Fall 2005

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  • Others were tested: these are the top ten responses
  • Fall 2005

    1. 1. University of Louisville <ul><li>Student Housing Business Plan Presentation </li></ul><ul><ul><li>Market Analysis </li></ul></ul><ul><ul><li>Operations Review </li></ul></ul><ul><ul><li>Implementation Plan </li></ul></ul>
    2. 2. University of Louisville <ul><li>Market Analysis </li></ul><ul><ul><li>Benchmarking </li></ul></ul><ul><ul><li>Student Survey </li></ul></ul><ul><ul><li>Demand Projections </li></ul></ul>
    3. 3. Market Analysis Benchmarking <ul><li>Profile of Off-Campus Properties </li></ul><ul><ul><li>Sample Size: 22 properties located within 15 miles of campus </li></ul></ul><ul><ul><li>Property Size: 42 to 689 units; median 208 units </li></ul></ul><ul><ul><li>Leases: All offer 12-month leases; majority offer 6- or 9-month leases (most for an additional charge) </li></ul></ul><ul><ul><li>Security deposits: $0 to $450 </li></ul></ul><ul><ul><li>Occupancy: 77% to 100%; median 92% </li></ul></ul>
    4. 4. Market Analysis Benchmarking <ul><li>Off-Campus Rents by Unit Type </li></ul>
    5. 5. Market Analysis Benchmarking <ul><li>Peer Institutions </li></ul><ul><ul><li>SUNY at Buffalo </li></ul></ul><ul><ul><li>University of Cincinnati </li></ul></ul><ul><ul><li>University of Illinois – Chicago </li></ul></ul><ul><ul><li>University of Kentucky – Lexington </li></ul></ul><ul><ul><li>University of Memphis </li></ul></ul><ul><ul><li>University of Missouri – Columbia </li></ul></ul><ul><ul><li>University of Nevada – Reno </li></ul></ul><ul><ul><li>University of Pittsburgh </li></ul></ul><ul><ul><li>University of South Florida </li></ul></ul><ul><ul><li>Wayne State University </li></ul></ul>
    6. 6. Market Analysis Benchmarking <ul><li>Peers: Beds/Units as a % of Enrollment </li></ul><ul><ul><li>Median: 12% </li></ul></ul>65% 25% 23% 23% 12% 12% 12% 12% 10% 9% 7% SUNY at Buffalo University of Pittsburgh University of Kentucky-Lexington University of Missouri-Columbia University of Memphis University of Illinois-Chicago University of Louisville University of Nevada-Reno University of Cincinnati University of South Florida Wayne State University 18% University of Louisville Proposed
    7. 7. Market Analysis Benchmarking <ul><li>Peers: Fall 2004 Occupancy </li></ul><ul><ul><li>Median: 98.5% </li></ul></ul>100% 100% 99% 99% 98% 97% 93% 82% University of Cincinnati SUNY at Buffalo University of Illinois-Chicago University of Pittsburgh University of Louisville University of Missouri-Columbia University of Nevada-Reno University of Memphis
    8. 8. Market Analysis Benchmarking <ul><li>Peers: Room Rate Traditional Double </li></ul><ul><ul><li>Median: $3,800 </li></ul></ul>$4,790 $4,680 $4,636 $4,510 $4,190 $3,400 $3,363 $3,168 $3,108 $2,620 University of Illinois-Chicago University of Cincinnati SUNY at Buffalo University of Pittsburgh University of Nevada-Reno University of Missouri-Columbia University of Kentucky-Lexington University of Louisville University of South Florida University of Memphis $4,600 University of Louisville Proposed
    9. 9. Market Analysis Benchmarking <ul><li>Peers: Room Rate Suite Double </li></ul><ul><ul><li>Median: $4,636 </li></ul></ul>$5,290 $5,210 $5,138 $4,790 $4,750 $4,636 $4,280 $4,250 $3,777 $3,108 $2,912 University of Nevada-Reno University of Illinois-Chicago University of Cincinnati University of Pittsburgh University of Missouri-Columbia SUNY at Buffalo Wayne State University University of Kentucky-Lexington University of Louisville University of South Florida University of Memphis $5,140 University of Louisville Proposed
    10. 10. Market Analysis Student Survey <ul><li>Off-Campus Housing Costs Per Person </li></ul><ul><ul><li>Single Students </li></ul></ul>
