Transcript University of Louisville
University of Louisville
Student Housing Business Plan Presentation Market Analysis Operations Review Implementation Plan
University of Louisville
Market Analysis Benchmarking Student Survey Demand Projections
Market Analysis
Benchmarking
Profile of Off-Campus Properties Sample Size: 22 properties located within 15 miles of campus Property Size: 42 to 689 units; median 208 units Leases: All offer 12-month leases; majority offer 6 or 9-month leases (most for an additional charge) Security deposits: $0 to $450 Occupancy: 77% to 100%; median 92% 3
Market Analysis
Benchmarking
Off-Campus Rents by Unit Type High Median Low Efficiency (n=6) 1 Bedroom (n=20) 2 Bedroom (n=21) 3 Bedroom (n=8) 4
Market Analysis
Benchmarking
Peer Institutions SUNY at Buffalo University of Cincinnati University of Illinois – Chicago University of Kentucky – Lexington University of Memphis University of Missouri – Columbia University of Nevada – Reno University of Pittsburgh University of South Florida Wayne State University 5
Market Analysis
Benchmarking
Peers: Beds/Units as a % of Enrollment Wayne State University University of South Florida University of Cincinnati University of Nevada-Reno University of Louisville University of Illinois-Chicago University of Memphis University of Louisville University of Missouri-Columbia University of Kentucky-Lexington University of Pittsburgh SUNY at Buffalo Median: 12% 7% 9% 10% 12% 12% 12% 12% 18% 23% 23% Proposed 25% 65% 6
Market Analysis
Benchmarking
Peers: Fall 2004 Occupancy University of Memphis University of Nevada-Reno University of Missouri-Columbia University of Louisville University of Pittsburgh University of Illinois-Chicago SUNY at Buffalo University of Cincinnati 82% Median: 98.5% 93% 97% 98% 99% 99% 100% 100% 7
Market Analysis
Benchmarking
Peers: Room Rate Traditional Double University of Memphis University of South Florida University of Louisville University of Kentucky-Lexington University of Missouri-Columbia University of Nevada-Reno University of Pittsburgh University of Louisville SUNY at Buffalo University of Cincinnati University of Illinois-Chicago $2,620 $3,108 $3,168 $3,363 $3,400 $4,190 $4,510 $4,600 $4,636 $4,680 $4,790 Proposed Median: $3,800 8
Market Analysis
Benchmarking
Peers: Room Rate Suite Double University of Memphis University of South Florida University of Louisville University of Kentucky-Lexington Wayne State University $2,912 $3,108 $3,777 $4,250 $4,280 SUNY at Buffalo University of Missouri-Columbia University of Pittsburgh University of Cincinnati University of Louisville University of Illinois-Chicago University of Nevada-Reno $4,636 $4,750 $4,790 $5,138 $5,140 Proposed $5,210 $5,290 Median: $4,636 9
Market Analysis
Student Survey
Off-Campus Housing Costs Per Person Single Students
$569
Utilities Rent $144
$417 $350 $352
$117 $100 $102 $425 $300 $250 $250 One Bedroom (n=45) Two Bedroom (n=93) Three Bedroom (n=47) Four Bedroom (n=23) 10
Market Analysis
Student Survey
Off-Campus Housing Costs Per Unit Married/Family Students Utilities Rent
$870 $625
$175
$685
$160 $245 $625 $525 $450 One Bedroom (n=16) Two Bedroom (n=38) Three Bedroom (n=11) 11
Market Analysis
Student Survey
Median Price Per Unit Comparison With Market Rents
Market
ASL Market Sample Single Student Survey Respondents Married/Family Survey Respondents
Efficiency
$460 $392 -
One Bedroom
$459 $425 $450
Two Bedroom
$562 $600 $525
Three Bedroom
$779 $750 $625 Students are generally renting at or below the median price in the market Married/family students generally seek lower cost housing than single student who share the rent 12
Market Analysis
Student Survey
Unit Types and Rents Tested in the Survey
Unit Type
Renovated Traditional Double Improved Traditional Double New Semi-Suite Double New Semi-Suite Single
Description
Full renovation that includes new furniture, new wall and floor finishes, replacement of heating and cooling, plumbing, electrical systems, and new windows so that the hall is like when it was first built Full renovation as described above plus more private and less crowded bathrooms, new study/lounge areas, expanded public areas including kitchens, laundries, and meeting rooms, improved in-room temperature control, and new acoustically insulated windows New construction, two double rooms sharing a semi-private bath (similar to Kurz Hall) New construction, two single rooms sharing a semi-private bath (similar to Kurz Hall)
Tested AY Rent Monthly Equivalent
$3,920 $4,600 $5,140 $5,860 $436 $511 $571 $651 13
Market Analysis
Student Survey
Most Important Factors Respondents Considered in their Housing Decision Affordable cost Proximity to campus facilities and services Adequate living space Have personal space/privacy Have own bedroom Security Freedom from rules and regulations Physical condition of the housing Ability to meet other students/social atmosphere Availability of parking Overall On Campus Off Campus 0 500 1000 1500 Weighted Scale 2000 2500 14
Market Analysis
Student Survey
Interest in Proposed Housing 9% 9% 41% 57% 37% 15% 18% 26% Would not have lived there.
