Forward Selling Or Perhaps Forward Leasing?

Very little has been revealed by Marymount's President Dr. Michael Brophy as to how Marymount might acquire funds to build on-campus housing and provide other income to help finance other pieces of The Marymount Plan.

Since the ballot measure has now been approved for voting on with the November 2, 2010 General Election cycle, I think it is time to consider in greater detail at least one option that the approval of the Initiative would allow Marymount to do.

I do feel all potential voters need the opportunity to learn how Marymount might fund construction of its Marymount Plan, some time before voters are asked to decide on whether to vote Yes or No on the Special Election portion of the General Election ballot.

Now, let's look at a possible scenario where a small college might seek approval to build on-campus housing and how it might find funding and other income to build such housing and possibly gain some other income to finance other projects and operations.

First, let's all go look at the following Web site, O.K.?

http://www.americancampus.com/servuces/financing/ace

Back yet? Fine, let's proceed.

I will use the example set by the University of New Mexico as a case study if you will, on how another, but much smaller college might use similar means to find financing and income from sources other than what that college's administration has not been willing to reveal.

Here is information provided via a May 11, 2010 item in what I believe is the UNM paper or newsletter:

American Campus Communities is one of the nation's largest developers, owners and managers of high-quality student housing communities. We led the industry to a new plateau in 2004 when we became the first publicly traded student housing REIT (NYSE: ACC). Since 1996, we've developed more than $2.3 billion in properties for our own account and our university clients, and we have acquired in excess of $2 billion in student housing assets. Also, we've become a national leader in third-party development and management of on-campus student housing, having been awarded the development of 53 on-campus projects (in addition to our 11 projects developed off campus). Our commitment to our college and university partners is evidenced in our strong ongoing relationships. Almost half of our on-campus developed communities (24 of 53) came from additional projects awarded to us after we had successfully completed a previous community.

A deep-rooted understanding of the industry drives the American Campus team. Seven members of our corporate staff at the level of vice president and above began their careers as resident assistants while attending college. Throughout their collective careers, our senior staff has been involved in the development, acquisition or management of more than 130 student housing properties, consisting of more than 81,000 beds at over 85 colleges and universities. This unparalleled experience guides how we analyze student markets, underwrite acquisitions, design and construct our developments, and how we market, lease and operate our communities.

The University of New Mexico Board of Regents has unanimously approved terms of a ground lease that will allow American Campus Communities (ACC) to begin construction on an 864-bed student housing community west of the Pit. This approval culminates a process that started more than two years ago with a Request for Information advertised to developers, owners and managers of student housing to determine how and where to best add new housing to meet a growing student demand.

Terms of Ground Lease

Regents approved a lease term for ACC of 40 years with three additional options of 10 years each. In the first five years of the agreement, ACC’s rent paid to UNM will grow from $333,643 to $375,518. In subsequent years, the rent will be 5.7% of gross revenues but no less than $350,000.

ACC will develop and construct the estimated $40 million project at its own cost by August 2011. The ground lease may be terminated by UNM if ACC fails to commence construction by August 1, 2010.

UNM is free to provide any residence hall housing (unlimited), or other student housing that is not similar to nor will have an adverse economic impact on ACC’s south campus project. The university may also be able to build a directly competitive project if an independent study shows demand. The university can also renovate or replace existing dorms.

Additionally, should ACC decide to sell the property within the first 10years, UNM will have first right to purchase it. UNM can also exercise its right of purchase at any time after 10 years and upon a contemplated transfer by ACC.

Echoing the comments of several regents that the housing is needed, student regent Cate Wisdom said plans for recreation and study facilities within the ACC project will make for an active living and learning center for upperclassmen who currently seek off-campus apartment or house accommodations. “Students will be able to engage in the community they live in,” said Wisdom.

Need for More Housing

The need, importance and benefits of new housing at UNM have been established for several years. An undergraduate student housing report conducted in 2006 project cost is approximately $40 million and no taxpayer or university money will be used.

"This is the first exciting step in dramatically modernizing the student residential experience at UNM," said Jason Wills, ACC senior vice president. "We are very excited about the opportunity to partner with the University of New Mexico and look forward to supporting the university in achieving its academic and student development objectives."

One of the big issues that the small college I am writing about has to deal with, compared to the University of New Mexico is that upperclassmen, and any on-campus residence hall dweller at the small college won't really have the opportunity to 'engage in the community they live in' close to the dorms because that community is dominated by single-family residential units and that most community engagement must be done using vehicular transportation to and from the residence hall to larger community activities found far lower in elevation that the small college is at.

I do think that if I were the President of the small college in the example in this post, I would be pretty darn stupid not to enter into an agreement possibly similar to the one written about because it looks like I wouldn't have to pay a dime to have the dorms constructed and maintained and a company I entered into the agreement would pay my college a fee every month that I could use on other things like soccer uniforms for my school's team and perhaps bleachers and field lighting for night soccer games.

After all, if voters approve my plan and I get to keep the new municipal code that allows me to do things I would be restricted from doing if I followed the city approved plans, I would have almost unlimited capabilities to build whatever I want, within a 15% additional amount and have all that funded through contracts I make between the dorm-management company and the facilities production company that will manage all non-academic activities and pay me a monthly fee to do so.

How great is that?

I know if I can't have dorms approved, I would have to go to supporters and seek donations and other means to build what I have been promising everyone I would do, for the last ten years. How would it look if voters didn't approve my plan and I was stuck finding funding for a project that does not contain the single most important thing I have always wanted yet could not find approval for.

I already know my school's enrollment has been declining and a good number of folks know I stated back in 2008 that I didn't think my college had enough funds to get my Plan or even the city-approved Project going.

I still need to figure out how to sell my plan to potential voters when I am not willing to offer anyone the whole truth about my plan or whether I would even begin the Project handed to me almost completely encompassing almost everything I asked for in the first place.

If I were to be headed towards being placed in a jar, that jar could only contain pickles, I fear.

With Dr. Brophy's and Dr. Soldoff's Marymount Plan, we know so very little as to how any improvements to the campus would be done if voters vote down the Initiative.

My assertion is that Marymount will not begin any expansion unless it is granted the right to build on-campus housing and if voters vote down the Initiative and short of court action in favor of Marymount's demands, there won't be enough financial support or donations to build The Project and I don't really believe Marymount has ever had that much more intent to simply construct on-campus housing and provide some of the applied for expansion that would garner it more income from non-academic uses.