    11. 11. Market Analysis Student Survey <ul><li>Off-Campus Housing Costs Per Unit </li></ul><ul><ul><li>Married/Family Students </li></ul></ul>
    12. 12. Market Analysis Student Survey <ul><li>Median Price Per Unit Comparison With Market Rents </li></ul><ul><ul><li>Students are generally renting at or below the median price in the market </li></ul></ul><ul><ul><li>Married/family students generally seek lower cost housing than single student who share the rent </li></ul></ul>
    13. 13. Market Analysis Student Survey <ul><li>Unit Types and Rents Tested in the Survey </li></ul>
    14. 14. Market Analysis Student Survey <ul><li>Most Important Factors Respondents Considered in their Housing Decision </li></ul>0 500 1000 1500 2000 2500 Availability of parking Ability to meet other students/social atmosphere Physical condition of the housing Freedom from rules and regulations Security Have own bedroom Have personal space/privacy Adequate living space Proximity to campus facilities and services Affordable cost Weighted Scale Overall On Campus Off Campus
    15. 15. Market Analysis Student Survey <ul><li>Interest in Proposed Housing </li></ul>
    16. 16. Market Analysis Student Survey <ul><li>Reasons for Lack of Interest in Proposed Housing </li></ul>0 100 200 300 400 500 600 Prefer University Tower or Medical/Dental Apartments Prefer Louisville Hall Prefer existing traditional campus housing I already own a home Prefer Bettie Johnson Hall I live with my spouse and/or children I do not want to move Concerned about the level of rules & regulations I live with my parents/relatives Prefer to rent off campus The housing is too expensive Number of Respondents Off Campus On Campus
    17. 17. Market Analysis Demand Projections <ul><li>Off-Campus Student Demand – Fall 2004 </li></ul><ul><ul><li>Overall, 7.5% of current off-campus residents “would” or “might” be interested in the proposed housing </li></ul></ul><ul><ul><li>Significant percentage of off-campus freshmen interested </li></ul></ul>Class Capture Rate 50% Closure Capture Rate 25% Closure Freshmen 2,167 8% 82 30% 164 245 Sophomores 1,884 2% 22 17% 79 101 Juniors 2,120 5% 48 21% 114 161 Seniors 2,285 3% 36 17% 98 134 8,456 187 454 641 Full-time Off-Campus Enrollment Projected Demand Definitely Interested Might Be Interested
    18. 18. Market Analysis Demand Projections <ul><li>On-Campus Student Demand – Fall 2004 </li></ul><ul><ul><li>Overall, 32% of current on-campus residents “would” or “might” be interested in the proposed housing </li></ul></ul><ul><ul><li>Lower-division students most interested </li></ul></ul>Class Capture Rate 50% Closure Capture Rate 25% Closure Freshmen 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 2,386 560 215 775 Full-time On-Campus Enrollment Projected Demand Definitely Interested Might Be Interested
    19. 19. Market Analysis Demand Projections <ul><li>Total Demand by Unit Preference – Fall 2004 </li></ul><ul><ul><li>Demand at higher rents for renovated traditional halls and new semi-suites still exceeds the proposed supply of 1,033 beds </li></ul></ul>Renovated Traditional Double $3,920 18% 117 20% 158 274 Improved Traditional Double $4,600 30% 194 42% 323 517 New Semi-Suite Double $5,140 20% 127 19% 149 276 New Semi-Suite Single $5,860 32% 204 19% 144 348 Total 100% 641 100% 775 1,416 Preference Demand Total Projected Demand 2004 Rent Per Student Per AY Unit Type Off-Campus Students Preference Demand On-Campus Students
    20. 20. University of Louisville <ul><li>Operations Analysis </li></ul><ul><ul><li>Progress Report </li></ul></ul><ul><ul><li>Challenges and Opportunities </li></ul></ul><ul><ul><li>Visioning the Future </li></ul></ul>
