6A — June 10 - 23, 2016 — Financial Digest — Creative Financing — M id A tlantic
Real Estate Journal
www.marejournal.com
C reative F inancing
By Mike Saraco and Jim Morris, M&T Bank Creativity is hallmark to financing the higher education of tomorrow
T
he Mid-Atlantic region is a hotbed of higher education. New Jer-
both student and community alike. They are working in tan- dem with private developers
In Central New Jersey, The College of New Jersey has just completed a 12-acre mixed use residential development proj- ect on TCNJ’s Ewing, NJ cam- pus, adjacent to the school’s main entrance. The $120 mil- lion project, developed by the PRC Group of West Long Branch, provides 278,000 s/f of living accommodations for some 612 upperclassmen, and includes 80,170 s/f of ground level retail and office space with a 14,000 s/f Barnes and Noble that serves as the school’s outsourced book store. In South Jersey, Rowan University has embarked on
a similar mixed use project that is the largest municipal redevelopment project in the state. The Rowan Boulevard Project connects Rowan’s cam- pus to the business district in Glassboro, NJ with a 1/3 mile retail corridor featuring a 129-room Courtyard by Mar- riott and a massive, 36,000 s/f Barnes and Noble Superstore. Spread across 26 acres, the project has taken place in sev- eral stages. The first, which was completed in 2011, can accommodate 1,164 students. The second phase includes a 316,000 s/f building developed by Nexus Holdings known as
220 Rowan Boulevard, which consists of 119 student hous- ing units (accommodating 456 students), 12 affordable units and 47 market-rate apart- ments, as well as ground level retail and 27,000 s/f of medical office space. Two other phases are planned for 2017 and 2018. These public/private part- nerships work because they help shift construction and de- velopment costs from tax pay- ers to third parties who have the real estate expertise to fi- nance, build and deliver world- class properties. Moreover, many colleges and universities have discovered that these projects improve town and gown relationships by draw- ing students from off-campus housing where conflicts can arise with the community. And finally, they often serve to reinvent and reimagine the campus atmosphere, providing contemporary study, live and play environments. But all is not easy in the world of public/private edu- cational development. Higher education comes with its own world of expectations, stan- dards, and administrative functions unknown in private development. For lenders and developers looking to tap the university market, here’s what they need to know: Income streams are unlike typical cookie cutter private multi-family development. Understanding the room and board process is critical to sup- porting a deal. As cash-flow lenders on these deals, banks such as M&T, which financed both the TCNJ development and Phase II of the Rowan project, must understand the university’s current capac- ity and future enrollment projections. To some degree, students may seem a captive market, but competition ex- ists everywhere. We carefully evaluated both on campus and comparable off-campus housing, determining current rents and projections for fu- ture increases. Also factored into the equation is the way rent gets paid--by the month or semester, through the aca- demic or calendar year, and whether these residences will be included in the school’s housing lottery. All are keys to understanding potential cash flows and the financial viability of the projects. Bankers need to understand continued on page 26A
sey, the most densely pop- ulated state in the Union, h a s m o r e than 50 col- l e g e s a n d universities. To c on t i n - ue to grow,
to leverage their capital dollars and bui ld cam- puses of the future to bet- ter position themselves in competi- tive markets
Jim Morris
Mike Saraco
many institutions are turning to creative development and financing to build the kinds of accommodations (room and board in the parlance of educa- tion) and amenities that serve
and appeal to the increasing demands of potential students. In New Jersey, two recent projects have set the standard for public/private educational real estate development.
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