Two years ago, the University of Kentucky’s decision to outsource its entire campus housing portfolio to EdR was a watershed moment for the industry, marking the first such privatization. And when Campus Apartments recently partnered with Washington, D.C. institution Howard University to produce on-campus residences, it was just the latest in this trend of public/private partnerships.
But those partnerships are in a pretty exclusive club.
“I don’t think you’ll see as many people getting into the on-campus arena,” says David Adelman, president and CEO at Philadelphia-based Campus Apartments. “Universities don’t want to take that chance. It’s going to be hard to get people into that space.”
Most universities have difficulty attracting funds for new buildings and infrastructure, let alone creating new dormitories for incoming students. That sets up a prime opportunity for the upper echelon of student housing developers.
“They figured out that maybe a way to go is to let the private sector do what it does best, build and own [housing],” says Randy Churchey, president and CEO at Memphis, Tenn.-based EdR Collegiate Housing. “And let the universities do what it does best–educate.” EdR’s $101.2 million plan to add more than 4,500 beds at the University of Kentucky is well under way, set to be delivered by 2015.
These partnerships are long-term engagements, and as such, universities look for developers with lengthy resumes. And the financial transparency and stability required of public companies is also a valued trait.
“We’re expected to be a student housing real estate trust forever,” Churchey says, which works in EdR’s favor. “That financial transparency and flexibility gives the university a great piece of comfort. You can build and own, no matter what the financial cycle.”
The vast majority of student housing developers won’t be able to fully grasp the intensive operational efforts--and unique partnerships--that go into running an on-campus community, Churchey says, and universities are well-aware of that.
“For colleges and universities, student housing isn’t just real estate, it’s part of the core academic mission,” adds Bill Bayless, president and CEO at Austin-based American Campus Communities. “That business segment has very high barriers to entry that most new entrants won’t be able to penetrate.”
Linsey Isaacs is an Assistant Editor for Multifamily Executive. Start a conversation with her @linseyi.