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 6or 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
$369
$550
$562
$779
$930
$345
$459
$390
$460
$890
Low
$1,080
Median
$565

Efficiency
1 Bedroom
2 Bedroom
3 Bedroom
(n=6)
(n=20)
(n=21)
(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
9%
10%
University of Nevada-Reno
12%
University of Louisville
12%
University of Illinois-Chicago
University of Memphis
University of Louisville
12%
12%
18%
Proposed
University of Missouri-Columbia
23%
University of Kentucky-Lexington
23%
University of Pittsburgh
SUNY at Buffalo

7%
Median: 12%
25%
65%
6
Market Analysis
Benchmarking

Peers: Fall 2004 Occupancy
University of Memphis
University of Nevada-Reno
University of Missouri-Columbia
University of Louisville

82%
93%
97%
98%
University of Pittsburgh
99%
University of Illinois-Chicago
99%
SUNY at Buffalo
100%
University of Cincinnati
100%
Median: 98.5%
7
Market Analysis
Benchmarking

Peers: Room Rate Traditional Double
University of Memphis
University of South Florida
University of Louisville
$3,108
$3,168
University of Kentucky-Lexington
$3,363
University of Missouri-Columbia
$3,400
University of Nevada-Reno
University of Pittsburgh
$4,190
$4,510
University of Louisville
$4,600
SUNY at Buffalo
$4,636
University of Cincinnati
$4,680
University of Illinois-Chicago

$2,620
Median: $3,800
Proposed
$4,790
8
Market Analysis
Benchmarking

Peers: Room Rate Suite Double
University of Memphis
University of South Florida
University of Louisville
$3,108
$3,777
University of Kentucky-Lexington
$4,250
Wayne State University
$4,280
SUNY at Buffalo
$4,636
University of Missouri-Columbia
$4,750
University of Pittsburgh
$4,790
University of Cincinnati
$5,138
University of Louisville
$5,140 Proposed
University of Illinois-Chicago
University of Nevada-Reno

$2,912
Median: $4,636
$5,210
$5,290
9
Market Analysis
Student Survey

Off-Campus Housing Costs Per Person

Single Students
$569
$144
Utilities
Rent
$417
$350
$352
$100
$102
$250
$250
$117
$425
$300
One Bedroom
Two Bedroom
Three Bedroom
Four Bedroom
(n=45)
(n=93)
(n=47)
(n=23)
10
Market Analysis
Student Survey

Off-Campus Housing Costs Per Unit

Married/Family Students
Utilities
$870
Rent
$625
$175
$450
$685
$245
$160
$525
$625
One Bedroom
Two Bedroom
Three Bedroom
(n=16)
(n=38)
(n=11)
11
Market Analysis
Student Survey

Median Price Per Unit Comparison With
Market Rents
Efficiency
One
Bedroom
Two
Bedroom
Three
Bedroom
ASL Market Sample
$460
$459
$562
$779
Single Student Survey Respondents
$392
$425
$600
$750
Married/Family Survey Respondents
-
$450
$525
$625
Market


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
Description
Tested
Monthly
AY Rent Equivalent
Renovated Traditional
Double
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
$3,920
$436
Improved Traditional
Double
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
$4,600
$511
New Semi-Suite Double
New construction, two double rooms sharing a semi-private
bath (similar to Kurz Hall)
$5,140
$571
New Semi-Suite Single
New construction, two single rooms sharing a semi-private
bath (similar to Kurz Hall)
$5,860
$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
Overall
On Campus
Off Campus
Freedom from rules and regulations
Physical condition of the housing
Ability to meet other students/social atmosphere
Availability of parking
0
500
1000
1500
Weighted Scale
2000
2500
14
Market Analysis
Student Survey

Interest in Proposed Housing
9%
Would not have lived
there.
9%
41%
57%
15%
Probably would not have
lived there (less than a
50/50 chance).
26%
Might have lived there
(50/50 chance).
37%
18%
45%
20%
On Campus
Off Campus
18%
Total
Definitely would have
lived there.
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
Off Campus
Prefer Louisville Hall
On Campus
Prefer University Tower or Medical/Dental Apartments
0
100
200
300
400
Number of Respondents
500
600 16
Market Analysis
Demand Projections

Off-Campus Student Demand – Fall 2004
Class
Full-time
Off-Campus
Enrollment
Definitely Interested
Capture
50%
Rate
Closure
Might Be Interested
Capture
25%
Rate
Closure
Projected
Demand
Freshmen
2,167
8%
82
30%
164
245
Sophomores
1,884
2%
22
17%
79
101
Juniors
Seniors
2,120
5%
48
21%
114
161
2,285
3%
36
17%
98
134
454
641
8,456


187
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
Full-time
On-Campus
Enrollment
Definitely Interested
Might Be Interested
Capture
Rate
50%
Closure
Capture
Rate
25%
Closure
Projected
Demand
1,550
50%
389
35%
135
524
Sophomores
604
45%
135
35%
53
187
Juniors
164
30%
24
53%
22
46
Seniors
68
33%
11
33%
6
17
215
775
Class
Freshmen
2,386


560
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
Total

2004 Rent
Per Student
Per AY
$3,920
$4,600
$5,140
$5,860
Off-Campus Students
Preference
Demand
On-Campus Students
Preference
Demand
Total
Projected
Demand
18%
30%
20%
32%
117
194
127
204
20%
42%
19%
19%
158
323
149
144
274
517
276
348
100%
641
100%
775
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 1st 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 frontloaded 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 reengineered 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


Construction Costs



25% of annual surplus, if available
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




Bond coupon rate
Term
Earnings on reserves
Reserves




(New/Reno)
5.5%
30 yrs
5.0%
20 yrs
2.5%
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
Development
Budget
0
0
0
250
241
250
0
292
298
100
100
209
1,740
14,309,000
9,467,000
14,733,000
11,830,000
$
Scheduled
Completion
Aug-2006
Aug-2006
Aug-2006
Aug-2007
Aug-2008
Aug-2008
Aug-2009
Aug-2009
50,339,000
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
Net Revenue
Operating Cost
Net Operating Income
$8,000
$6,000
$4,000
$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
Target Min. Coverage
Debt Service Coverage
1.80
1.60
1.40
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
48
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
1,600,000
15,000,000
1,400,000
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
-
Annual P+I
1,800,000
20,000,000
Principal

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
4% TIC
Estimated Revenues
$
Less: Debt Service
$
Operating Cost Allowance
$
Cost per Bed
Cost per GSF

490 beds
175,277 gsf
2,600,000
5% TIC
$
(1,358,000) $
1,242,000
$2,535
$7.09
$
2,600,000
6% TIC
$
(1,528,000) $
1,072,000
2,600,000
(1,706,000)
$
$2,188
$6.12
UL operating expense budget for FY2006 is
$2,995/bed or $10.43/gsf
894,000
$1,824
$5.10
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