Student Housing P3s Are Racking Up, And Not Everyone Is Happy About It
University leaders are finding it easier, in an era of tight state funding, to pull the trigger on student housing and campus development using public-private partnerships.
Park West, on 50 acres of former horse pasture land in College Station, Texas, is the latest in P3 development, and it highlights the benefits of the system — and why some are against P3s on college campuses.
The Texas-sized $368M, 3,400-bed project on the campus of Texas A&M University has a slew of amenities: 140 study and communal areas, a game room, three fitness centers, three resort-style pools and green space that “represent the student living experience modern students and their parents seek,” according to Servitas, the Irving-based partner that developed and will manage the property.
“More and more universities are willing to transfer some of the risk in construction and even in lease-up to the private section,” Servitas Vice President of Development Angel Rivera said. “At the same time, there is an incredible demand for this asset class ... at a price that is relatively inexpensive compared to the market.”
Park West, within walking distance of classes and football on George Bush Drive, incorporates units with various price points, from $600 to $1K per month. The P3 arrangement also allows Servitas to bring the project to market quickly, within two years. That is important for the flagship campus adding 1,300 students a year to a small town.
The public-private partnership model for Park West works like this: Texas A&M University owns the land. The nonprofit National Campus and Community Development Corp. of Austin will hold a 32-year ground lease on the land. The Texas A&M University system picked Servitas to enter a contract with NCCD in 2015. Texas A&M will own Park West at the end of the ground lease.
The university system considers the deal a plus because Servitas takes the risk under the contract negotiated with NCCD. The contract provides the university with upfront and annual payments that will eventually total $600M. The university provides campus security and a bus stop for the units. Servitas manages a property already in high demand on campus, within walking distance of classes and with a view of Kyle Field from its pool deck.
Servitas’ portfolio is all in partnership with universities and almost exclusively student housing. Park West is the company's largest project to date, with additional P3s at Blinn College, Midwestern University and Florida International University. Texas A&M University has used the P3 model almost exclusively in recent years to expand access to student housing.
Other projects have included White Creek Apartments, U Centre at Northgate, Easterwood Airport and Century Square. The five properties are expected to generate up to $1B in revenue, which university officials expect to reinvest in the university system over time.
Public-private partnerships are not limited to large universities. In the case of Blinn College, a P3 was a crucial option for expanding the campus, which is in rural Brenham, Texas.
"This is an excellent option for a school like Blinn, strong on campus culture and student experience," Rivera said. "There's almost no off-campus rental options in that market, and there's not a whole lot of people looking to build an apartment complex in the town of 4,000."
Blinn and Servitas will co-manage the dorm, with Blinn handling the placement of students through its student housing office. The cost of land is zero to the developer, and the financing terms are excellent for bondholders.
"It also brings a student housing expert into the conversation," Rivera said. "That's all we do. So they can do their staff and budget and regulatory and student issues, and we can worry about housing."
But not everyone is happy with the creation of so many tax-exempt facilities. Last year, Brazos County Attorney Rodney Anderson asked for an opinion as to whether this hybrid project — private construction on public land — should be paying taxes to the city and county. Attorney General Ken Paxton eventually ruled Park West could keep its tax exemption.
More recently, College Station Mayor Karl Mooney expressed concerns that streets around campus were not built to carry so much additional traffic, and the project's tax-exempt status meant it would not be paying its portion of the cost to build roads. At the least, the city would like a seat at the table when the university system makes plans to put hundreds of apartment units on the ground.
“The leaders and staff of the City of College Station are always willing and ready to work in partnership with Texas A&M University and the Texas A&M University System,” Mooney told local newspaper The Eagle. “It is a consistent objective of the city to be helpful in the university’s growth and changes. For that purpose, city leaders and staff welcome any opportunity to engage in planning and addressing the needs of the university and the system, especially when those plans will have a direct impact on our community.”
Texas A&M University's next P3 project, also with NCCD, will be a 250-room hotel and conference center. The university has agreed to pay hotel occupancy taxes on the property, which will open in 2018.
Learn more about P3s in student housing at Bisnow's Annual Student Housing event, an all-day conference in Austin Nov. 7.