Probably would not have lived there (less than a 50/50 chance).
Might have lived there (50/50 chance).
45% 20% 18% Definitely would have lived there.
On Campus Off Campus Total 15
Market Analysis
Student Survey
Reasons for Lack of Interest in Proposed Housing The housing is too expensive Prefer to rent off campus I live with my parents/relatives Concerned about the level of rules & regulations I do not want to move I live with my spouse and/or children Prefer Bettie Johnson Hall I already own a home Prefer existing traditional campus housing Prefer Louisville Hall Prefer University Tower or Medical/Dental Apartments Off Campus On Campus 0 100 200 300 400 Number of Respondents 500 600 16
Market Analysis
Demand Projections
Off-Campus Student Demand – Fall 2004
Class
Freshmen Sophomores Juniors Seniors
Full-time Off-Campus Enrollment
2,167 1,884 2,120 2,285
8,456 Definitely Interested Capture Rate
50% Closure 8% 2% 5% 3% 82 22 48 36
187 Might Be Interested Capture Rate
25% Closure 30% 17% 21% 17% 164 79 114 98
454 Projected Demand 245 101 161 134 641
Overall, 7.5% of current off-campus residents “would” or “might” be interested in the proposed housing Significant percentage of off-campus freshmen interested 17
Market Analysis
Demand Projections
On-Campus Student Demand – Fall 2004
Class
Freshmen Sophomores Juniors Seniors
Full-time On-Campus Enrollment
1,550 604 164 68
2,386 Definitely Interested Capture Rate
50% Closure 50% 45% 30% 33% 389 135 24 11
560 Might Be Interested Capture Rate
25% Closure 35% 35% 53% 33% 135 53 22 6
215 Projected Demand 524 187 46 17 775
Overall, 32% of current on-campus residents “would” or “might” be interested in the proposed housing Lower-division students most interested 18
Market Analysis
Demand Projections
Total Demand by Unit Preference – Fall 2004
Unit Type
Renovated Traditional Double Improved Traditional Double New Semi-Suite Double New Semi-Suite Single
2004 Rent Per Student Per AY
$3,920 $4,600 $5,140 $5,860
Total Off-Campus Students Preference Demand
18% 30% 20% 32% 117 194 127 204 100%
641 On-Campus Students Preference Demand
20% 42% 19% 19% 158 323 149 144 100%
775 Total Projected Demand 274 517 276 348 1,416
Demand at higher rents for renovated traditional halls and new semi-suites still exceeds the proposed supply of 1,033 beds 19
University of Louisville
Operations Analysis Progress Report Challenges and Opportunities Visioning the Future
Operations Review
Overview
Four Aggressive Years of Growth and Improvements Challenges and Opportunities Remaining Major issues and recommendations for University Leadership Major Issues and recommendations for Housing and Residence Life Visioning the Future 21
Operations Review
Progress Report
Four Years of Growth and Improvement General fund subsidy has been eliminated from the housing budget Student housing capacity has doubled in four years from 9% to over 18% of fulltime undergraduate students ULP surpluses have been used, in part, to expand renovations in traditional U of L residence halls 22
Operations Review
Progress Report
…More Improvements Housing license cancellation policies and penalties have been strengthened to reduce mid year vacancies and improved spring occupancy by 2-3 % annually.
Space renovated in Threlkeld for the Etscorn Honors Center Publications and marketing efforts have been enhanced considerably Policy review has been completed with policy adaptations for enhanced student service have been implemented 23
Operations Review
Progress Report
… And Even More Improvements… Strengthened overall residence hall security and fire safety program with access control and sprinkler systems House calls and Facility Assistant visits implemented in each hall Enhanced First Year Experience for students in residence halls through personal calls before fall semester, meetings with first year students (MPACT), roommate contracts, and several other initiatives 24
Operations Review
Challenges and Opportunities
Recommendations for University Leadership Effect the coordinated marketing and management of UofL Housing with ULP For a specified period of years consistent the housing master plan, re-direct general fund overhead charges and housing budget surpluses directly to the residential capital projects 25
Operations Review
Challenges and Opportunities
Recommendations for University Leadership Effect the coordinated marketing and management of UofL Housing with ULP For a specified period of years consistent the housing master plan, re-direct general fund overhead charges and housing budget surpluses directly to the residential capital projects 26
Operations Review
Challenges and Opportunities
Recommendations for University Leadership Delegate to the Housing and Residence Life management team the decisions of where students should be assigned based on market forces and educational needs.
