Public-Private Partnerships 101: Corvias’ Geoff Eisenacher Says P3s May be Only Option for Cash-Strapped Universities
RALEIGH, NC — Universities are in need of capital, but the solution is not as simply raising tuition and fees. Enter Public-Private Partnerships, which according to Geoff Eisenacher, Vice-President of Business Development at Corvias Campus Living, might be just what the doctor ordered to help universities get the ball rolling on a backlog of projects. In this CAPRE Insider Report, we highlight some of Eisenacher’s remarks as to why P3s are becoming more in vogue with universities of various sizes — especially in North Carolina.
“I would not say that North Carolina is as mature of a P3 operation as states such as Texas…but specific to student housing, a number of the state schools have been dipping their toes into the P3 arena as of late,” began Eisenacher during his remarks, Exploring the Ins and Outs of Public-Private Partnerships Between Academic Institutions and Third-Party Developers at CAPRE’s Carolinas Student Housing Forum this Spring, before listing some of the most exciting developments as of late in the Tar Heel State.
“Western Carolina just awarded a project on their Millennium Campus. We’re in the process of delivering a project in partnership with North Carolina Central, at Durham. Balfour-Beatty is in the process of delivering a project at UNC Wilmington. RISE is in the process of delivering a large development at Appalachian State University in Boone,” he listed. “And there are a number of other state schools that we know are kind of nipping around the edges, and trying to figure out what they want to do and when they want to do it — for example, Fayetteville State University, University of North Carolina Pembroke, North Carolina Agricultural and Technical State University, the College of the Arts.”
Eisenacher then divulged that these institutions may be early in the P3 game, but they have advisors on- call, helping them figure their strategy. “Some of them are going to be full P3 in a development capacity, and some of them may be in a managed capacity,” he explained.
Next, Eisenacher waded into the waters of what such institutions want specifically, which is basically a way to improve the status quo, which in terms of facilities management, can leave a lot to be desired. “They have buildings that are outdated, they have un-renovated facilities, they have code violations,” he explained. “Your garden variety school has some kind of combination of issues that they’re managing, and what they’re really looking for, generally speaking, is some support for strategic planning.”
In other words, these universities and colleges are looking for a way to address their facilities backlog — in an environment where costs are going up pretty rapidly. In 2007, the cost of property at a public institution was right around $90 per square foot, but as of 2017, that figure had increased to $120 per square foot.
“So a garden variety public school really has no way to manage that on a systemic or sustainable basis. The schools have to deal with doing more with less,” he outlined. “They have to deal with some of the factors we’ve talked about – shifting demographics. It’s a reality that finding alternative sources of capital really is one of the only ways they’re going to be able to address these issues.”
“What schools have traditionally done has been to tie revenue to expenses. They have x amount of revenue coming in, and they balance their budgets,” reiterated Eisenacher. “They balance their budgets through increasing revenues or cutting expenses, and they generally have managed to co-exist by doing that. What the schools are looking for in a P3, specifically the ones in North Carolina, is to take that revenue, create value, unlock that value, and do more with that value. And they’re creating that value by structuring P3s that help them retain more students, help them charge higher tuitions or rental rates, lower the cost of education by retaining students longer so that they don’t lose those students that they’ve invested money into, as well as lowering operating expenses.”
“By unlocking and unbundling that value and bringing forth larger capital raised, they’re able to diffuse debt, invest in non-revenue generating facilities, expand their revenue-generating housing, which helps them to across the board create and retain new value,” he concluded.
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