public private partnerships for development of student housing
DESCRIPTION
Public Private Partnerships for Development of Student Housing. OACUBO Presentation April 18, 2010. Participants. Developer/Manager: Collegiate Companies Brian Jones, Vice President Architect: BHDP Architecture Paul Orban, AIA, LEED AP Market Leader - PowerPoint PPT PresentationTRANSCRIPT
Public Private Partnershipsfor Development of Student
Housing
OACUBO PresentationApril 18, 2010
ParticipantsDeveloper/Manager: Collegiate Companies
Brian Jones, Vice President Architect: BHDP Architecture
Paul Orban, AIA, LEED APMarket Leader
Construction Manager: Quandel Construction Services
Mark Welling, PEDirector of Development
Finance: ParenteBeard
Liz McMahon, CPASenior Manager
Legal: Ohio Attorney General Office
Jerry Kasai, Assistant Attorney GeneralJon Walden, Assistant Attorney General
YOUR CURRENT PROJECT DELIVERY
Current Method
Owner
Architect General Contractor Prime
Mechanical Contractor Prime
Plumbing Contractor Prime
Site Contractor Prime
Electrical Contractor Prime
Site Contractor Prime
Supplement Prime
Contractors
Financing
YOUR CURRENT PROJECT DELIVERY
Current Method
Owner
Architect General Contractor Prime
Mechanical Contractor Prime
Plumbing Contractor Prime
Site Contractor Prime
Electrical Contractor Prime
Site Contractor Prime
Supplement Prime
Contractors
RISK Financing
YOUR CURRENT PROJECT DELIVERY
Current Method
Owner
Architect General Contractor Prime
Mechanical Contractor Prime
Plumbing Contractor Prime
Site Contractor Prime
Electrical Contractor Prime
Site Contractor Prime
Supplement Prime
Contractors
Financing
ARCHELEC PRIMEPLUM PRIME
MECH PRIMEGEN PRIME
PERMITPLANNER LAWYER OWNER SITE PRIME
CONSULTSCOST EST
RISK
PUBLIC PRIVATE PARTNERSHIP DELIVERY
Owner Financing
Public Private PartnerTeam
Developer
Construction ManagerArchitect
PUBLIC PRIVATE PARTNERSHIP DELIVERY
Owner Financing
SHAREDRISK
Public Private PartnerTeam
Developer
Construction ManagerArchitect
PUBLIC PRIVATE PARTNERSHIP DELIVERY
Owner Financing
SHAREDRISK
Public Private PartnerTeam
Developer
Construction ManagerArchitect
DEVELOPER/OWNER
CMARCHITECT
DESCRIPTION OF PUBLIC PRIVATE PARTNERSHIPS
Basic Definition:A public-private partnership is a contractual agreement formed between public and private sector partners.
A public-private partnership exists when public sector agencies (federal, state, or local) join with private sector entities and enter into a business relationship to attain a commonly shared goal, which also achieves objectives of the individual parties.
HISTORY OF PUBLIC PRIVATE PARTNERSHIPS
• Early Public Private Partnerships:• Unreasonable University Guarantees• Lackluster Returns to the University• Lack of University Control
• Current Public Private Partnerships:• Multiple models were formed.• Models are typically a hybrid between
traditional university development and private ownership model.
• These models better align the objectives of University and PPP Team.
WHY ENTER INTO PUBLIC PRIVATE PARTNERSHIPS?
• Traditional funding sources are not keeping pace with infrastructure investment needs and the growing public demand for services.
• PPP’s allow private sector development companies to do what they do best…develop projects, and allows Colleges and Universities to focus on what they do best…educate students.
• Projects can be delivered more quickly than traditional university-led development.
• Projects can be delivered at a lower cost than traditional university-led development.
BASIC DELIVERY STRUCTURES
There are Three Basic Delivery Methods Used Today for the Construction of Student Housing:
• Design Bid Build: Traditional University Debt• Developer Owned: Conventional Debt
Financing • Privatized Finance: Tax Exempt Financing.
COMPARISON OF DELIVERY STRUCTURES
Capital investment by University? Yes No NoCross-collateralized - Other University Revenue? Yes No
NoUniversity liable for repayment of debt? Yes No NoDirect University control over project? Yes Yes NoUniversity controls design decisions? Yes Yes NoUniversity controls management decisions? Yes Yes NoUniversity receives all surplus net cash flows? Yes Yes
NoUniversity ownership of the land and leasehold? Yes Yes
YesProject ownership? University501(c)3
DeveloperProperty taxes paid? Exempt Exempt Yes
Who controls rents to students? UniversityUniversity Developer
Construction Management
Traditional Debt
Privatized
FinanceTax
Exempt
Developer Owned
Conventional
Financing
UNIVERSITY REVENUE BONDS – WHAT DOES IT TAKE?
University Liability For Repayment of Debt (reduction in debt capacity for other campus projects)
State and University Board Approval to Issue Bonds (time and costs) University Dedication of Staff Resources Obligation to Follow State Procurement Regulations for Each
Contract of Project (time and costs) Cross-collateralization with other University Revenues_______________________________________________Using this means of finance, the University will receive similar benefits as tax-
exempt bond financing. However, the University is directly taking on a much higher degree of financial risk and liability. The bond interest rate would be projected to be approximately 50-100 bp lower (depending on the credit of the University, final tax exempt bond structure and degree of University support).
