Total Cost of Ownership New Construction: 30 year – vs - 75 year ACUHO-I 2017 Gary Thompson, EFP Director of Facilities University Housing University of Georgia

“tudes”! Longitude/Latitude Multitude Platitude Rectitude Ineptitude Attitude Aptitude Gratitude Fortitude Altitude Amplitude Longitude/Latitude Multitude Platitude Rectitude Ineptitude MAGNITUDE!!!!

What is The Total Cost of Ownership? Cradle to grave costs Assumptions based upon current cost evaluations and knowledge Concept to Demolition A way to challenge LBDM!

Rationale for Construction: 30-Year Pros Cons Overall fit to pro forma Design flexibility Cheaper to construct Shorter construction schedule Other? Build 3 times in 75 years Often built using cheaper materials and methodologies Typically higher M&O costs Other?

Rationale for Construction: 75-Year Pros Cons Build only once in 75 years Build for long-term to support type of use Built to last Other? Construction method takes more time and money Forced to deal with aging building issues Chance it will not fit with future desired residence life program models Other?

How To Decide Which Way To Go Resource Availability Reserves Bonding Authority Land P3 Initiatives Campus Standards Campus Political Climate Criticality of Need

Evaluating Your Decision Utilizing…. 30-YEAR 75-YEAR TOTAL COST OF OWNERSHIP

When you are called to the “Numbers Office” They Have: You Have Projection numbers Debt numbers Pro-forma numbers Numbers you have never seen before numbers Numbers to provoke a reaction numbers Assessed Qualitative data: Survey data Satisfaction percentages Assumed retention impact Statistical reference NO Relevant Numbers!!!

Total Cost of Ownership Formula (Rr + Sr)-(Ca + Cc + Co + Cm + Cf + Cd+ Ds) = TCO

TCO Terminology Ca – Cost of Acquisition (Design, Construction, Installation)* Cc – Cost of Commissioning* Co – Cost of Operations (Personnel, Supplies, Insurance, Equipment)* Cm – Cost of Maintenance (Repairs, Supplies, Vehicles, Utilities)* Cf – Cost of Life Cycle Replacement (Building Systems)* Cd – Cost of Demolition* Ds – Cost of Debt Service Rr – Rent Revenue Sr – Summer Revenue *(From Dana K. Smith’s article in APPA’s Facility Manager magazine – July/August 2016)

30-YR vs 75-YR: Basic Assumptions – Year 1 30 Year Building 75 Year Building Double loaded corridor # of Beds = 250 GSF = 80,000 GSF/Bed = 320 Budget Cost/Bed = $65,000 Total Project Budget = $16,250,000 Design and Contingency = $2,925,000 Total Construction Cost = $13,325,000 Cost/GSF = $203 Double loaded corridor # of Beds = 250 GSF = 85,000 GSF/Bed = 340 Budget Cost/Bed = $100,000 Total Project Budget = $25,000,000 Design & Contingency = $4,500,000 Total Construction Cost = $20,500,000 Cost/GSF = $294

Assumptions Cont. 75-Year Building 30-Year Building Rebuilt in years 31-32 and 62-63 Commissioned 3 times 71 years of M&O - no M&O costs incurred in years 31-32 or 62-63 2 Demolitions (Years 31 and 62) 25 Year Debt Service for each construction Debt Service rate at 3% Inflation rate = 3%/year 71 years of revenue - no revenue in years 31- 32 and 62-63 Initial room rate = $7,000/9 mo. Initial summer revenue = $130,900/summer Built 1 time 1 Commissioning 75 years of M&O 1 Demolition 25 Year Debt Service Debt Service rate at 3% Inflation rate = 3%/year 75 years of revenue Initial room rate = $7,000/9 mo. Initial summer revenue = $130,900/summer

Ca – Cost of Acquisition 30-Year Building 75-Year Building 16,250,000 (yr. 1) 39,443,015 (yr. 32) 98,610,706 (yr. 62) 154,303,721 = Total Ca 25,000,000 = Total Ca