    21. 21. Operations Review Overview <ul><li>Four Aggressive Years of Growth and Improvements </li></ul><ul><li>Challenges and Opportunities Remaining </li></ul><ul><ul><li>Major issues and recommendations for University Leadership </li></ul></ul><ul><ul><li>Major Issues and recommendations for Housing and Residence Life </li></ul></ul><ul><li>Visioning the Future </li></ul>
    22. 22. Operations Review Progress Report <ul><li>Four Years of Growth and Improvement </li></ul><ul><ul><li>General fund subsidy has been eliminated from the housing budget </li></ul></ul><ul><ul><li>Student housing capacity has doubled in four years from 9% to over 18% of fulltime undergraduate students </li></ul></ul><ul><ul><li>ULP surpluses have been used, in part, to expand renovations in traditional U of L residence halls </li></ul></ul>
    23. 23. Operations Review Progress Report <ul><li>… More Improvements </li></ul><ul><ul><li>Housing license cancellation policies and penalties have been strengthened to reduce mid year vacancies and improved spring occupancy by 2-3 % annually. </li></ul></ul><ul><ul><li>Space renovated in Threlkeld for the Etscorn Honors Center </li></ul></ul><ul><ul><li>Publications and marketing efforts have been enhanced considerably </li></ul></ul><ul><ul><li>Policy review has been completed with policy adaptations for enhanced student service have been implemented </li></ul></ul>
    24. 24. Operations Review Progress Report <ul><li>… And Even More Improvements… </li></ul><ul><ul><li>Strengthened overall residence hall security and fire safety program with access control and sprinkler systems </li></ul></ul><ul><ul><li>House calls and Facility Assistant visits implemented in each hall </li></ul></ul><ul><ul><li>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 </li></ul></ul>
    25. 25. Operations Review Challenges and Opportunities <ul><li>Recommendations for University Leadership </li></ul><ul><ul><li>Effect the coordinated marketing and management of UofL Housing with ULP </li></ul></ul><ul><ul><li>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 </li></ul></ul>
    26. 26. Operations Review Challenges and Opportunities <ul><li>Recommendations for University Leadership </li></ul><ul><ul><li>Effect the coordinated marketing and management of UofL Housing with ULP </li></ul></ul><ul><ul><li>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 </li></ul></ul>
    27. 27. Operations Review Challenges and Opportunities <ul><li>Recommendations for University Leadership </li></ul><ul><ul><li>Delegate to the Housing and Residence Life management team the decisions of where students should be assigned based on market forces and educational needs. </li></ul></ul><ul><ul><li>Develop a plan to eliminate the requirement that upper class students living on campus must purchase a meal plan </li></ul></ul>
    28. 28. Operations Review Challenges and Opportunities <ul><li>Recommendations for University Leadership </li></ul><ul><ul><li>Appoint a task force of faculty and student affairs and housing staff to develop a strategic plan for an expanded focus on residential learning </li></ul></ul><ul><ul><li>Provide appropriate educational funds to support the residential learning initiatives needed to support recruitment and retention of students </li></ul></ul>
    29. 29. Operations Review Challenges and Opportunities <ul><li>Housing and Residence Life </li></ul><ul><ul><li>How can the residential facilities and the on campus experience support recruitment and retention of students? </li></ul></ul><ul><ul><li>Can we guarantee housing to all first year students? </li></ul></ul><ul><ul><li>What is the primary focus of the educational experience in residence life? </li></ul></ul><ul><ul><li>Developing business practices that enable full tracking of all fiscal issues while allowing reduction in operating costs </li></ul></ul><ul><ul><li>Adapting practices where appropriate from the Allen & O’Hara management and marketing model </li></ul></ul>