DEVELOPER OWNED – CONVENTIONAL FINANCING
Land is leased to developer for term of 40-50 years.
Developer secures 100% of the financing for the project from bank and equity sources.
Developer contracts with architect and construction manager.
Leaseback Option: Upon completion, title to the improvements and facility equipment and furnishings are transferred to the University and leased back to Developer via the ground lease agreement.
DEVELOPER OWNED – CONVENTIONAL FINANCING
PPP team manages the project. Developer and University share in cash flows
generated from the project. The University will have the ability to buy-out
Developer’s interest at any time during the lease for the lesser of 1) fair market value or, 2) the sum of the outstanding debt and the net present value of Developer’s future share of the cash flows.
At the end of the 30-year lease period the University owns the facility free and clear provided that the debt has been fully amortized.
TAX-EXEMPT FINANCING – WHAT DOES IT TAKE?
Qualified Tax-exempt Borrower Qualified Issuer Ground Lease of Selected Site to Borrower College Participation in Marketing, Leasing,
Residential Life University Accepts Surplus Cash Flows as
Ground Lease Payment
PRIVATIZED FINANCING APPROACH
Type: Tax-exempt Bond Financing Borrower: 501(c)(3) Corporation Issuer: Qualified State or Local Entity Term: Approximately 30 Years Rate: Fixed or variable rate, enhanced
with a letter of credit Structure:College leases the site to the Borrower
100% of Net Cash Flow Reverts to University
BENEFITS OF TAX-EXEMPT FINANCING STRUCTURE
100% Tax Exempt Bond Financing Non-Recourse Debt to Institution Second Lowest Cost of Capital Lower Rents versus Taxable Structures
University retains Direct Control over Entire Project
Non-Subordination of Land Title Flexible Management Options Maximizes Return to University
College / University
Architect Construction Manager
Trustee
Bonds BondProceeds
BondIssuer
Underwriter
Tax-Exempt Entity
501(C)(3) LLC
GroundProject &
ManagementControl
Lease
Project Development Agreement
Ground LeasePayment
ManagementContract
PRIVATIZED FINANCING APPROACH FLOW CHART
THE ARCHITECT’S ROLE
Programming Phase What are the
strategic goals from a business perspective?
The “End User” The Owner’s Interests Coordinating the
Team
CONSTRUCTION MANAGER’S ROLE
Early Involvement Building Information Modeling Constructability Estimating and Budget Control Schedule and Weather Analysis Cost Saving Ideas LEED/Green Practices Local Contractors and Suppliers Phased Bid Packaging
Working with aPublic Private Partnership
Team
STEPS TO WORKING WITH PPP TEAM
1. Determine Need and Develop a Consensus2. Determine Feasibility through Market Study3. Set the Procurement Process• RFP or RFQ?• Clearly Outline Goals of Project• Clearly Detail Desired Project Structure• Legal Review of Final Document• Set a Timetable and Stick to It
4. Select Team and Negotiate Agreement5. Assign Appropriate Individuals as Point of Contact
from University6. Hold Regular Meetings to Update Status and
Review Budgets, Plans and Specifications. Communication is Critical!
Determining Size of Project• Market Study and Surveys• Review of Enrollment Projections• Review of Competitive Peer Institutions
Determining Room Configuration• Age of Students• Type of Housing Students Currently Live In• Campus Culture• Surveys
Determining Amenities and Common Areasto be Included
• Suites vs. Apartments• Cost vs. Rent• Student Surveys
Feasibility: Feasibility: Project ScopeProject Scope
What Do Students Want in a Community?What Do Students Want in a Community?
Top Requests
PrivacyPrivacy
SecuritySecurity
TechnologyTechnology
Natural LightNatural Light
Useful AmenitiesUseful Amenities
Open Green SpaceOpen Green Space
Quiet SpaceQuiet Space
StorageStorage
ConvenienceConvenience
What Do Students Want in their Units?What Do Students Want in their Units?
Top Requests
PrivacyPrivacy
Private/Semi-Private Private/Semi-Private BathroomsBathrooms
SecuritySecurity
TechnologyTechnology
Natural LightNatural Light
Stylish FurnitureStylish Furniture
Quiet SpacesQuiet Spaces
StorageStorage
COMMON AREAS AND AMENITIESCOMMON AREAS AND AMENITIES
Example Projects
EDISON STATE COLLEGE
EDISON STATE COLLEGE
MIDWESTERN STATE UNIVERSITYMIDWESTERN STATE UNIVERSITY
NICHOLLS STATE UNIVERSITYNICHOLLS STATE UNIVERSITY
QUESTIONSQUESTIONSDeveloper/Manager: Collegiate Companies
Brian Jones, Vice President Architect: BHDP Architecture
Paul Orban, AIA, LEED APMarket Leader
Construction Manager: Quandel Construction Services
Mark Welling, PEDirector of Development
Finance: ParenteBeard
Liz McMahon, CPASenior Manager
Legal: Ohio Attorney General Office
Jerry Kasai, Assistant Attorney GeneralJon Walden, Assistant Attorney General