1. Public Private Partnerships for Development of Student Housing OACUBO Presentation April 18, 2010

2. Participants Developer/Manager:Collegiate Companies Brian Jones, Vice President Architect: BHDP Architecture Paul Orban, AIA, LEED AP Market Leader Construction Manager: Quandel Construction Services Mark Welling, PE Director of Development Finance: ParenteBeard Liz McMahon, CPA Senior Manager Legal: Ohio Attorney General Office Jerry Kasai, Assistant Attorney General Jon Walden, Assistant Attorney General

3. YOUR CURRENT PROJECT DELIVERY Current Method Owner Architect General Contractor Prime Mechanical Contractor Prime Plumbing Contractor Prime Site Contractor Prime Electrical Contractor Prime Site Contractor Prime Supplement Prime Contractors Financing

4. YOUR CURRENT PROJECT DELIVERY Current Method Owner Architect General Contractor Prime Mechanical Contractor Prime Plumbing Contractor Prime Site Contractor Prime Electrical Contractor Prime Site Contractor Prime Supplement Prime Contractors RISK Financing

5. YOUR CURRENT PROJECT DELIVERY Current Method Owner Architect General Contractor Prime Mechanical Contractor Prime Plumbing Contractor Prime Site Contractor Prime Electrical Contractor Prime Site Contractor Prime Supplement Prime Contractors Financing ARCH ELEC PRIME PLUM PRIME MECH PRIME GEN PRIME PERMIT PLANNER LAWYER OWNER SITE PRIME CONSULTS COST EST RISK

6. PUBLIC PRIVATE PARTNERSHIP DELIVERY Owner Financing Public Private Partner Team Developer Construction Manager Architect

7. PUBLIC PRIVATE PARTNERSHIP DELIVERY Owner Financing SHARED RISK Public Private Partner Team Developer Construction Manager Architect

8. PUBLIC PRIVATE PARTNERSHIP DELIVERY Owner Financing SHARED RISK Public Private Partner Team Developer Construction Manager Architect DEVELOPER/OWNER CMARCHITECT

9. DESCRIPTION OF PUBLIC PRIVATE PARTNERSHIPS Basic Definition: A public-private partnership is a contractual agreement formed between public and private sector partners. A public-private partnership exists when public sector agencies (federal, state, or local) join with private sector entities and enter into a business relationship to attain a commonly shared goal, which also achieves objectives of the individual parties.

10. HISTORY OF PUBLIC PRIVATE PARTNERSHIPS Early Public Private Partnerships: Unreasonable University Guarantees Lackluster Returns to the University Lack of University Control Current Public Private Partnerships: Multiple models were formed. Models are typically a hybrid between traditional university development and private ownership model. These models better align the objectives of University and PPP Team.

11. WHY ENTER INTO PUBLIC PRIVATE PARTNERSHIPS? Traditional funding sources are not keeping pace with infrastructure investment needs and the growing public demand for services. PPP’s allow private sector development companies to do what they do best…develop projects, and allows Colleges and Universities to focus on what they do best…educate students. Projects can be delivered more quickly than traditional university-led development. Projects can be delivered at a lower cost than traditional university-led development.

12. BASIC DELIVERY STRUCTURES There are Three Basic Delivery Methods Used Today for the Construction of Student Housing: Design Bid Build: Traditional University Debt Developer Owned: Conventional Debt Financing Privatized Finance: Tax Exempt Financing.

13. COMPARISON OF DELIVERY STRUCTURES Capital investment by University?YesNoNo Cross-collateralized - Other University Revenue?YesNoNo University liable for repayment of debt?YesNoNo Direct University control over project?YesYesNo University controls design decisions?YesYesNo University controls management decisions?YesYesNo University receives all surplus net cash flows?YesYesNo University ownership of the land and leasehold?YesYesYes Project ownership?University501(c)3Developer Property taxes paid?ExemptExemptYes Who controls rents to students?UniversityUniversity Developer Construction Management Traditional Debt Privatized Finance Tax Exempt Developer Owned Conventional Financing

14. UNIVERSITY REVENUE BONDS – WHAT DOES IT TAKE?  University Liability For Repayment of Debt (reduction in debt capacity for other campus projects)  State and University Board Approval to Issue Bonds (time and costs)  University Dedication of Staff Resources  Obligation to Follow State Procurement Regulations for Each Contract of Project (time and costs)  Cross-collateralization with other University Revenues _______________________________________________ Using this means of finance, the University will receive similar benefits as tax-exempt bond financing. However, the University is directly taking on a much higher degree of financial risk and liability. The bond interest rate would be projected to be approximately 50-100 bp lower (depending on the credit of the University, final tax exempt bond structure and degree of University support).

