While higher education institutions face many challenges related to facilities management and capital programs, one aspect of their campuses that does not have to suffer from decreased endowments and reductions in capital spending is student housing. That is because student housing has successfully adapted to the economic climate by integrating new concepts, specifically public-private partnerships (P3s). In fact, P3s have become so popular within the student housing sector that these arrangements represent the fastest growing trend in higher education today.
Lower developer costs
Access to capital
Preservation of debt capacity
More favorable balance sheets and credit statements
Faster procurement and project delivery (It can typically take a university about 5 years to get a project built. With a P3, that process can be reduced to just 2 years. Additionally, P3s can save approximately 25% in costs compared to typical projects.)
Provide better housing for students
Expand campus capacity
Create high-quality facilities
Expand the tax base for both a city and county
Provide an economic boost to surrounding areas, which likely lead to private growth and other improvements
High cost of capital
Reduced control for the university
Complexity of deals
Multi-party roles and responsibilities
Considering these pros and cons, and the fact that higher education institutions have diverse needs and reasons to consider implementing P3s into their portfolios, there are different arrangements that can be negotiated.
The above agreements provide higher education institutions multiple options when exploring if a P3 would be beneficial in addressing their infrastructure needs and student housing capital plans.
P3s have seen much success within the student housing sector - so much success that they are now expanding into other types of campus infrastructure projects such as parking garages, recreation centers, and even renewable energy initiatives. Going forward, this method is only going to grow within the higher education setting. It will be interesting to see how many more companies jump into the market because of its vitality and potential for long-term profitability.