Cc – Cost of Commissioning 30-Year Building 75-Year Building 75,250 (yr. 1) 181,131 (yr. 32) 456,643 (yr. 62) 713,024 = Total Cc 80,250 (yr. 1) 232,587 (yr. 37) 312,837 = Total Cc

Co – Cost of Operations 30-Year Building 75-Year Building $71,608,198 (71 yrs.) 3.50/sf x 80,000 sf = 280,000/yr @ 3% for 75 years (not including years 31, 32, 62, 63) = 71,608,198 $81,107,680 (75 yrs.) 3.50/sf x 85,000 sf = 297,500/yr @ 3% for 75 years = 81,107,680

Cm – Cost of Maintenance 30-Year Building 75-Year Building $81,949,410 (71 yrs.) 4.00/sf x 80,000 sf = 320,000/yr @ 3% for 75 years (not including years 31,32,62,63)= 81,949,410 $81,107,680 (75 yrs.) 3.50/sf x 85,000 sf = 297,500/yr @ 3% for 75 years = 81,107,680

Cf – Cost of Life Cycle Replacement 30-Year Building 75-Year Building 3,331,250 (1st 25 yrs.) 11,000,353 (2nd 25 yrs.) 26,700,745 (3rd 25 yrs.) 42,101,098 = Total Cf 25% x Total Construction Cost/25 yrs. 5,125,000 (1st 25 yrs.) 12,832,013 (2nd 25 yrs.) 26,084,840 (3rd 25 yrs.) 45,229,353 = Total Cf 25% of Total Construction Cost/25 yrs.

Cd – Cost of Demolition 30-Year Building 75-Year Building 4,854,525 (Yr. 31) 12,500,803 (Yr. 63) 17,355,328 = Total Cd 17,823,157 (Yr. 75) 17,823,157 = Total Cd

Ds – Debt Service 30-Year Building 75-Year Building 23,117,700 (1st Construction) 56,112,900 (2nd Construction) 67,337,712 (12 yrs. of 3rd Construction) 162,858,216 = Total Ds 35,565,000 (1st Construction) 35,565,000 = Total Ds

Rr – Rent Revenue 30-Year Building 75-Year Building 447,551,227 = Total Rent Revenue (71 yrs.) 447,551,227 = Total Rr $7,000 x 250 residents = 1,750,000/yr @ 3% for 71 years 477,103,997 = Total Rent Revenue (75 yrs.) 477,103,997 = Total Rr $7,000 x 250 residents = 1,750,000/yr @ 3% for 75 years U Penn 1942 - $420 Room Rate/Year

Sr – Summer Revenue 30-Year Building 75-Year Building 33,429,864 = Total Summer Revenue (71 yrs.) 33,429,864 = Total Sr $130,900/yr @ 3% for 71 years 35,687,379 = Total Summer Revenue (75 yrs.) 35,687,379 = Total Sr $130,900/yr @ 3% for 75 years

Total Cost of Ownership Numbers – vs - Numbers 30 Year Building 75 Year Building Revenue Rr 447,551,227 Sr 33,429,864 Total Revenue 480,981,091 Expenditures Ca 154,303,721 Cc 710,024 Co 71,608,198 Cm 81,949,410 Cf 42,101,098 Cd 17,355,328 Ds 162,858,216 Total Expenditures 530,885,995 Residual -49,904,904 Revenue Rr 477,103,997 Sr 35,687,379 Total Revenue 512,791,376 Expenditures Ca 25,000,000 Cc 312,837 Co 81,107,680 Cm 81,107,680 Cf 42,229,353 Cd 17,823,157 Ds 35,565,000 Total Expenditures 283,145,707 Residual 229,645,669

TOTAL COST OF OWNERSHIP Numbers - VS - Numbers 30-YEAR 75-YEAR TOTAL COST OF OWNERSHIP “Made You Look!”