South Seattle Community College Feasibility Study for Student Housing Presented by: Cynthia P. Balogh, Partner C. Joseph Carter, Consultant Stephen A. Masini, AIA, Consultant December 11, 2007

Introduction & Project Objectives In April 2007, SSCC contracted with MGT to assist in preparing a Feasibility Study for Student Housing to determine the future course of action related to the development of student housing. Guiding principles for establishing student housing: Enhance the SSCC learning environment by providing options that focus on meeting student academic & social needs Support anticipated growth in international student enrollments by expanding their access to housing Support recruitment efforts for students from farther distances Offer students a residential college experience

Introduction & Project Objectives Confirm market demand for housing International students Domestic students Evaluate the number of beds and units needed Determine appropriate rental rates Evaluate building site Provide preliminary development & operating cost estimates

Project Methodology Research Activities: Analysis of available enrollment & programmatic data Interviews & focus groups with campus constituencies Student survey Site analysis Local housing review Review student housing offerings at selected institutions Demand estimates for student housing Financial pro forma for feasibility analysis Customer research – interviews, focus groups, Web-based or mail surveys, market testing, student dining interests, housing demand estimates Rental market analysis – off-campus availability, utilization, and rental rates Peer and/or competitive institution review – national trends, recent facilities planning, construction, and renovation projects Facilities assessment and programming – “walk through” or BASYS, inventory mix, facilities to support goals and programming, unit configuration and design concepts, site selection assistance, coordination with Campus Master Plan development Financial analysis – rental rate projections, financing strategies (conventional and privatized models), capital budgets, operating pro forma, and cash low analyses

Research Findings: Interviews Leadership Goals for Introducing Campus Housing: Ease the path of international students into & through SSCC programs Offer housing alternatives & reduce time/expense of commuting Respond to demand of those interested in the “college experience” of a residential campus Support student success & retention through a living/learning environment Broaden the base of support for campus services that would benefit both commuters & campus residents Support & promote recruitment efforts for culinary arts, oenology, & aviation

Research Findings: Interviews Planning Priorities to Address Goals: Attract single students, especially recent high school graduates, seeking a campus residential experience Relieve limited supply & high cost of student rentals near campus Offer international students a convenient & connected place to live Expand capacity & options for housing international students Provide housing opportunities for students from farther distances (e.g., culinary arts, wine, and nursing) Support growth in baccalaureate programs at SSCC & with partner institutions Provide accommodations for conference groups & “summer only” students Be a self-supporting enterprise

Research Findings: Focus Groups Student Interest in Living On Campus: Convenience Affordability Participation in the “college experience” Connection with the campus community

Research Findings: Focus Groups Perceived Benefits of Living On Campus by International Students: Help international students learn English Offer housing alternative to host family living arrangements Serve as an asset for recruitment because of its affiliation with the college

Research Findings: Focus Groups Student Needs & Preferences for Campus Housing: Interested in apartment-type housing Units with kitchens (limited dining options close by) Attracted to traditional residential program focused on: Social Cultural Recreational Intellectual & academic needs of residents Concerned about rules & regulations that would govern life on campus

Research Findings: Focus Groups Desired Amenities: High quality soundproofing Privacy High speed Internet connections, including wireless Cable television Optional land line telephone service

Research Findings: Student Survey SSCC students were surveyed about interest in & preferences for on-campus housing 139 surveys were returned Over 75% of respondents were extremely or somewhat interested campus housing Interest was stronger among international student respondents 100% expressed at least some interest 35% of student respondents live at home with their parents 46% of student respondents live in various types of rental properties

Research Findings: Student Survey Essential Housing Features: High speed Internet connection (58%) Campus security patrol (51%) Clothes washer/dryer in each unit (49%) Clothes washer/dryer in complex (45%) Telephone line in unit (45%)

Research Findings: Student Survey Configuration Preferences: Most popular configurations Two-bedroom apartment Four-bedroom apartment Least popular configuration Four-bedroom suite Willingness to Pay for Rent & Utilities: On average, respondents pay $527 per month For on-campus housing, respondents report they are willing to pay $450 to $550 per month

Research Findings: Local Housing Market Ten apartment complexes analyzed (3 to 9.8 miles) Per person apartment unit rent (1 to 4 bedrooms): Average: $878 per month (phone, Internet, & cable included) Range: $276 to $1,723 per month Common amenities offered in off-campus facilities: On-site fitness center (90%) Dishwashers in apartments (80%) Washer/dryer in each apartment (80%)

Research Findings: Selected Institutions Colleges Selected for Comparison of Housing Offerings: Big Bend Community College Edmonds Community College Green River Community College St. Martin’s University Skagit Valley College Yakima Valley Community College

Research Findings: Selected Institutions Colleges Selected for Comparison of Housing Offerings: 3 offer housing in traditional halls 2 only offer traditional housing 3 offer only apartment-style housing in 4-bedroom units Only 1 institution offers students a variety of housing options (traditional, suites, & apartments) Average rent for apartments per resident (all utilities included): 4 BR/1 BA: $488 per month 2 are building or planning new facilities

Projections: Enrollment Academic Transfer & Professional Vocational Enrollment Projections Form the Base to Estimate Housing Demand Approach #1: Annual enrollment growth was estimated at 5% for total enrollments Approach #2: Enrollment trends were estimated separately for full-time & part-time students Full-time enrollment growth was estimated at 0.5% Part-time enrollment growth was estimated at 10% Enrollments 3,857 in Fall 2006 Approach #1: 6,283 in Fall 2016 Approach #2: 7,590 in Fall 2016

