Student Housing Thrives in Public/Private Partnerships
By Tonie Auer, Contributing Editor
September 14, 2009 – At a time when many construction projects languish in limbo awaiting the turnaround of the economy, university projects continue moving forward.
“The higher education market is going fairly strong because there are only a few markets with money and that market is moving at a fairly strong pace,” Rick Johnson, COO of student housing developer Collegiate Development Services in Irving, Texas, told CPE.
“We’re seeing more universities embracing public/private partnerships, mainly because of the overall economy,” Johnson added. “Endowments are down and there is less money for facilities. Student housing is a revenue generator. So, there is an avenue for universities to pay for the project by itself or defray most of the costs,” he added.
Most institutions have a combination of bonds and private funding. It is a different financial market to allow those construction markets to continue to move forward, Terry Clower, associate director for the Center for Economic Development and Research at the University of North Texas, told CPE.
“For universities, it is not a matter of going to a bank and borrowing money,” Clower said. “If they have borrowed money, it is typically pledged against tuition and consistent revenue patterns. Universities overall are in a much different position of the way that they fund programs.”
Johnson agreed and said it depends on what kind of financing the university is bringing to the project.
“Tax exempt financing is fairly inexpensive,” he said.
Collegiate Development Services recently finished a project at Midwestern State University in Wichita Falls, Texas. The university brought the financing through the state of Texas.
“For smaller universities, in particular, the private/public partnership provides a single point of contact. They’re bringing in someone with expertise regarding what students want in today’s market. It does change as time goes on and smaller schools don’t always have that expertise,” Johnson said.
The use of public/private partnerships for student housing is growing, added Roger Phillips, vice president of development and acquisition for Campus Living Villages of Houston.
“Speed and cost are the two big reasons,” Phillips told CPE. “Getting state funding may take a while to get approved, so going the public/private route allows the developer to go to the market and finance those projects when you’re ready to do them. With student housing, universities are generating income for the life of that debt. At the end of the term, you can continue to operate debt free or if you want to start over, you have no debt on it.”
