University of Houston Campus Developments

[TheNiche]

I was addressing your complaint about them prioritizing the dormitories over other investments, not the question of public or private developers. If they are using revenue bonds backed by the revenue from the dormitories, then they are NOT in fact allocating resources to dormitories instead of to other programs. The resources being allocated to the dormitories are being generated by the dormitories and are not available for other programs.

Considering the considerably higher cost per square foot of developing midrise and highrise residential structures and that they appear to be going with an antiquated SRO layout, I think that they can probably fill up the place at such a rent as is insufficient to achieve a cash-flow-neutral project with 100% debt or that they'll end up with vacancy that is insufficient to achieve a cash-flow-neutral project with 100% debt. It strikes me as extremely unlikely that UH can develop and operate this facility without making fairly significant cash outlays or without making commitments to debt holders that may tie their hands on future projects for which they would want to issue debt. Even among public entities, there's no such thing as a free lunch.

[Houston19514]

Considering the considerably higher cost per square foot of developing midrise and highrise residential structures and that they appear to be going with an antiquated SRO layout, I think that they can probably fill up the place at such a rent as is insufficient to achieve a cash-flow-neutral project with 100% debt or that they'll end up with vacancy that is insufficient to achieve a cash-flow-neutral project with 100% debt. It strikes me as extremely unlikely that UH can develop and operate this facility without making fairly significant cash outlays or without making commitments to debt holders that may tie their hands on future projects for which they would want to issue debt. Even among public entities, there's no such thing as a free lunch.

Apparently, UH disagrees with your analysis:

February 19, 2009

REGENTS APPROVE NEW RESIDENCE HALL, RENOVATIONS TO DINING FACILITIES

The University of Houston System Board of Regents recently approved two major construction projects that will play key roles in building a stronger "Cougar Nation."

The regents approved a new undergraduate residence hall and a major renovation to Moody Towers

Edited June 6, 2009 by Houston19514

[TheNiche]

Apparently, UH disagrees with your analysis:

February 19, 2009

REGENTS APPROVE NEW RESIDENCE HALL, RENOVATIONS TO DINING FACILITIES

The University of Houston System Board of Regents recently approved two major construction projects that will play key roles in building a stronger "Cougar Nation."

The regents approved a new undergraduate residence hall and a major renovation to Moody Towers’ dining hall. Both projects soon will break ground and will have long-term impact on the campus community.

"These are significant projects that will contribute greatly to student success" said David Irvin, associate vice president of plant operations. "They also are among the many planned projects that will help the university continue to look and feel like a top-tier institution."

The new co-ed residence hall will be located along Wheeler Avenue between Moody Towers and the Quadrangle. The 284,964-square-foot facility will house 1,085 students and contain tutoring rooms, classrooms, social spaces and a small grocery store. It is budgeted at $50 million and will be paid for through student rental fees.

They're trying to pack in one student per every 263 square feet, inclusive of the common areas and the classroom/tutoring/grocery spaces not related to the housing, and this project is probably going to cost about twice per net rentable square foot of space what other recent housing projects have cost. There is a reason that there isn't a private partner involved in this deal.

They can disagree all they like. I stand by my analysis and I most definitely stand by my earlier conclusion that there is no such thing as a free lunch.

EDIT: To put things in perspective, they're talking about a 20% increase in the number of beds by way of this one project. Counting the Calhoun Lofts, which is nearing completion, these two projects will have increased the number of beds at UH by 38% within only a couple of years. Once again, there is a reason that there isn't a private partner involved in this deal.

Edited June 6, 2009 by TheNiche

[UrbaNerd]

Oh and yes...those new Calhoun lofts start at around 800 dollars a month. At that price, I could probably get a decent efficiency somewhere in Midtown or something.

[Brian Reading]

As far as I know, the Quadrangle dorms and Towers dorms were developed by UH.

Cambridge Oaks = partnership between UH/Century Property (1991)

Cullen Oaks = partnership between UH/American Campus Communities (2000)

Bayou Oaks = partnership between UH/American Campus Communities (2003)

Best I can tell from a quick internet search, UH is developing Calhoun Lofts and the new freshman dorms on Wheeler on their own.

So, it appears UH has tried both methods, and apparently has decided to go it alone. Maybe their experience has been that they're better off developing on their own? I don't know...

