January 19, 2011
In the realm of campus development, public-private partnerships are becoming a more common occurrence, but are nothing new. The trend began nearly 20 years ago as cash-strapped colleges and universities looked to the private sector to assist with the construction of student housing. Private development had been used previously to construct bookstores, student centers, and offices, so upon a key IRS decision in the 90’s, housing was the next natural extension of this arrangement. Private developers, with knowledge of real estate markets and the development process, saw that their skills could marry well with universities’ tax-exempt status, land holdings, and constant stream of tenants.
Universities are finding that this is a beneficial arrangement for a number of reasons. For one, it provides the obvious advantage of deferring the delivery and budget risks to the developer as well lessening the impact of the debt to the university’s books. This also makes the developer solely accountable for completing the project on time. When students sign contracts for the housing months in advance, they and their parents fully expect to move in at the designated date before the semester begins. If a project gets behind schedule and the facility is not ready for occupancy on day one of the contract, the developer is charged with finding suitable accommodations, usually in a nearby hotel, and arranging transportation to campus.
This partnership structure also leads to a more manageable bidding process that greatly reduces the amount of time and money needed to go from project inception to completion. As opposed to a standard process, whereby the university bids out separately for planning, design, and construction services in stages, with public-private development the university issues a single RFP for full-service developer-led teams. The developer is able to assemble a specialized team of architects, engineers, and contractors and leads the process while working intimately with university administration. The value of this type of integrated planning is that it allows for the entire team to discuss design and specification issues as they happen, rather than requiring the construction team to loop back with the design team over discrepancies, helping to keep the project on budget and on schedule. The development and construction process is also more streamlined because the developer is required to guarantee the design to the exact specifications agreed on by the University at a guaranteed maximum price.
Georgia, like a number of other states, does not provide public funding for housing development, which leads most public colleges and universities in the state to pursue public-private partnerships to increase their housing stock. In particular, Georgia Southern University in Statesboro, Ga. has built 2,900 new beds since 2003, each with varying design programs and rental rates, to attract undergraduate students to on-campus living throughout their college years. The most recent project to open is Centennial Place, completed in partnership with Ambling University Development Group, which includes 1,001 beds in apartments and suites as well as 10,000 SF of retail space. For this development, GSU’s third public-private housing development, the University set up a separate single-purpose non-profit LLC to own the project. GSU manages and maintains the property as part of its current housing program, with the LLC board providing oversight of the building’s finances and repair costs.
In the end, it’s the institution’s students, faculty, or staff, not the development team, who will be the users. As Vickie Hawkins, Director of Housing for Georgia Southern University, states, what is most important in the relationship is to choose a developer that is willing to treat the university as a customer and work collaboratively. “When disagreements arose on issues such as how much money was allocated to the project, interpretation of the contract, or interpretation of the University’s architectural standards, the clear, open, and honest communication as well as the strong working relationship that the university and developer had established was the key to effectively resolving these issues. You cannot have an adversarial relationship and get what you want out of the project.” The university’s administration has to be very involved with decisions on the design and material selection throughout the project.
Hawkins, who has been with Georgia Southern University for 30 years, offers the following advice for institutions seeking to enter into a public-private partnership.
Public-private partnerships do not work for all campus housing projects, but they do allow universities to drastically increase the stock of on-campus housing and other revenue producing campus facilities without relying on public money or donations. While it is too early to understand the long-term implications of this type of development, to date it has allowed a more efficient and collaborative process that can create a winning formula for both the universities and development teams involved.
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