Developers seeking to enter the world of on-campus student housing may be accustomed to arranging private deals with clients. But the public nature of the university realm requires a more formal approach, one that entails responding to a request for proposal (RFP) from the school seeking housing.
Most universities planning to put out RFPs or requests for qualifications (RFQs) normally do so in September or October. Usually, they award the project the next April or May in anticipation of having it built by August of the following year, in time for school to open, says Cecil Phillips, chairman and CEO of Atlanta-based Place Properties, which has built 25 to 30 public–private deals.
The RFP generally takes two forms. Schools put out either broad specifications for which they choose a partner to work with, or they put out strict specifications for which they seek someone to build a project to their exact specifications.
“At UK [University of Kentucky], it was pick a partner to work with, and they didn’t try [to] mandate or dictate what the buildings would look like,” says Thomas Trubiana, chief investment officer of student housing REIT Education Realty Trust (EdR). “In other cases, it will get detailed. The schools know what they want and they have already hired an architect.”
But Phillips says he sees more schools avoiding the 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 the company responds to the RFP. Does the firm propose to build the project as the school wants, even though the developer knows there’s a good chance it would fail? Or does the developer propose what it believes will work best, even if there’s a good chance that diverging from the script may alienate the school?
Capstone Cos. 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,” says Mike Mouron, founder and president of the Birmingham, Ala.–based developer. “Most of the time, we’d propose efficiencies and one-bedrooms. So you find yourself in the quandary: Do you respond with the product that your experience tells you [the school needs], 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, so it proposed efficiencies. Eventually, the school pulled the project.
Alternatively, a developer could take both approaches. American Campus Communities (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,” says Jamie Wilhelm, executive vice president of public–private partnerships for the Austin, Texas–based student housing REIT. “If we know the procurement is coming, we’ll conduct a market analysis to understand the on- and off-campus market.”
Whatever type of RFP a school uses, savvy developers will respond by considering the university’s desires carefully while casting their own unique qualifications in the best light.
Les Shaver is a former senior editor of Multifamily Executive.