More Developers Enrolling in Campus Housing
Baby boomers heading to college in the 1960s created the last campus housing building spree, but now the boom echo is creating a similar phenomenon and colleges and universities are racing to replace and upgrade aging dormitories.
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University of Maryland Debt-service capacity at the University of Maryland in College Park is stretched, leading the university to contract with private developers to build and manage new residence facilities. Capstone Development Corporation is currently In a first-of-its-kind arrangement, Capstone will manage all aspects of the housing program except for residence life, although the stipend to pay for residence life will be built into the firm’s budget. Residence advisors will still be employed by the university, while functions such as accounting and maintenance will be handled by Capstone. The other private firm contracting with the university is Ambling Companies Inc., which opened a 704-bed facility last fall. Prairie View A & M University The new $12.5 million living/learning center for freshman at this Texas university is the most recent phase of nation’s largest privatized student housing development. American Campus Communities of Austin, Texas, previously completed three phases of upperclassman residence hall construction at the school, but the university was struggling with freshman recruitment and retention. The latest housing complex, which opened last fall, is designed for first-time students and centralizes orientation, advisement, mentoring, and student support services. The new facility sits at the heart of the campus, making first year students feel connected to the campus. Near the facility’s central courtyard, the planning team included offices for 20 university guidance counselors, who will provide both academic and social counseling. The facility’s 150-seat mini-theater was designed to accommodate an entire residence hall population to take part in events such as movies, multi-media programs, and academic instruction. Housing 1,260 freshman, the new complex brings the total number of beds provided by American Campus Communities to 3,100. A general manager from the American Campus Communities staff is overseeing all four facilities. Community assistants in each complex are students employed by the company; the ratio is one assistant for every 34 residents. University of Pennsylvania University officials considered outsourcing student housing as part of an $80 million renovation, but decided to manage the project traditionally. This summer’s construction schedule represents the Overall, private residential colleges, especially Ivy League institutions, have so far proved more reluctant to enlist private student housing developers, according to Tom Hier at Biddison Hier LLC, which performed programming services for the university, located in Philadelphia. College of Santa Fe A decision by the college to draw upperclassmen back to campus with apartment-style housing resulted in revenues of $100,000 per year. The complex is the first of its kind for the New Mexico school. Dekker/Perich/Sabatini has completed five student housing projects as part of a partnership called Housing Solutions, also based in Santa Fe. After receiving the turnkey project from the firm in 1998, The complex itself features small windows looking onto a central courtyard-a concept originally used for defense in New Mexico’s early history. Inside the “pueblo deco” facility are 48 two-bedroom/two-bathroom units each with a kitchen. The cost per bed was $28,000. Linfield College Student housing is now viewed as a customer-driven market and designers are listening. Students at Linfield College in McMinnville, Ore., were quick to offer suggestions when surveyed about a proposed new residence hall. “The administration needed to be convinced,” said Gary Meddaugh of Student Housing Northwest, a non-profit organization that has provided program consulting and management services at residence halls for 31 years. Suggestions that topped students’ lists included a washer and dryer in every unit and more storage space. Working as a team with Mahlum Architects, Student Housing Northwest recommended closets that are Separate outside access to each unit also was a priority for students at the private college where 75 percent of the student body lives on campus. The recently completed complex is a blend of apartments and suites with 12 two-bedroom units, two three-bedroom units, and 50 four-bedroom units. |
completing the university’s latest complex, including a 454-bed residence hall expected to open by fall, followed by another 256-bed facility in January. Most units will provide students with private rooms featuring voice/video/data capabilities and shared bathrooms for two.
third of four phases for the 1,500-bed project on the school’s historic Quad. The building’s student lounge is shown here. A 106-year-old structure will receive new infrastructure and HVAC as part of the renovation, designed by the architecture firm of Ewing Cole Cherry Brott. 
school officials report the two-story complex is now 100 percent occupied with a long waiting list. 
six feet long rather than the conventional four feet. And after Student Housing Northwest found a supplier of washing machines to provide coin-operated units at no expense to the college, officials approved the plan. “Housing is filled to the gills right now,” says Tom Hier, programming consultant at Biddison Hier Ltd. “In fall 2000, you couldn’t pick up a paper without reading about a college using double units as triples and struggling to place all their students.”
Seizing on the need to deliver projects quickly, private firms that build-and often times manage-on-campus residential facilities claimed a large portion of the market in the south and are making inroads in other regions. Even schools that do not outsource projects are forced to view their on-campus programs in a more business-like way.
Private housing firms still face state-by-state regulatory hurdles. And although privatization of bookstores and foodservices are common, private residence halls are less so. The industry, therefore, faces skepticism about the private sector’s role in student housing, which is nearer the core of the institution’s identity.
But the outlook for both the student housing construction market and for private firms is excellent; not only are construction rates rising, the quality of the buildings is improving. And, within the last five years, the amount spent per bed has doubled.
Accounting for the increases are redesigned and feature-laden facilities. Apartments and suites are replacing the double-loaded corridor and bathrooms shared by 30 students. New facilities for freshmen are rarely planned with more than eight students to a single bathroom, and private baths and kitchens abound in the effort to lure upperclassmen back to the campus. And, in today’s information age, all rooms feature wiring for voice/video/data.