Right. The last university-owned and run housing was Cougar Place, which was built in 1981. All the later housing complexes listed above have been built on university-owned land, but are not the property of the university. I have lived at Cullen Oaks, and currently live at Cambridge Oaks. While I was a student at UTSA, I also lived at another Century Campus Housing (now it's actually known as Campus Living Villages) property, so I'm familiar with this business model.

At UH even though the aforementioned properties are privately managed, they do this in conjunction with the university's Residential Life and Housing department. They use some of the university's utility services as well. For example, while I was at Cullen Oaks, the complex was forced into using the residential network for internet access (the same one in use at the Quadrangle/Moody Towers), and it was horrible. I was told by the management that it was Residential Life and Housing's call. If a resident owes money to one of the private complexes, the management can also request that a hold be placed on the student's university records. This can actually stop a student from registering for classes and graduating. Even if a student is paid off, the change won't be immediate, and the management can only get the hold removed by calling/emailing Residential Life and Housing.

Calhoun Lofts and the new Wheeler dorms will both be done using the traditional campus-housing model, and I think it's a good thing. It gets messy when things are mixed with private owners/management. It is important that UH competes with off-campus housing though. I think they're especially attempting to do that with Calhoun Lofts. It will be coming with AT&T U-Verse. I think they also need to upgrade the networks for the rest of campus-housing.

As far as the reasoning for the model UH is using, it may actually just have to do with the fact that the administration has changed. I'm really loving what our President is doing.

[Houston19514]

Oh and yes...those new Calhoun lofts start at around 800 dollars a month. At that price, I could probably get a decent efficiency somewhere in Midtown or something.

So, you're predicting they won't be able to fill the Calhoun lofts at these prices, and therefore, they won't be able to self-fund? Time will tell...

[Houston19514]

They're trying to pack in one student per every 263 square feet, inclusive of the common areas and the classroom/tutoring/grocery spaces not related to the housing, and this project is probably going to cost about twice per net rentable square foot of space what other recent housing projects have cost. There is a reason that there isn't a private partner involved in this deal.

They can disagree all they like. I stand by my analysis and I most definitely stand by my earlier conclusion that there is no such thing as a free lunch.

EDIT: To put things in perspective, they're talking about a 20% increase in the number of beds by way of this one project. Counting the Calhoun Lofts, which is nearing completion, these two projects will have increased the number of beds at UH by 38% within only a couple of years. Once again, there is a reason that there isn't a private partner involved in this deal.

So, I guess you are predicting they won't be able to rent these dorm rooms at their forecast rates?

[TheNiche]

So, I guess you are predicting they won't be able to rent these dorm rooms at their forecast rates?

The sheer increase in the amount of on-campus student housing in such a short period of time is enough to raise a red flag. How deep is the pool of demand right now, how much will demand be cannibalized after Calhoun is marketed, and what is their forecasted absorption rate? If financed entirely by debt, I forsee that there will be negative cash flow issues that plague them for at least the first several years.

If I were them, I'd wait for about two years and see how well Calhoun is received by the marketplace, then proceed (or not) based on an analysis using stabilized market data.

[Houston19514]

The sheer increase in the amount of on-campus student housing in such a short period of time is enough to raise a red flag. How deep is the pool of demand right now, how much will demand be cannibalized after Calhoun is marketed, and what is their forecasted absorption rate? If financed entirely by debt, I forsee that there will be negative cash flow issues that plague them for at least the first several years.

If I were them, I'd wait for about two years and see how well Calhoun is received by the marketplace, then proceed (or not) based on an analysis using stabilized market data.

We shall see. These are planned to be ready for the 2010 school year. I would presume/hope that someone at UH has run the numbers on demand for dorm space. And, since I believe they are probably using revenue bonds to fund this, apparently the bond purchasers have been satisfied with the numbers as well.

But more to the point, whether or not their projections are accurate, UH does not believe that it is necessary to prioritize dorms over other projects, and they have in fact not done so. They are of the belief that the dorms can be self-funding, something that many other schools have done and they have done before as well.

Edited June 6, 2009 by Houston19514

[Brian Reading]

Oh and yes...those new Calhoun lofts start at around 800 dollars a month. At that price, I could probably get a decent efficiency somewhere in Midtown or something.

Where did $800 come from? Their site says $545/person.

[N Judah]

In addition, dorms can be privately funded. There is also already an example of this on the UH campus.

Where did $800 come from? Their site says $545/person.

That's the base price...there is also a "utilities package" that costs another $300+.

