Cass Business SchoolLondon                Nicholas Beyts   Nicholas.Beyts.1@city.ac.uk
New Partnerships to Improve       Education?           ***
New Rooms for Old?              or  Create Finance to Build the    University ExperienceCan a university use a Public Priv...
What is PFI?1. Private Finance Initiative.   Announced in The House of Commons, 1992.1. Public Private Partnerships are Pr...
PFI - Partnership Projects Based on Four Principles1. Risk Allocation. The partner who can best manage a risk is the partn...
PFI is ControversialAdvocates of PFI claim          Opponents of PFI claim• It offers VFM                  • PFI is an exp...
ToThe contractor undertakes The university undertakesto:                             to:• Design, Build, Finance and • For...
PPP and Higher Education• Partnerships. PFI – partnership projects between the  public and the private sector based on fou...
To Build a Hall of Residence• A company (a Special Purpose Vehicle – SPV) is formed  bringing together architects , builde...
A Case Study  Example
Darwin Hall• Number of study bedrooms 220• Cost per Study Bedroom* £30,000• Capital Cost of Darwin Hall £6,600,000• *Rolle...
Estimated Annual Income per Study Bedroom Rent from students £82pw x 40 weeks           £3,280 Vacation Letting £100pw x 4...
Structure Table ACapital Cost                £6,600,000Loan                  80%   £5,280,000Equity                20%   £...
Structure Table BLoan             80% Interest Rate pa 8% £422,400Equity           20% Hurdle Rate      17% £224,400      ...
Institutional Investors         e.g. A Pension Fund         Example AAfter period of y years income is £646,800pa*Pension ...
A Name• What is in a name? Save & Prosper Manchester Nuts & Bolts Ltd Levi Jeans Intel IBM
Co-BrandPPP may provide a university with purpose builtstudent accommodation which offers the universitythe prospect of a ...
The University and Living Learning Communities• Themed Student Housing - University with co-brand• The professions - Unive...
The University and Living Space• Architecture - Design for Wow! (Chiddick, 2004)• Themed Living Space   Profession - Unive...
Forming Partnerships – Faculty & Resident Life                   Professionals• Association of College and University Hous...
New Rooms for Old?              or  Create Finance to Build the    University ExperienceCan a university use a Public Priv...
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IAU_KU_2011_Beyts

