Picture a posh New York restaurant on a Wednesday afternoon around noon. Roger Sterling and Don Draper are schmoozing with some high-powered executive from Lucky Strike over lunch. After devouring steaks and throwing back a few old-fashioneds, a deal is sealed. Now, something similar may still occur in the ad business today, but certainly not in deals on public–private student housing partnerships.

“We try to establish a rapport on a personal and professional level, but it’s by sitting across from college administrators at a desk, not sitting beside them at a bar,” says Mike Mouron, the founder and president of Birmingham, Ala.–based Capstone Cos., a company that helped pioneer the public–private model by building about 65 public–private projects over the years.

Sure, in an effort to shape the project, private developers or managers may court a school long before it issues a request for proposal (RFP), but universities, especially those governed by ethics expectations in the public realm, demand an arm’s-length distance.

“All universities, particularly public institutions, will undertake a public process,” says Jamie Wilhelm, executive vice president of public–private partnerships for Austin, Texas–based student housing REIT American Campus Communities (ACC), which has built approximately 70 on-campus public–private development deals. “They will work very diligently to have a level playing field.”

So how does a developer get an edge in this environment? It isn’t easy, but it’s possible. Schools like a track record, but if you can bring something special to the table (like a coveted piece of dirt), you’ve fought much of the battle. Still, developers encounter many hurdles in the public–private partnership arena.

Beating the RFP

At the University of Kentucky (UK), Memphis, Tenn.–based student housing REIT EdR, which has built 42 public–private deals, invested more than five years to help university officials shape their eventual $500 million, 9,000-bed privatization project. The firm traveled an arduous road to get there. It would check in quarterly with the university and, when needed, it would fly officials to meet in Lexington.

Despite all of this work, nothing really moved forward until a new president, Eli Capilouto, came aboard in July 2011 and decided the university needed new housing. A request for qualifications (RFQs) went out in October 2011. The university scrutinized applicants in November of that year and entered into negotiations with a partner, which happened to be EdR, in December 2011.

You’d think EdR had the project in the bag from the beginning, but Thomas Trubiana, chief investment officer at the REIT, insists that wasn’t the case.

“If you can assist the school up front, it doesn’t necessarily mean you’ll have an inside track,” Trubiana says. “There have been times when companies have worked with universities and they go through [the] process and someone else gets picked.”

But it’s certainly better to be consulting with the school on the RFP before it goes out. “We try to get in there early and help structure the project so we’re not reacting to an RFP,” says Robert Kim, executive managing director at Irvine, Calif.–based student housing developer Hanover Pacific.

When Kim approaches a school about a project, he’s bringing a track record of working with urban schools that need to find sorely needed land next to their ­campuses. “You have to bring something unique to the table,” Kim says. “Having land is the best way to do that. For many urban campuses, the lack of land is the No. 1 issue.”

Having experience may be even better than having land, though. If that happens, schools may pursue a developer before an RFP is even released.

“Often, we’ll be called to sit down and make them aware of various structures and financing and a good RFP process,” says Trubiana.

But there’s also the old-fashioned knocking-on-the-door approach, when a developer spots a school that’s a good fit. Depending on the school, a developer can start seeking opportunities in residence life, ­finance and administration, the CFO’s office, or with the president.

“We really try to make [school administrators] feel comfortable with an open-book or honest approach to look at their various issues,” says Daniel I. Bernstein, executive vice president and chief investment officer with Philadelphia-based Campus Apartments. “We try to come off as creative and flexible and transparent and capable.”

Not all RFPs Are Alike

UK started its privatization process about the same time that most schools do. Cecil Phillips, chairman and CEO of Atlanta-based Place Properties, which has built 25 to 30 public–private deals, says schools normally put out RFPs or RFQs in September or October. Usually, they award the project the next April or May in anticipation of having it done in August of the following year, in time for school to open.

The RFP generally takes two forms: Schools either put out broad specifications, in which they choose a partner to work with, or they put out strict specifications, in which they seek someone to build a project to exact specifications.

“At UK, it was, pick a partner to work with, and they didn’t try [to] mandate or dictate what buildings would look like,” Trubiana says. “In other cases, it will get detailed: The schools know what they want and have already hired an architect.”

But Phillips says he sees more schools avoiding this latter template. “Most schools don’t spend the time or money to dictate a complete set of drawings with details down to the door handles,” Phillips says. “What’s important is what they want in terms of beds, size of rooms, and what’s included.”

But other schools have tighter specifications. When schools specify a design, it can lead to an issue for the developer when responding to the RFP. Does the firm propose to build the project as the school wants, even though it knows there’s a good chance of failure? Or does the firm propose what it believes will work best, even if there’s a good chance that diverging from the script may alienate the school?

Mouron faced that dilemma with a school that wanted graduate housing with four beds and four baths per unit. “Anybody who has done any graduate student housing knows graduates don’t want multiple roommates,” he says. “Most of the time, we would propose efficiencies and one-bedrooms. So you find yourself in the quandary: Do you respond with the product your experience tells you they need, or do you tell them what they want to hear in hopes of changing their opinion?”

Mouron thought the school deserved the benefit of Capstone’s experience and proposed efficiencies. Eventually, the school pulled the project.

Alternatively, a developer could do both. ACC responds to each proposal with what the school asks for and then adds an alternative route to consider. “We first answer the question and, second, provide other thoughts based on our experience,” Wilhelm says. “If we know the procurement is coming, we’ll conduct a market analysis to understand the on- and off-campus market.”

Standing Out

Once the RFP comes out, the rules change. The informal discussions between the developer and school should end.

“[The schools] work to have a level playing field,” Trubiana says. “It becomes a formal process run by [the] procurement [department]. Questions are in writing, and answers are distributed to ­everyone.”

At that point, a developer needs to distinguish itself through its responses and its balance sheet. “You have to be a well-capitalized public or private company to be successful in on-campus development,” Phillips says. “You need access to a lot of capital. You’re building hundreds of millions in new buildings or refurbishing existing buildings.”

Wilhelm says schools will evaluate a firm’s experience, the team assigned to the project, the strength of its balance sheet, and the architectural team, among other things. “They talk about the financing capability of the development partner and their experience in multiple types of finance,” Wilhelm says.

The developer’s thought process also plays a huge role. “Our goal is to show the university how we think through whatever their particular real estate issue is,” Bernstein says.

“We try to show that we’re critical thinkers and have taken different issues into account and balanced them. It may not be about bricks and sticks, but could be about sensitive ties with debt capacity or credit rating or price points. We try to show our creative and flexible approach.”

But, just as important, developers need to prove that they’ve worked on campus before.

“Universities and administrators aren’t paid to give someone their first opportunity,” Wilhelm says. “They can look at other successes as a model that someone can be successful on their campus.”

Trubiana agrees there’s no substitute for experience. “The key component is doing a good job where you’ve worked with other schools,” he says. “You need to create a raving fan, because these schools will check references. To have a president or a head of facilities at another school speak highly of EdR says more than anything we can say about ourselves.”

But you create that impression through a job well done … not expensive drinks and meals.