[UrbaNerd]

That's the thing; 545 is per person, if you get a basic one bedroom unit, which is split between two people. An efficiency is around 800+. I spoke to someone a bit back about it since I was interested in housing next semester, but it's too pricey for me, esp since I will have to rely on loans.

I'm not exactly sure how much the regular dorms are; anyone care to fill me in on that?

[FalconRanch1]

That's the thing; 545 is per person, if you get a basic one bedroom unit, which is split between two people. An efficiency is around 800+. I spoke to someone a bit back about it since I was interested in housing next semester, but it's too pricey for me, esp since I will have to rely on loans.

I'm not exactly sure how much the regular dorms are; anyone care to fill me in on that?

Ok, I have toured these lofts and they are absolutely phenomenal. I would absolutely love to live there. HOWEVER whoever is running the numbers on this thing needs to get fired! At first they had opened it to graduate students only, shortly after they added the "Professional Students" students in PPA, PES, etc. Then they opened it up to upperclass men (Juniors and Seniors) and NOW they just opened it up to sophmores! This is why:

$810 for an efficency. (The living room doubles as your bedroom)

$1090 for a ONE bedroom. (It's $545 if you share with a roomate, the rooms are really small)

$1620 for a TWO bedroom.

*All rooms requre a one year agreement*

At these prices they are never going to get this thing filled You can tell that they are not filling these up as fast (if any) as they would like because they keep opening it up to more and more students, I would not be surprised if freshmans would be allwoed to live there next. I know of a lot of students who want to live on camus and we finally found something that was right next to out classes and "safe" HOWEVER they are pricing out students left and right. We minus well go get a house and rent out all the rooms.

[totheskies]

The sheer increase in the amount of on-campus student housing in such a short period of time is enough to raise a red flag. How deep is the pool of demand right now, how much will demand be cannibalized after Calhoun is marketed, and what is their forecasted absorption rate? If financed entirely by debt, I forsee that there will be negative cash flow issues that plague them for at least the first several years.

If I were them, I'd wait for about two years and see how well Calhoun is received by the marketplace, then proceed (or not) based on an analysis using stabilized market data.

Pretty big actually...

1) Cougar Place is on the chopping block... as it should be. That facility is in shambles and needs to be raised.

2) UofH hit record enrollment last year at above 36,000 students for the main campus. That's last year as in Fall 2007. We'll get the data for 08-09 next semester, but from my workload as an Academic Advisor and the onslaught of the recession to Houston, there's no way enrollment decreased.

3) Moody Towers was overbooked by almost 100 people in Fall 08. They were reported for being in violation of the fire code... some of the students had to sleep on cots in the basement and in the lounge of the dorms. It was a real mess at the beginning of the semester.

I guess I don't understand the difference between having a private-owned facility and a university-owned facility. The actual dorms are going to be run by the university (as opposed to an outside company like Cullen Oaks), but the retail portions will be private entities in Calhoun Lofts. Just FYI, they're having trouble filling Calhoun Lofts with graduate students, but have received a flood of requests from undrgrads, and they decided to open the facility to seniors and juniors just so they could meet the expected quota (I'm not sure if it's been met yet though).

[totheskies]

Oh and yes...those new Calhoun lofts start at around 800 dollars a month. At that price, I could probably get a decent efficiency somewhere in Midtown or something.

Yes... if you're already familiar with the Houston area, and/or can find a roommate to share with you. Otherwise $800 is getting harder to find in Midtown or Montrose.

I know for my graduate program, all but one of the people in my class were from outside of the Houston area. We tend to associate UH with "local education" but many people (at an increasing rate) come from out of town and all over the country to attend here. Calhoun Lofts will (hopefully) be a great deal for these students.

Edited June 7, 2009 by totheskies

[UrbaNerd]

But hey, I'm an architecture student. It's not like I'll be sleeping much in those dorms anyway!

[TheNiche]

We shall see. These are planned to be ready for the 2010 school year. I would presume/hope that someone at UH has run the numbers on demand for dorm space.

So do I. I hope I'm wrong.

But more to the point, whether or not their projections are accurate, UH does not believe that it is necessary to prioritize dorms over other projects, and they have in fact not done so. They are of the belief that the dorms can be self-funding, something that many other schools have done and they have done before as well.

The actions undertaken by UH run counter to the student housing paradigm. To be clear, I'm not saying that there aren't other examples of student housing undertaken solely by universities in the last decade, just that they're uncommon...and on the whole, for good reason.

