public private partnerships for development of student housing oacubo presentation april 18, 2010

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


Supplement Prime

Contractors

Financing


Current Method

Owner







Supplement Prime

Contractors

RISK Financing


Current Method

Owner







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


Owner Financing

SHAREDRISK


Developer



Owner Financing

SHAREDRISK


Developer


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

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

public private partnerships for development of student housing oacubo presentation april 18, 2010

Documents

publicprivate partnership

private sector entities

private sector partners

private ownership model

growing public demand

public sector agencies

objectives of university

unreasonable university