Some big things are in store for Wayne State University, found in the heart of Detroit, after it selected Corvias, a private, East Greenwich, R.I.–based company, to develop, construct, manage, and maintain its student housing in a 40-year partnership.
The agreement, which allows Wayne State to defease $102 million of existing debt and execute its 10-year master plan, was announced in late September. The master plan includes adding 842 new beds, renovating 3,100 existing beds, and constructing commercial and university spaces, without issuing any new university debt.
It was two years ago that Wayne State initiated a market and demand analysis of student housing and prepared the 10-year master plan. It determined a need for more than 3,800 beds by 2020, which presented a deficit of 800 on-campus apartment beds. As a result, the master plan called for $90 million in new construction and $130 million in renovations, as well as the demolition of the Helen L. DeRoy Apartments, to both meet growing student demand and ensure the high-quality condition of campus facilities and infrastructure.
Geoff Eisenacher, vice president of partnership development at Corvias, says the company entered the Michigan area two years ago in anticipation of universities needing additional student housing. This will be Corvias’ first project in the state.
“Michigan became a focus [two years ago], and we thought we could really make an impact across the state,” Eisenacher says, “so we invested early to learn how we could get up to speed and how we could help schools throughout the state.”
Wayne State issued its first RFQ in 2015 for student housing, before pulling it back and amending it to include a larger scope, Eisenacher says. “They needed to look at their housing auxiliary as a strategy unto itself, to really find a partnership solution that really did more than deliver beds, but really provided an end-to-end improvement solution across the whole campus to meaningfully make a difference in the school’s ability to compete and educate.”
The partnership allows the university to maintain ownership of all buildings and land at all times, as well as control over residence life, and still receive the economic benefits of the program. Throughout the partnership, Wayne State will continue to operate all student-facing services, while Corvias will assume the financial risk. As a result, Wayne State will have the ability to pursue the master plan in order to attract new students, fortify its residential campus, and improve the campus’ learning atmosphere without taking on additional debt.
“Wayne State is an integral institution within Midtown and the city of Detroit, and we share their desire to invigorate the local economy through this program,” said Dan McConaghy, president of Corvias’ Higher Education segment, in a release. “Given the extent of our shared philosophies, we expect this to be a highly beneficial program for everyone in the Wayne State community.”
Approximately 400 new beds are scheduled to open in fall 2018, with another 442 beds scheduled to open in fall 2019. In addition, the Helen L. DeRoy Apartments (415 beds) will be demolished by fall 2019 and converted into open green space to enlarge the existing Williams Mall area.
In total, the project will introduce 842 new beds, and rents will be set at or below Midtown market rates to ensure their affordability to students. The project will also include more than 18,000 square feet of new retail space and 9,000 square feet for a new campus health center and related services. Corvias emphasizes local participation in the design and construction process, including the opportunity for internships for Wayne State students.
According to the developer, the partnership should lead to $3.5 billion in anticipated economic impact to Midtown Detroit over the life of the partnership. In the first 10 years, $185 million will be spent to construct new housing and renovate and replace existing units. There will also be a reinvestment account that is projected to exceed $800 million over the 40 years. That account, Corvias says, will allow each building to go through minor and/or major renovations and replacements multiple times over the 40 years without requiring additional debt capital.
“This really is a living, breathing program that’s going to make continual reinvestment, continual improvements, and continual benefits for Detroit and Wayne State,” Eisenacher says.
Corvias is accustomed to long-range partnerships. In 2014, it entered into a $548 million public–private partnership (P3) with the University System of Georgia (USG) Board of Regents, which included the development, construction, management, and long-term maintenance of 3,753 new beds and 6,195 existing beds on nine campuses across the state. This agreement marked the first time a state system had privatized student housing across a portfolio of campuses.
Corvias, which owns and operates almost 100,000 beds for military, private, and student housing, has executed more than 25 P3 infrastructure transactions, with a combined value exceeding $3.5 billion over its 20-year history.