Develop a plan to eliminate the requirement that upper class students living on campus must purchase a meal plan 27
Operations Review
Challenges and Opportunities
Recommendations for University Leadership Appoint a task force of faculty and student affairs and housing staff to develop a strategic plan for an expanded focus on residential learning Provide appropriate educational funds to support the residential learning initiatives needed to support recruitment and retention of students 28
Operations Review
Challenges and Opportunities
Housing and Residence Life How can the residential facilities and the on campus experience support recruitment and retention of students?
Can we guarantee housing to all first year students?
What is the primary focus of the educational experience in residence life?
Developing business practices that enable full tracking of all fiscal issues while allowing reduction in operating costs Adapting practices where appropriate from the Allen & O’Hara management and marketing model 29
Operations Review
Challenges and Opportunities
Recommendations for Housing Leadership Develop a plan, in collaboration with enrollment management, to guarantee all first year students who apply by May 1 st each year (and thereafter as well) Identify market niches and marketing strategies to increase overall fall occupancy by 2-3% within three years 30
Operations Review
Challenges and Opportunities
Recommendations for Housing Leadership Establish first year residence halls so that front loaded student support can efficiently enhance their retention to the sophomore year Centralize residence education and student services around a simplified and focused residential experience to enhance the success of first year and other residential students 31
Operations Review
Challenges and Opportunities
Recommendations for Housing Leadership Reduce operating expenses through re-organization, more clearly focused student academic success activities, and re engineered business practices Develop a business model scenario applying the ULP operations structure to UofL Housing to clearly identify the added operating expenses of the current H&RL budget Analyze the differences to determine if the added expenses are justified by student outcomes in terms of recruitment or retention 32
Operations Review
Visioning the Future
A Vision for the Cardinal’s Residential Experience The educational experience of living on campus is recognized and valued Aggressively funded capital investments transform the traditional residence halls into engaged learning environments with comfortable and secure accommodations The recruitment of next generation students is enhanced by the quality residential facilities and programs at the University of Louisville 33
University of Louisville
Implementation Plan Scope Financial Plan Summary Recommendations
Implementation Plan
Scope
On-Campus Facilities Operations: All existing halls Capital Improvements: Residential master plan projects; others deferred ULP Beds Bettie Johnson, Kurz, and Campus Commons not in financial model Project surpluses source of revenue only Merger of management systems to be determined 35
Implementation Plan
Scope
ULP Merger/Acquisition Ownership to remain with ULH No financial benefit to University ownership Risk of financial default should remain with ULH Improving net available cash flow to University Additional debt service not advisable in wake of $50 million in new debt for residential master plan Management Short-term: Process re-engineering to approach vision Long-term: Realignment to single point of control within University to achieve vision 36
Implementation Plan
Financial Plan
Challenges and Constraints Rental rates are low High operating costs per bed Ongoing renewal and replacement Existing debt service Low reserve balance Outcome: Minimal debt capacity exists to fund renovations and quality construction 37
Implementation Plan
Financial Plan
Creating Debt Capacity Increase rents faster than operating costs Charge rental premiums for comprehensive renovations and new construction Trim operating costs and non-operating transfers Minimize capital expenses Outcome: Increased cash flow that can be leveraged to fund capital improvements 38
Implementation Plan
Financial Plan
Revenue Assumptions 6% annual escalation through FY2009 all beds 45% premium in year following project completion 95% post-completion occupancy Operating Cost Assumptions Current operating results as baseline 3% annual inflation (i.e., 3% less than rents) 10% reduction in year following completion 39
Implementation Plan
Financial Plan
Capital Improvements Capital Expenses 25% of annual surplus, if available Construction Costs Based on input from planning team $160 per gross square foot for new construction Development Budgets Include FF&E, design fees, development costs, contingency, and financing costs Average markup 33% of construction costs 40