15. DEVELOPER OWNED – CONVENTIONAL FINANCING  Land is leased to developer for term of 40-50 years.  Developer secures 100% of the financing for the project from bank and equity sources.  Developer contracts with architect and construction manager.  Leaseback Option: Upon completion, title to the improvements and facility equipment and furnishings are transferred to the University and leased back to Developer via the ground lease agreement.

16. DEVELOPER OWNED – CONVENTIONAL FINANCING  PPP team manages the project.  Developer and University share in cash flows generated from the project.  The University will have the ability to buy-out Developer’s interest at any time during the lease for the lesser of 1) fair market value or, 2) the sum of the outstanding debt and the net present value of Developer’s future share of the cash flows.  At the end of the 30-year lease period the University owns the facility free and clear provided that the debt has been fully amortized.

17. TAX-EXEMPT FINANCING – WHAT DOES IT TAKE?  Qualified Tax-exempt Borrower  Qualified Issuer  Ground Lease of Selected Site to Borrower  College Participation in Marketing, Leasing, Residential Life  University Accepts Surplus Cash Flows as Ground Lease Payment

18. PRIVATIZED FINANCING APPROACH  Type:Tax-exempt Bond Financing  Borrower:501(c)(3) Corporation  Issuer:Qualified State or Local Entity  Term:Approximately 30 Years  Rate:Fixed or variable rate, enhanced with a letter of credit  Structure:College leases the site to the Borrower 100% of Net Cash Flow Reverts to University

19. BENEFITS OF TAX-EXEMPT FINANCING STRUCTURE  100% Tax Exempt Bond Financing  Non-Recourse Debt to Institution  Second Lowest Cost of Capital  Lower Rents versus Taxable Structures  University retains Direct Control over Entire Project  Non-Subordination of Land Title  Flexible Management Options  Maximizes Return to University

20. College / University Architect Construction Manager Trustee Bonds Bond Proceeds Bond Issuer Underwriter Tax-Exempt Entity 501(C)(3) LLC Ground Project & Management Control Lease Project Development Agreement Ground Lease Payment Management Contract PRIVATIZED FINANCING APPROACH FLOW CHART

21. THE ARCHITECT’S ROLE  Programming Phase  What are the strategic goals from a business perspective?  The “End User”  The Owner’s Interests  Coordinating the Team

22. CONSTRUCTION MANAGER’S ROLE  Early Involvement  Building Information Modeling  Constructability  Estimating and Budget Control  Schedule and Weather Analysis  Cost Saving Ideas  LEED/Green Practices  Local Contractors and Suppliers  Phased Bid Packaging

23. Working with a Public Private Partnership Team

24. STEPS TO WORKING WITH PPP TEAM 1.Determine Need and Develop a Consensus 2.Determine Feasibility through Market Study 3.Set the Procurement Process RFP or RFQ? Clearly Outline Goals of Project Clearly Detail Desired Project Structure Legal Review of Final Document Set a Timetable and Stick to It 4.Select Team and Negotiate Agreement 5.Assign Appropriate Individuals as Point of Contact from University 6.Hold Regular Meetings to Update Status and Review Budgets, Plans and Specifications. Communication is Critical!

25. Determining Size of Project Market Study and Surveys Review of Enrollment Projections Review of Competitive Peer Institutions Determining Room Configuration Age of Students Type of Housing Students Currently Live In Campus Culture Surveys Determining Amenities and Common Areas to be Included Suites vs. Apartments Cost vs. Rent Student Surveys Feasibility: Project Scope

26. What Do Students Want in a Community? Top RequestsPrivacySecurityTechnology Natural Light Useful Amenities Open Green Space Quiet Space StorageConvenience

27. What Do Students Want in their Units? Top RequestsPrivacy Private/Semi-Private Bathrooms SecurityTechnology Natural Light Stylish Furniture Quiet Spaces Storage

28. COMMON AREAS AND AMENITIES

29. Example Projects

30. EDISON STATE COLLEGE

32. MIDWESTERN STATE UNIVERSITY

33. NICHOLLS STATE UNIVERSITY

34. QUESTIONS Developer/Manager:Collegiate Companies Brian Jones, Vice President Architect: BHDP Architecture Paul Orban, AIA, LEED AP Market Leader Construction Manager: Quandel Construction Services Mark Welling, PE Director of Development Finance: ParenteBeard Liz McMahon, CPA Senior Manager Legal: Ohio Attorney General Office Jerry Kasai, Assistant Attorney General Jon Walden, Assistant Attorney General