[Houston19514]

The actions undertaken by UH run counter to the student housing paradigm. To be clear, I'm not saying that there aren't other examples of student housing undertaken solely by universities in the last decade, just that they're uncommon...and on the whole, for good reason.

Whether or not any of that is true, it doesn't change the fact that UH has undertaken to build dormitorieswithout having to prioritize them over other programs.

[TheNiche]

Whether or not any of that is true, it doesn't change the fact that UH has undertaken to build dormitorieswithout having to prioritize them over other programs.

Unless the full capital cost of the dormitories are financed in their entirety by non-recourse revenue bonds and net operating income is consistently sufficient to pay down the debt service, then UH is in fact making a capital budgeting decision that will impact their cash positions or that exposes them to all variety of financial risks or that increases their aggregate leverage ratio and has a marginal increase of their cost of capital for future projects.

Putting things in italics appears to be important to you, so I'm going to say this one more time: there is no such thing as a free lunch.

[Houston19514]

Unless the full capital cost of the dormitories are financed in their entirety by non-recourse revenue bonds and net operating income is consistently sufficient to pay down the debt service, then UH is in fact making a capital budgeting decision that will impact their cash positions or that exposes them to all variety of financial risks or that increases their aggregate leverage ratio and has a marginal increase of their cost of capital for future projects.

Putting things in italics appears to be important to you, so I'm going to say this one more time: there is no such thing as a free lunch.

Yes, Niche, we all know there is no such thing as a free lunch. Nobody claimed anything to the contrary. I don't really need a lesson in capital costs or operating costs, least of all from you. I am quite aware that everything in your first paragraph is true. You are using your google skills to their max again, aren't you? ;-)

From the beginning, I have said IF they are funded with revenue bonds supported by the revenue stream of the dormitories (and that appears to be the case), then there is no prioritization necessary vis a vis other projects. Very simple. Nothing you have said above is in any way contrary to or corrective of that.

Edited June 14, 2009 by Houston19514

[totheskies]

Unless the full capital cost of the dormitories are financed in their entirety by non-recourse revenue bonds and net operating income is consistently sufficient to pay down the debt service, then UH is in fact making a capital budgeting decision that will impact their cash positions or that exposes them to all variety of financial risks or that increases their aggregate leverage ratio and has a marginal increase of their cost of capital for future projects.

Putting things in italics appears to be important to you, so I'm going to say this one more time: there is no such thing as a free lunch.

UH obviously looks at the new dorms as a big bold investment, but to be clear, an increased residential population is presumed to be an essential for Tier 1 status. These dorms are much more than extra sleeping quarters... they are helping to esablish a new UH community. Just like downtown... we could argue forever over whether or not One Park Place was needed there, but to a certain extent, the developers had to take the leap and hope that the project works out for the best. UH continues to grow during the recession, and the student base is now more diverse than ever. It is no longer acceptable for UH to be labled as simply a "commuter campus". If we're going to grow and have any hope of achieving Tier 1 status, these dorms are a critical stone for our future foundation.

[TheNiche]

Yes, Niche, we all know there is no such thing as a free lunch. Nobody claimed anything to the contrary. I don't really need a lesson in capital costs or operating costs, least of all from you. I am quite aware that everything in your first paragraph is true. You are using your google skills to their max again, aren't you? ;-)

From the beginning, I have said IF they are funded with revenue bonds supported by the revenue stream of the dormitories (and that appears to be the case), then there is no prioritization necessary vis a vis other projects. Very simple. Nothing you have said above is in any way contrary to or corrective of that.

You must need a lesson in finance, otherwise you would not have made the absurd statements that you have. If you are so incapable of reading comprehension as that you continue to press points that I've already addressed, then I'm sorry but I can't help you any further.

[TheNiche]

UH obviously looks at the new dorms as a big bold investment, but to be clear, an increased residential population is presumed to be an essential for Tier 1 status.

By whom and for what reason? Platitudes are not sufficient.

[totheskies]

By whom and for what reason? Platitudes are not sufficient.

Precedent. Most Tier 1 (AAU) schools have tight residential communities, notable faculty, a healthy endowment and state-of-the-art research facilities. It only makes sense that UH would want to model itself off of the Tier 1 schools that are already in existence. UT and A&M are known for having strong residential ties (and probably by no surprise, very strong alumni connections).