Projections: Housing Demand Scenarios Moderate housing capture rate Enrollment Projection Approach #1: 176 by Fall 2010 Enrollment Projection Approach #2: 177 by Fall 2010 Aggressive housing capture rate Enrollment Projection Approach #1: 311 by Fall 2010 Enrollment Projection Approach #2: 258 by Fall 2010 Estimated that, by Fall 2016, demand for housing would increase between: 235 to 254 students based on moderate scenario 359 to 417 students based on aggressive scenario

Proposed Project Description: 3-floor facility with 220 bed capacity Apartment-style configuration for 4 residents Private bedrooms (49 units with 4 BR / 2 BA) Shared bedrooms (6 units with 2 BR / 2 BA) Shared “common” space Multi-purpose programming rooms Study rooms Laundry Administrative space Staff Resident Manager/Hall Director 6 Resident Assistants (students)

Financial Analysis Objectives for Housing Facility: Should support strategic interests of SSCC & the Foundation Should provide student housing that is: attractive safe affordable Should be financially supportable from its own operating income

Financial Analysis Focus is Most Directly on Third Objective: Project should be financially self-sufficient Three Basic Assumptions: Project will be debt financed by revenue bonds SSCC Foundation will be owner & debtor of record (non-profit corporation recognized as tax-exempt under Section 501(c)(3) of the Internal Revenue Code) Bonds will be issued through a conduit agency of government that can qualify interest paid to bondholders to be exempt from federal income tax

Financial Analysis: Assumptions Project Development Schedule: Major Steps from Inception to Completion with Planned Occupancy in August 2010 Activity Commence Conclude Designer Selection December 2007 February 2008 Programming, Design, Preliminary Permitting February 2009 Final Permitting April 2009 Bid Period May 2009 Bid Award (Calendar Year) June 2009 Bid Award (Fiscal Year) FY 2009 Construction July 2009 July 2010 Months in Construction 13 Occupancy Date (Calendar Year) August 2010 Occupancy Date (Fiscal Year) FY 2011

Financial Analysis: Assumptions Space & Configuration Specifications: 49 apartment units with single-occupancy bedrooms 4 bedrooms 2 bathrooms Size: 913 NSF 6 apartment units with double-occupancy bedrooms 2 bedrooms Size: 843 NSF Total Design Capacity = 220 Beds Community, Administrative, Support Space = 4,000 NSF Total Project 53,795 Net Assignable Square Feet 71,727 Gross Square Feet

Financial Analysis: Assumptions Estimated Project Development Costs Construction ( FY 09 Bid Date) $10,357,560 Soft Costs $217,509 Design $543,772 Project Administration/Inspection $326,263 Developer $435,018 Furnishings $484,000 Contingency Fund $517,878 Project Development, Total $12,882,000 Total Debt Issue $15,308,000

Financial Analysis: Assumptions Operating Expenses for Proposed Project: Estimate based on FY 2007-08 operating budget for student housing at Green River Community College Expenses recognized in the Base Model include: Rental, Payroll, Administrative, Common Area, Grounds, Utilities, Interior Unit, Maintenance, Taxes, & Insurance Expenses recognized in the Alternative Model include: All expenses listed above in Base Model Fee for management by a third party contractor

Financial Analysis: Assumptions First Year Operating Budget for Proposed SSCC Student Housing Facility College Managed Contractor Managed Total Operating Budget $565,111 $632,678 Per Gross Square Foot $7.88 $8.82 Per Bed $2,569 $2,876 Annual Escalation Rate 3.5%

Financial Analysis: Assumptions Operating Revenue: Twelve month leases Per Person Rental Rates (FY 2007-08) (includes utilities) 4 Bedroom, Single Occupancy = $575 per month, $6,900 annually 2 Bedroom, Double Occupancy = $475 per month, $5,700 annually Average occupancy rate = 95% Miscellaneous Income = 5% of total rental revenue Annual Escalation Rate = 5% First year total projected revenue = $1,640,395

Financial Analysis: Financial Feasibility Key Measures for Determining Financial Feasibility are: Net income sufficient to fund operating expenses debt service repair & replacement reserve Net operating income equal to at least 1.2 times its annual debt service

Base Model Pro Forma Cash Flow Summary of Results Financial Analysis Base Model Pro Forma Cash Flow Summary of Results Year One Year Eight Year Sixteen Operating Revenue $1,640,395 $2,308,200 $3,410,263 Operating Expense $565,111 $718,978 $946,757 Net Operating Income $1,075,284 $1,589,222 $2,463,506 Debt Service & Mandatory Transfers $986,873 $997,373 $1,012,359 Net Income $88,411 $591,849 $1,451,147 Debt Service Coverage Ratio 1.09 1.60 2.49

Financial Analysis Findings & Conclusions: The project would not initially achieve the desired 1.20 debt service coverage ratio Base Model achieves required ratio in Year 3 (FY 2013) Alternative Model achieves required ratio in Year 4 (FY 2014) The project would produce positive net income from Year 1 forward $88,411 for Base Model (SSCC Management) $20,844 for Alternative (Contracted Management) Options for overcoming shortfalls in debt service coverage ratio: Project financing structure Reducing project costs Increasing project revenues

Project Summary & Recommendations Benefits of campus housing for SSCC have strong appeal Potential demand for the project appears adequate Positive net income & the target debt service ratios appear to be achievable MGT concludes that development of housing on SSCC’s campus is a desirable & achievable objective

Questions & Discussion