Across the country, our current healthy economy is creating opportunities for colleges and universities to take a new direction in developing student housing—turning to developers to finance, design and construct much-needed housing instead of financing it themselves. The reasons are numerous—from decreasing state financial support, to the lack of developable property on dense urban campuses, to limited in-house resources in market-driven development, to managing risk of future enrollment changes.
The move toward including developer-led housing in a college or university’s student housing portfolio is a smart decision. Developers have an advantage, as they understand marketplace dynamics and can design for long-term flexibility of their real estate asset. They can design and build projects that provide what student consumers want today, while working with the higher education institution to manage long-term occupancy risks.
Constructing cost-effective student housing through traditional procurement methods can be financially challenging for universities. But when universities can find the right developer/architect team to partner with, they can bring a rigor to the search for good, basic value that does not exceed the financial means of the project to support itself. Critical to the long-term success of a student-housing development is an understanding of the basic forces of costs, financing and the private housing marketplace, without compromising the unique student housing experience that the college or university is leveraging to differentiate itself from competitors.
Several recent examples illustrate how universities are benefiting from developer-led housing.
MUCH-NEEDED HOUSING WITH NO CAPITAL INVESTMENT
As with other universities nationally, the University of Wisconsin has seen decreased financial support and a tuition freeze from State government across its multi-campus system. Needing both new residence halls and space for the fine arts, the University of Wisconsin-Milwaukee (UWM) looked at the historic Kenilworth Complex, a full-block, multi-building historic warehouse that it utilized for storage near its densely built urban campus. With no ability to finance the project itself, the University turned to the development community for financial solutions. After a competitive interview process, the University chose Weas Development, working with HGA and KBS Construction, to redevelop the warehouses into Kenilworth Square.
Familiar with the local market dynamics, the developer monetized the intrinsic value of the University’s land, buildings, parking, and potential retail and rent from students to finance the renovation. These potential income streams attracted investors, and Weas was able to renovate one building into the Peck Graduate School of the Arts and another connected building into a 400-bed graduate-student residence. The renovation also included a light-filled courtyard, extensive ground-floor retail, and parking for students, faculty, and the public.
Through this developer-led agreement, the public University turned an aging warehouse into new housing and academic space, with minimal investment and risk.
In another instance at UWM, campus leadership wanted to improve the quality of its freshman experience and increase retention rate by requiring first-year students to live in residence halls. Yet the lack of available campus sites was an obstacle. Turning to the housing development community, the University Foundation partnered with the Mandel Group, who owned property near campus along the Milwaukee River bluff, to develop Cambridge Commons, a 700-bed student residence designed by HGA that combines living and classrooms space for freshmen and sophomores.
The live-learn residence encourages collaborative learning and a sense of community. Freshmen occupy suites of four students, divided into two double-bed rooms with a shared bath. Sophomores live in apartment-style units, in which four students share a living/dining/kitchen space. Each residence floor has lounges, study areas, and communal kitchens.
Many amenities elevate the standard dormitory offerings, with a sound-proof music rehearsal room, variety of seminar rooms for student and faculty to meet for credit classes, cafeteria with computer terminals, fitness center, coffee shop, several street-front retail outlets, landscaped courtyard, and 100-car underground parking garage.
Through the development process, Mandell Group helped win a student-housing zoning variance for the brownfield site and led efforts to achieve LEED Gold for a sustainable building design. The University signed a lease with Mandel to house freshmen and sophomores, achieving their goals of having all freshmen students living in residence halls and significantly improving their retention rates.
Similarly, at the University of Wisconsin-Platteville, the campus Real Estate Foundation worked with C.D. Smith as developer and builder for Rountree Commons, also designed by HGA. The residence hall supports the University’s long-term plans to increase student residential options for this growing campus of approximately 7,500 students in southwestern Wisconsin. The six-story, 620-bed residence includes private student suites, main-floor commons, convenience store, several lounges, two multipurpose rooms, media center, fitness center, laundry room, landscaped courtyard, and 36-space surface parking.
As with Cambridge Commons, the facility focused on amenities tailored to the student population to support a sense of community. The first-floor commons area features varied seating for relaxing, meeting with friends, or studying. The furnished student suites include 20 single Resident Assistant units and 150 two-bedroom units (with two beds per bedroom), shared kitchenette, shower room, and half-bath. Students have access to two study rooms and a lounge with microwave oven on each floor.
DIVERSE PARTNERSHIP MODELS
The University of Minnesota-Rochester (UMR) took a similar but slightly broader tactic when planning a student residence for its growing campus, the newest in the University system. Developed by G.H. Holdings and designed by HGA, 318 Commons is a mixed-use development that supports UMR students, local residents, and growing business opportunities in downtown Rochester. The public-private development utilized the Rochester Local Sales Tax Initiative for partial funding. The nine-story, 237-resident building includes a restaurant and other leased tenant space on the ground floor, campus-wide Student Life Center on the 2nd floor, classrooms on the lower level, faculty offices, student apartments on the 3rd through 8th floors, and market-rate apartments on the 9th floors.
In still other instances, student residences are being built to serve students from multiple higher education institutions in an urban area. Eleven25 at Pabst in Milwaukee, for instance, took a vast historic brewery from 1888 and restored it using historic tax credits for student housing. Developed by Blue Ribbon Management with HGA as the architect, the project was not formally constructed for any single nearby college or university, but instead draws its residents from many campuses, including UWM, Milwaukee School of Engineering, Marquette University, Milwaukee Area Technical College, and others. While the developer has taken on significant risk in attracting students to this housing development, the facility is tailored to student life and has experienced high occupancy rates in its first year.
Ultimately, the developer-led team relieves colleges and universities of large capital investments, bond obligations, and long-term risks. Developers know how to add marketplace value by planning functional, beneficial spaces—such as more community spaces that encourage collaborative learning or leasable commercial space that adds to the urban setting and student experience. Given the shifting financial resources within higher education today, many colleges and universities may continue to turn to developers and their architect teams to finance and construct student housing cost-effectively—benefitting the student, the campus, and the surrounding neighborhood.