[TheNiche]

Precedent. Most Tier 1 (AAU) schools have tight residential communities, notable faculty, a healthy endowment and state-of-the-art research facilities. It only makes sense that UH would want to model itself off of the Tier 1 schools that are already in existence. UT and A&M are known for having strong residential ties (and probably by no surprise, very strong alumni connections).

There are many Tier-One-correlated variables already listed in your statement; furthermore, I do not believe your list of variables to be exhaustive. You didn't mention football at all, for instance.

Of these many variables, some are more important (i.e. take priority) and likely correlate weakly. In a circumstance where an institution has a finite budget (which is to say, every circumstance), capital and operating budgets should reflect these priorities.

Furthermore, In the case of on-campus university-operated student housing, much of the existing stock was constructed in a different era and is a legacy of the past, not necessarily reflecting a practical future.

The core of your argument seems to be that they have a physical plant of known characteristics, they are better (for reasons not very well articulated), UH should aspire to be like them, and so UH should have a physical plant of similar characteristics. This is poor reasoning. My own analytical paradigm is as follows: first identify the function of UH, second identify what factors allow that function to be optimally fulfilled provided a finite budget. If the function of UH is to be like UT-Austin or TAMU, then UH needs university-operated student housing. If the function of UH is as described in its mission statements, then university-operated student housing is a dubious proposition at best.

Edited June 14, 2009 by TheNiche

[Houston19514]

ROFLMAO. You are a treasure, Niche.

Edited June 14, 2009 by Houston19514

[totheskies]

There are many Tier-One-correlated variables already listed in your statement; furthermore, I do not believe your list of variables to be exhaustive. You didn't mention football at all, for instance.

All I did was make a list, forgive me if I didnt's specify in the aforementioned post that I was only discussing the first of the listed criteria, and took it to reason that (along with the current trends within this thread) that I didn't need to go into detail about the remaining criteria.

Of these many variables, some are more important (i.e. take priority) and likely correlate weakly. In a circumstance where an institution has a finite budget (which is to say, every circumstance), capital and operating budgets should reflect these priorities.

Furthermore, In the case of on-campus university-operated student housing, much of the existing stock was constructed in a different era and is a legacy of the past, not necessarily reflecting a practical future.

Whether or not they were practical in the past doesn't matter in the present. If all developers thought this way, then Houston in its current form would most certainly NOT EXIST. If Moody Towers, the Quadrangle and Cougar Place were sitting unused during the regular school year, then you may have a point in this statement, but the fact that the dorms have been filled to capacity for several years now, and that the university cannot meet housing demand for all students that wish to live on campus shows that whoever in the past decided to take a gamble on those projects was correct... that gamble paid off. In the case of Cougar Place, it's a shame that they decided to build the facility with cheap construction materials, but still it remains in use because University Housing has run out of room. Business practicality is very important to an institution and is LIFE or DEATH to a private company, but UH has the dubious distinction of being a public entity for the Houston community. Sometimes, they have to stick their necks out and make impractical business decisions because they see need down the road.

The core of your argument seems to be that they have a physical plant of known characteristics, they are better (for reasons not very well articulated), UH should aspire to be like them, and so UH should have a physical plant of similar characteristics. This is poor reasoning. My own analytical paradigm is as follows: first identify the function of UH, second identify what factors allow that function to be optimally fulfilled provided a finite budget. If the function of UH is to be like UT-Austin or TAMU, then UH needs university-operated student housing. If the function of UH is as described in its mission statements, then university-operated student housing is a dubious proposition at best.

Your statement here is somewhat confusing, but I'll try to respond...

UH does not want to "be like" Rice, UT or A&M, but they do see some areas in which those schools have solid operating systems, whil UH may need some improvement in those areas. UH can never replicate the campuses of other Tier 1 schools. And I agree with you... nowhere in UH's mission statement does it say "be like UT, Rice or A&M". However it does seek to discover and disseminate knowledge through the education of a diverse population of traditional and non-tradtitional students. Anyone who has attended college as a traditional student knows that dorm life was an essential part of their education. And with the Fall of 2009 shaping up to be another record year of FTIC attendance for UH, this part of the mission statement is a top priority.

[totheskies]

Oh, and an update on this project FYI...

The site has been cleared and fenced off already, and they've begun to move in some construction equipment. they'll probably start in the next few weeks.

[lockmat]

Construction begins Monday on a $50 million dormitory at the University of Houston

[KinkaidAlum]

Egads, that has the potential to be a really ugly looking Soviet block type of facility...