Regional Results
Private developers/managers have done much to help colleges rethink student housing. And the south is where a lot of the rethinking is done; the region accounted for more than half of the privatized student housing constructed in the last five years. The trend has caught on in the southwest and is gradually migrating to the rest of the country. The reason: private developers working with state regulators and the finance industry to create a comfortable climate in which to partner with public universities-private colleges, tending to tradition, have not sought out private firms at the same rate as public institutions.
“Other than stock car racing and country music, this may be the only thing to come out of the south that’s spreading across the country,” said Michael Mouron, referring to privatize residence hall construction. Mouron is president of Birmingham, Ala.-based Capstone Development Corporation, which leads the market in the number of on-campus projects completed over the past seven years.
Mouron says Capstone introduced off-balance sheet, non-taxable debt to the industry, allowing schools to financially partner with private developers and still maintain their tax-exempt status. Off-balance sheet financing has since become standard practice and, next to the delivery speed offered by private firms, has become a primary appeal to colleges even though the institution can arrange it without a developer.
“An earlier model invalidated the three key advantages that colleges and universities have over the private sector: they can use tax-exempt debt, they’re exempt from property taxes, and in most cases they already own the land,” says Mouron. “We set about to come up with a new model that would preserve these three advantages.” School-affiliated foundations now serve as not-for-profit owners of private developments.
In addition, the Internal Revenue Service approved unaffiliated foundations, such as the College Housing Foundation, to work with multiple institutions as a tax-exempt, 501(c)(3) entity. The IRS has since taken a small but costly step back from its original position and is currently auditing the College Housing Foundation to reevaluate its 501(c)(3) status. The IRS’ indecision produced a cloud that has lead many colleges to back away from building through unaffiliated foundations as they wait for a definitive statement from the agency.
Private industry also is getting a boost from government regulations. The state of Georgia, for example, eliminated funding for residence halls. “Culturally, the south has been more pro-business,” says Cecil Phillips, formerly a lawyer and executive assistant to the governor of Georgia, currently president of Atlanta-based Place Collegiate Properties. Phillips played a leading role in Georgia’s regulations allowing it to eliminate residence hall funding. The rules were changed to permit non-state entities to own campus housing and to allow steel stud construction.
“I spent three years persuading the attorney general that our structure passed legal muster, so that there was no direct or indirect, contingent, moral, or legal obligation on behalf of the university system, the state, or the taxpayers, either to finance these projects on the front end or rescue it on the back end,” Phillips said.
Phillips adds that private developers do not share in the cash flow or appreciation in the housing as an asset, taking only what is left over from operating expenses, debt service, and reserves. “All the money stays with the affiliated or unaffiliated foundation to do with what they want,” he says.
Florida and Texas followed Georgia with policy and regulatory revisions of their own. Tennessee, North Carolina, South Carolina, and Connecticut are in the process of revising their regulations. Among states considering a similar action are Alabama, Missouri, Wyoming, Kansas, and the highly active market, California. “There is hesitance on the part of the University of California and Cal State systems to embrace the autonomy required when letting campuses develop housing on their own,” says Capston’s Mouron. “There’s a little friction between some of the schools that would like to develop private housing and the system that wants to maintain centralized control,” he says.
Sophomore Industry
Barely 10 years old, the new student housing market continues to mature, and both the institutions and the developers are asking better questions than just a few years ago when some colleges started to overbuild, rushing to construct a second phase of apartments based solely on the success of the first. “We’ve had to say, wait a minute, maybe what you need to do instead is replace your suites, not just run in and build all apartments,” says Mouron.
A few years ago, amenity-filled apartments were being built more than suites and, while colleges and universities continue to take this route with success, apartments have lost their edge to the less expensive suite setup-typically, two double rooms with a bathroom in the middle, housing four to six students.
One rationale favoring apartments was the belief that, because the current generation of students did not share a bedroom at home, they will not share a bedroom in college. “This [idea] is patently untrue, at least for freshmen and some sophomores,” says Hier. “In almost every institution where we’ve undertaken our market research, freshmen are looking for the traditional residence hall experience. They’re looking for the double-loaded corridor and a community bathroom where they share four, six, or even eight to a bathroom,” said Hier.
And, because not all existing housing is of the poor quality associated with 1960s dorms, renovation and remodeling also has its place in the building boom. Grand old facilities are being outfitted with new necessities: private telephone lines, cable TV, and high-speed Internet connections.
Entering the Market
Schools need to be clear about their objectives before going to a developer, says Hier. Market research on both the students and the local housing market is necessary to determine what kind of housing to build and what kind of financing options are best. The model should be developed from an economic standpoint, but schools are not always so thoughtful.
Private developer/managers often act as the prod to get colleges thinking about their student housing as a source of revenue, providing the rigorous accounting schools often lack. “Most universities we talk to don’t account for their housing system in that way. Housing is lumped in with maintenance for the campus along with the library and the president’s house. They really don’t know how much it costs every year in window replacement or light bulbs,” says Phillips. A situation that makes the outlook for private developers appear healthy.
“However,” cautions Hier, “the jury is still out on privatization. When the housing is 25 years old and some of those leases are coming to an end, that will be the time when one can look back and say if this was an experiment that worked or not.”