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IAU_KU_2011_Beyts

  1. 1. Cass Business SchoolLondon Nicholas Beyts Nicholas.Beyts.1@city.ac.uk
  2. 2. New Partnerships to Improve Education? ***
  3. 3. New Rooms for Old? or Create Finance to Build the University ExperienceCan a university use a Public Private Partnership (PPP) toacquire the use of residential accommodation, which offers itthe prospect of a sustainable advantage as a provider of accessand success in higher education?
  4. 4. What is PFI?1. Private Finance Initiative. Announced in The House of Commons, 1992.1. Public Private Partnerships are Projects2. To get better Value for Money for taxpayers than other arrangements
  5. 5. PFI - Partnership Projects Based on Four Principles1. Risk Allocation. The partner who can best manage a risk is the partner to manage it on the project.2. Value for Money (VFM). PFI should provide better value for money than other ways of procurement.3. The Partnership is based on principles not on rules.4.PFI Projects are excluded from the PSBR (Public Sector Borrowing Requirement.
  6. 6. PFI is ControversialAdvocates of PFI claim Opponents of PFI claim• It offers VFM • PFI is an expensive form of• NAO says property projects hire-purchase. perform well PFI • Contractors make excessive• Goverrnments around the profits from the public purse. world have adopted • We are mortgaging our PFI/PPP children’s future• Europe exceeds Euro 60 • Government is neglecting its billion in PFI/PPP Projects public service duties• PFI is misused as lease • PFI - no public service ethos back, which it is not• The media stigmatise PFI
  7. 7. ToThe contractor undertakes The university undertakesto: to:• Design, Build, Finance and • For the 25 years of the Operate (DBFO) the hall for contract the university will the university for an agreed tell it students and staff period e.g. 25 years about the property • On a student by student• After 25 years the contract arrangement when a may is renewed or dissolved student takes a room the in a prearranged fashion e.g. university guarantees the the asset is sold or it passes student will pay the rent to the university. makes good the rent to the contractor.
  8. 8. PPP and Higher Education• Partnerships. PFI – partnership projects between the public and the private sector based on four principles• Controversial. PPP is controversial• Reputation. PPP enables a reputable university or college to have the prospect of acquiring the use of purpose built student accommodation, regardless of its wealth or poverty.• Global. University or college could be in any one of many countries around the world which have adopted PPP
  9. 9. To Build a Hall of Residence• A company (a Special Purpose Vehicle – SPV) is formed bringing together architects , builders, financiers and facilities management for the purpose of the project. It is bankruptcy remote. They assess the project and the reputation of the university as a partner• The university identifies what type of hall of residence it wants and assesses the SPV as the provider and its prospective partner.
  10. 10. A Case Study Example
  11. 11. Darwin Hall• Number of study bedrooms 220• Cost per Study Bedroom* £30,000• Capital Cost of Darwin Hall £6,600,000• *Rolled up cost
  12. 12. Estimated Annual Income per Study Bedroom Rent from students £82pw x 40 weeks £3,280 Vacation Letting £100pw x 4 weeks £400 [remaining weeks are void] Charges for utilities and services £680pa £(680) Income per study bedroom net of £3,000 ancillary charges Annual Income for Hall, net of ancillary charges £660,000
  13. 13. Structure Table ACapital Cost £6,600,000Loan 80% £5,280,000Equity 20% £1,320,000
  14. 14. Structure Table BLoan 80% Interest Rate pa 8% £422,400Equity 20% Hurdle Rate 17% £224,400 £646,800Interest Cover 1.56 Income £660,000
  15. 15. Institutional Investors e.g. A Pension Fund Example AAfter period of y years income is £646,800pa*Pension Fund requires interest of £6.5% pa 6.50%Income from the premises £646,800 £646,800As part of a portfolio a fund will pay up to £9,950,769If the SPV sold the revenue to the pension fundit would achieve a pre tax profit or surplus £3,350,769*excluding growth, inflation and tax
  16. 16. A Name• What is in a name? Save & Prosper Manchester Nuts & Bolts Ltd Levi Jeans Intel IBM
  17. 17. Co-BrandPPP may provide a university with purpose builtstudent accommodation which offers the universitythe prospect of a sustainable advantage in securingequity in access and success in higher education. 2 + 2 = 5?The accommodation may be branded and then co-branded with the university’s brand to publicise theuniversity’s brand as a provider of equity in accessand success in higher education. With acknowledgement to Leuthesser et al 2003
  18. 18. The University and Living Learning Communities• Themed Student Housing - University with co-brand• The professions - University with co-brand , Lincoln• A case, civil engineering - University with co-brand• International Students - University with co-brand• Living Learning Communities
  19. 19. The University and Living Space• Architecture - Design for Wow! (Chiddick, 2004)• Themed Living Space Profession - University with co-brand , Lincoln A faculty, civil engineering - University with co-brand• International Students - University with co-brand• Living Space in IHE’s (Silver 2004)• The University and Living Learning Communities• Independent and Affinity Groups
  20. 20. Forming Partnerships – Faculty & Resident Life Professionals• Association of College and University Housing Officers- International April 2002• Educational Programming and Student Learning in College and University Residence Halls Schuh J (1999) San Francisco: Jossey-Bass• La Trobe University, Australia; Harvard University, USA; University of New Brunswick, Canada.• Recruitment & Retention (O Connor, 2003) • AIU02SRHE08Lcobrand009CR04
  21. 21. New Rooms for Old? or Create Finance to Build the University ExperienceCan a university use a Public Private Partnership (PPP) toacquire the use of residential accommodation, which offers itthe prospect of a sustainable advantage as a provider of accessand success in higher education?

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