Per the Palm Beach Post, Florida Atlantic University is getting out of the housing business, finalizing a privatization deal that involves contracting out the management of five existing residence halls and the construction and management of two new ones in return for a $12 million upfront payment:
An agreement approved Wednesday by Florida Atlantic University trustees gives the go-ahead to finalize a deal with [Boca Raton development firm Crocker Partners] to develop and manage two new residence halls, as well as oversee the school’s five current dorms on the Boca Raton campus.
As part of the deal, FAU will get a $12 million infusion of cash early next year to build a new football stadium and other facets of the university’s long-sought Innovation Village.
Wednesday’s vote was called landmark by school officials – a turning point in the makeover of FAU into a traditional university, one no longer burdened with a reputation as solely a commuter school. “This is the culmination and a beginning of what we’ve been working on now for many years,” FAU President Frank Brogan said about the plan.
The deal works this way: A new not-for-profit organization created by FAU will issue approximately $90 million in bonds early next year that will be repaid with operating revenue from the residence halls that Crocker will manage. From the bond, approximately $69 million will go to build the first residence hall, $12 million will be given to FAU as a lease payment for the land on the Boca Raton campus, and the remainder will go to closing costs on the bond.
Crocker is working with the construction firm Balfour Beatty and the residence hall management company of Capstone Development.
Crocker is out money on the front end in development costs, which include items such as architectural and design plans. The company is also putting up $3 million to $5 million in capital as a down payment on the bond.
FAU Chief Counsel David Kian, who negotiated the plan, said the school couldn’t have done the deal without a developer because it wouldn’t have been able to get the $12 million up front for leasing the land. That $12 million will then be used in a separate deal to get financing for the stadium. […]
FAU will maintain control over setting policy for the residence halls, as well as rental and fee rates. That had been a concern of at least one trustee. […]
The first residence hall is expected to be completed in August 2011. A second one is expected to be built within the next decade, but trustees will decide on when it is constructed based on need.
FAU now has about 2,400 residence hall beds on its Boca Raton campus and a waiting list of about 600 students each fall. This year the demand for on-campus housing was so high that FAU had to hold a lottery for spots.
For more on the merits of university housing privatization, see Reason Foundation’s 2006 policy study, “Privatizing University Housing.” As we discuss in the study, privatization has provided a number of benefits to universities and to the students who live in their residence halls, including lower costs, faster construction, and higher quality housing.