that will contribute to reviewing the operating budget and assign- ing the rents to the housing. SHB: Is that public-private part- nership satisfying a need or a demand on that campus? What are the benefits to the university and how does the public-private part- nership satisfy that? Filippone: It's a commuter school right now; they don't have any housing. We've been trying to put housing there for the last 15 to 20 years. This is just a model where we're going to have a proven, suc- cessful developer in Capstone, and an operator come in and actually design/build the housing and help market it. We'll have our own resi- dential life, but we'll help market the beds and have it be the first 1,000 beds at our Boston campus. The governor of Massachusetts had to approve the project, and the suc- cess of this building will allow us to go back to the governor and get approval to hopefully build more housing on-campus, if needed. When UMass did its master plan 10 years ago, for this campus, it was envisioned that residential housing with 2,000 beds would be built. SHB: Is this the first P3 that the UMass Building Authority has done? Filippone: Yes. It's the first public- private partnership we've done on our own land, and it's the first residence hall with a public-private partnership on the Boston campus. SHB: That's got to be a difficult project being in a relatively urban area, right? Filippone: Right. It's being built on land that was a parking lot, so obviously the parking lot has been taken offline. The campus had a parking garage, which also closed in 2006. So, we're also building a new 1,400-car parking garage on-campus that will be ready next December to fulfill that need. It's challenging, but we are very excit- ed for the finished project. SHB: What are the next projects for the Building Authority? Filippone: Right now on the Boston campus, we're finishing up the utility corridor project; we're about 50 percent done. We're working on the 1,400-car parking garage, which just got in the ground this month. That will be done next January. We're doing the residence A public-private partnership with Capstone is developing 1,087 beds at UMass Boston.

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