1. Public/Private Partnerships for Housing Oregon University Systems, 2001 Bob Simonton February 15, 2001

2. Introduction The Anderson Strickler report provides: Internal Benchmark of existing housing Defines forms of partnerships Highlights relevant case studies Strategies for future housing projects

3. Overview of Student Housing OccupancyOccupancy Deferred MaintenanceDeferred Maintenance Existing Debt ServiceExisting Debt Service

4. Overview of Student Housing Occupancy & Housing Types

5. Overview of Student Housing Deferred Maintenance

6. Overview of Student Housing Current Annual Debt Service

7. Overview of Student Housing General ConclusionsGeneral Conclusions –Current operating performance does not justify or support the addition of new housing –However, enrollment projections suggest a need for a mechanism to develop new student housing on all campuses –Additionally, campuses are facing increasing deferred maintenance backlogs for facilities that are not configured to meet student demands –Renovations and conversions will require additional, substantial debt capacity –A partnership solution for new construction should also address the needs of existing facilities (i.e., comprehensive solution needed)

8. Partnerships Why Consider PartnershipsWhy Consider Partnerships Elements of a PartnershipElements of a Partnership Risk Return & ControlRisk Return & Control Partnership ModelsPartnership Models –Traditional University Sponsored –University Affiliated Foundation –Unaffiliated Nonprofit Corporation –Fully Privatized

9. Fundamentals of Partnerships Partnering for a PurposePartnering for a Purpose –Shift risk –Speed up development process –Gain necessary expertise –Obtain financing –Improve value of project Partnership Structure Depends on Objectives for OutsourcingPartnership Structure Depends on Objectives for Outsourcing

10. Elements of a PartnershipElements of a Partnership –Outsourcing of tasks defines structure Ownership University Affiliated Foundation Unaffiliated Nonprofit Private Developer Ownership University Affiliated Foundation Unaffiliated Nonprofit Private Developer Development University Private Developer Development University Private Developer Financing University Conduit Authority 63-20 Corporation Banker Financing University Conduit Authority 63-20 Corporation Banker Architect Engineer Contractor Management University Private Developer Third-party Management University Private Developer Third-party Design/Build Turnkey Fundamentals of Partnerships

11. Risk, Return, and ControlRisk, Return, and Control –Risk and control go hand-in-hand –Return increases with the amount of risk that is assumed Attribute Traditional Development University- Affiliated Foundation Unaffiliated Nonprofit Corporation Fully Privatized Development RiskModerate LowLow or None ReturnHighModerate to Low Low or None ControlHighModerateLowNone PublicPrivate

12. Fundamentals of Partnerships Oregon University System Financing Land Owner Oregon University System Financing Land Owner Campus Treasurer Campus Housing Architect Design Contractor Construction Contractor Construction Campus Project Developer Project Manager Campus Project Developer Project Manager Consultant Planning Bond Financing Operations Residence Life All risk, return and control are assumed by the University Public Traditional University-Sponsored ModelTraditional University-Sponsored Model Private

13. Fundamentals of Partnerships University-Affiliated Foundation ModelUniversity-Affiliated Foundation Model Oregon University System Land Owner Oregon University System Land Owner Banker Financing Banker Financing Property Manager Contractor Construction Contractor Construction 501(c)(3) Foundation Project Developer Project Manager 501(c)(3) Foundation Project Developer Project Manager Consultant Planning Operations Residence Life Campus All risk, return and control are assumed by foundation, but the University is likely to be viewed as owner if boards are overlapping PublicPrivate Architect Design

14. Fundamentals of Partnerships Unaffiliated Nonprofit Corporation ModelUnaffiliated Nonprofit Corporation Model Oregon University System Land Owner Oregon University System Land Owner Banker Financing Banker Financing Property Manager Architect Design Contractor Construction Contractor Construction 501(c)(3) Nonprofit Special Purpose Corp. Consultant Planning Operations Residence Life Campus Developer Developer Ground Lease Development and operational risk are assumed by contractors to the foundation; operating surpluses can accrue to University. PublicPrivate

15. Fundamentals of Partnerships Fully Privatized ModelFully Privatized Model Oregon University System Land Owner Oregon University System Land Owner Banker Financing Banker Financing Property Manager Architect Design Contractor Construction Contractor Construction Private Developer Project Developer Project Manager Private Developer Project Developer Project Manager Operations Residence Life Campus All risk, return and control are assumed by the developer; minimal control of operations available to the University PublicPrivate

16. Fundamentals of Partnerships Factors Favoring Traditional ApproachFactors Favoring Traditional Approach –Site is proximate to campus core –The traditional means of developing and operating housing are successfully established –Tax-exempt financing is available and inexpensive –Housing is integral to the educational mission of the institution –Institution wants control and/or financial return; willing to take the associated risk

17. Fundamentals of Partnerships Factors Favoring a PartnershipFactors Favoring a Partnership –Housing required faster than institution can deliver it –Debt capacity or financing is unavailable –Cost of developing or operating in the traditional manner is cost prohibitive –Institution lacks expertise in developing and operating residential facilities –Capital projects are predominantly new construction

18. Partnership Recommendations University-Affiliated FoundationsUniversity-Affiliated Foundations –OUS can modify rules to add an “OUS Foundation” –Use of University-affiliated Foundation not likely because: Primary purpose is to raise money for research, scientific or educational programsPrimary purpose is to raise money for research, scientific or educational programs Foundation boards are probably not comfortable with operating student housingFoundation boards are probably not comfortable with operating student housing

19. Partnership Recommendations University-Affiliated FoundationsUniversity-Affiliated Foundations –Unresolved Issues Oregon Law prohibits institutional control of a Foundation-voids IRS qualification to issue tax- exempt bonds. Would require qualification as a “Public Charity”Oregon Law prohibits institutional control of a Foundation-voids IRS qualification to issue tax- exempt bonds. Would require qualification as a “Public Charity”

20. Next Steps Issues for ConsiderationIssues for Consideration –What’s Broken What features of the Traditional Model do not work for your Campus?What features of the Traditional Model do not work for your Campus? What features of the 4 public/private models interests you?What features of the 4 public/private models interests you?

21. Next Steps HighestModerateLowest Ease of Implementation Lowest Potentially High HighHighest Financial Return Lowest High if managed by Campus Lower if managed by 3 rd party Highest Level of University Control Yes Probably Possible Probably Not Possible Not Possible Off-Balance Sheet Financing Not Available Potentially Available Available Access to Tax-Exempt Financing HighestHigher Slightly Higher Lowest Cost of Capital Fully Privatized Unaffiliated Nonprofit Corporation University- Affiliated Foundation Traditional University Development Issue