Universities Are Increasingly Asking Private Developers To Build Their Student Housing
As universities look to attract and retain students in a drastically more competitive landscape without blowing their budgets, they are increasingly turning toward the private sector and public-private partnerships to address their student housing needs.
These partnerships vary greatly in their approach, depending on the university or system they are applied to and the development partner the school brings in.
Drexel University Vice President of Campus Services Rita LaRue has worked closely with American Campus Communities on their partnership. ACC occupies university-owned property via a ground lease, and owns, operates and markets its three student housing buildings: Summit, Chestnut Square and University Crossings. The students sign leases directly with ACC.
LaRue said this is not a hands-off approach. Drexel and ACC's relationship is collaborative, she said; the two entities have a joint advisory board that meets regularly to discuss the services provided to students in ACC housing.
Another private student housing developer has a different approach, which it applied to its two most recent public-private partnerships.
In 2015, Corvias launched a $538M agreement with the University System of Georgia Board of Regents to develop, construct, manage and maintain 3,753 new beds and 6,195 beds across nine campuses, the first instance of a state system privatizing its entire student housing portfolio. It also signed a 40-year deal with Detroit's Wayne State University involving $300M in upfront program capital, with 3,100 existing beds renovated and 841 new beds delivered.
Corvias has entered a “partnership concessionaire” agreement with Wayne State, where the university handles all forward-facing services, collects revenues, executes its own marketing and leasing, and maintains ownership of assets and cash flow, according to Corvias Partnership Innovator Greg Cannito.
Corvias then operates it on a fixed partnership fee, managed for the broader performance and delivery of long-term maintenance and sustainability. This way, the cash flow and assets stay with the university, while the financing is taken out of Corvias’ balance sheet.
Public-private partnerships are relatively new to the student housing sector. They have traditionally been seen in municipal infrastructure projects, or in Corvias’ case, first with military housing for the Department of Defense.
Though parallels have usually been drawn between multifamily and student housing, Cannito sees more similarities with the firm's government projects, with both struggling to address a deferred maintenance backlog and costs increasing much faster than revenues. Additionally, student housing needs to be “consistent with the culture” of the university, he said, something multifamily developers do not need to take into consideration.
Universities are sometimes pushed by time constraints to build in a reactionary manner, Cannito said, with the only consideration being to deliver more beds or deliver their capital program. Instead, Cannito suggests taking a “go slow to go fast” holistic approach to consider infrastructure in the long run.
LaRue emphasized that Drexel’s primary motivator in seeking the partnership was to make sure its academic resources were going toward its academic needs, and to increase access and affordability for students.
“We can never dust off our hands and say that we’re done,” she said.
Ultimately, universities are looking to free up their resources to focus on their core competency: providing the best education to students. While student housing is part of that experience, it ultimately exists to help students succeed in their time at the school.
Considering the current nationwide attention being paid to costs and spending at universities around the country, public-private partnerships could be an important way for schools to gain a financial advantage over their competition.
Learn more about public-private partnerships and the rapidly growing student housing sector at Bisnow's Big East Coast Student Housing event on June 29 in Philadelphia.