Implementation Plan
Financial Plan
Financing and Reserves
(New/Reno)
Bond coupon rate Term Earnings on reserves 5.5% 30 yrs 2.5% 5.0% 20 yrs Reserves Balance of $1.0 million assumed as of 7/1/2005 Operating surpluses are transferred to reserves Operating deficits are funded from reserves Provide backup debt service coverage 41
Implementation Plan
Financial Plan
Summary
Project
49A: West Hall 49B: Center Hall 49C: Wellness Hall New Commons Phase 1 Threlkeld Hall New Commons Phase 2 Stevenson Hall Miller Hall Unitas Towers University Tower Apts Medical Dental Complex Louisville Hall
Project Type
Vacate Vacate Vacate New Construction Renovation New Construction Vacate Renovation Deferred Deferred Deferred Deferred
Revenue Beds/Units
0 0 0 250 241 250 0 292 298 100 100 209
1,740 Development Budget
14,309,000 9,467,000 14,733,000 11,830,000 -
$ 50,339,000 Scheduled Completion
Aug-2006 Aug-2006 Aug-2006 Aug-2007 Aug-2008 Aug-2008 Aug-2009 Aug-2009 42
Implementation Plan
Financial Plan
Bed Distribution 3,500 3,000 2,500 ULP Beds Single Double Triple Quad 2,000 1,500 1,000 500 0 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 43
Implementation Plan
Financial Plan
Operating Budget $16,000 $14,000 $12,000 $10,000 $8,000 $6,000 $4,000 Net Revenue Operating Cost Net Operating Income $2,000 $0 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 44
Implementation Plan
Financial Plan
Debt Service Coverage 2.20
2.00
1.80
1.60
1.40
Target Min. Coverage Debt Service Coverage 1.20
1.00
0.80
'06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 45
Implementation Plan
Financial Plan
Reserves $20,000 $15,000 Restricted for Debt Coverage Unrestricted Funds Transfer To (From) Reserves $10,000 $5,000 $0 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 ($5,000) 46
Implementation Plan
Summary Recommendations
Establish advisory team to oversee the Plan Collaborate with Academic Affairs to establish living/learning environments Formalize inter-departmental business processes and agreements in support of full auxiliary status Seek operational and programmatic efficiencies to reduce operating costs Implement phased facilities renewal plan Move oversight and control of ULP management to Residence Administration 47
Extra Slides Follow
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Implementation Plan
ULP Analysis
Key Provisions of Partnership Structure Annual Rent Equal to the Net Available Cash Flow Revenues less operating expenses, debt service, management fee (6%), and deposits to reserves Debt is non-recourse to the University Purchase Option Purchase price equal to outstanding principal balance Lessor responsible for loan recording fees and transfer taxes 49
Implementation Plan
ULP Analysis
Ground Rent Received Through FY2003, University reports $337,623 revenues received For FY 2004, ULP financial statements report ground lease expenses (payments?) Bettie Johnson Hall Kurz Hall $531,172 $435,494 Though less than projected because of early tenant issues, the properties now have the potential to return projected cash flow 50
Implementation Plan
ULP Analysis
Purchase Option for Bettie Johnson Hall ULP Debt Outstanding principal balance Annual debt service $23,485,000 $1,365,000 University annual debt service on refinancing $1,706,000 at 6.0% TIC $1,528,000 at 5.0% TIC $1,358,000 at 4.0% TIC 51
Implementation Plan
ULP Analysis
BJH Outstanding Balance and Refinancing 25,000,000 2,000,000 1,800,000 20,000,000 1,600,000 15,000,000 10,000,000 5,000,000 Series 2001 Pincipal P+I at 4% Refi Rate P+I at 5% Refi Rate P+I at 6% Refi Rate 20 01 20 02 20 03 20 04 20 05 20 06 20 07 20 08 20 09 20 10 20 11 20 12 20 13 20 14 20 15 1,400,000 1,200,000 1,000,000 800,000 52
Implementation Plan
ULP Analysis
BJH Breakeven Analysis of Purchase Estimated revenue for FY2005 $2,600,000 Estimated Revenues Less: Debt Service Operating Cost Allowance Cost per Bed Cost per GSF 490 beds 175,277 gsf
4% TIC 5% TIC 6% TIC
$ 2,600,000 $ (1,358,000) $ 2,600,000 $ (1,528,000) $ 2,600,000 $ (1,706,000) $ 1,242,000 $2,535 $7.09
$ 1,072,000 $2,188 $6.12
$ 894,000 $1,824 $5.10
UL operating expense budget for FY2006 is $2,995/bed or $10.43/gsf 53
Implementation Plan
ULP Analysis
Conclusions Housing will have difficulty operating within a cost structure necessary to breakeven Current ground lease payments would have to be replaced, requiring an even more efficient operation With planned renovations and new construction, the timing is not advantageous for taking on additional debt for the acquisition 54
Implementation Plan
ULP Analysis
Recommendation for BJH Do not exercise purchase option until Housing can meet or exceed current operating results In the near term, solve problem of split management systems through a re-engineering of processes rather than through acquisition In the long term, reconsider acquisition when planned renovations and construction are complete and if advantageous financially and risk-wise 55