    30. 30. Operations Review Challenges and Opportunities <ul><li>Recommendations for Housing Leadership </li></ul><ul><ul><li>Develop a plan, in collaboration with enrollment management, to guarantee all first year students who apply by May 1 st each year (and thereafter as well) </li></ul></ul><ul><ul><li>Identify market niches and marketing strategies to increase overall fall occupancy by 2-3% within three years </li></ul></ul>
    31. 31. Operations Review Challenges and Opportunities <ul><li>Recommendations for Housing Leadership </li></ul><ul><ul><li>Establish first year residence halls so that front-loaded student support can efficiently enhance their retention to the sophomore year </li></ul></ul><ul><ul><li>Centralize residence education and student services around a simplified and focused residential experience to enhance the success of first year and other residential students </li></ul></ul>
    32. 32. Operations Review Challenges and Opportunities <ul><li>Recommendations for Housing Leadership </li></ul><ul><ul><li>Reduce operating expenses through re-organization, more clearly focused student academic success activities, and re-engineered business practices </li></ul></ul><ul><ul><li>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 </li></ul></ul><ul><ul><li>Analyze the differences to determine if the added expenses are justified by student outcomes in terms of recruitment or retention </li></ul></ul>
    33. 33. Operations Review Visioning the Future <ul><li>A Vision for the Cardinal’s Residential Experience </li></ul><ul><ul><li>The educational experience of living on campus is recognized and valued </li></ul></ul><ul><ul><li>Aggressively funded capital investments transform the traditional residence halls into engaged learning environments with comfortable and secure accommodations </li></ul></ul><ul><ul><li>The recruitment of next generation students is enhanced by the quality residential facilities and programs at the University of Louisville </li></ul></ul>
    34. 34. University of Louisville <ul><li>Implementation Plan </li></ul><ul><ul><li>Scope </li></ul></ul><ul><ul><li>Financial Plan </li></ul></ul><ul><ul><li>Summary Recommendations </li></ul></ul>
    35. 35. Implementation Plan Scope <ul><li>On-Campus Facilities </li></ul><ul><ul><li>Operations: All existing halls </li></ul></ul><ul><ul><li>Capital Improvements: Residential master plan projects; others deferred </li></ul></ul><ul><li>ULP Beds </li></ul><ul><ul><li>Bettie Johnson, Kurz, and Campus Commons not in financial model </li></ul></ul><ul><ul><li>Project surpluses source of revenue only </li></ul></ul><ul><ul><li>Merger of management systems to be determined </li></ul></ul>
    36. 36. Implementation Plan Scope <ul><li>ULP Merger/Acquisition </li></ul><ul><ul><li>Ownership to remain with ULH </li></ul></ul><ul><ul><ul><li>No financial benefit to University ownership </li></ul></ul></ul><ul><ul><ul><li>Risk of financial default should remain with ULH </li></ul></ul></ul><ul><ul><ul><li>Improving net available cash flow to University </li></ul></ul></ul><ul><ul><ul><li>Additional debt service not advisable in wake of $50 million in new debt for residential master plan </li></ul></ul></ul><ul><ul><li>Management </li></ul></ul><ul><ul><ul><li>Short-term: Process re-engineering to approach vision </li></ul></ul></ul><ul><ul><ul><li>Long-term: Realignment to single point of control within University to achieve vision </li></ul></ul></ul>
    37. 37. Implementation Plan Financial Plan <ul><li>Challenges and Constraints </li></ul><ul><ul><li>Rental rates are low </li></ul></ul><ul><ul><li>High operating costs per bed </li></ul></ul><ul><ul><li>Ongoing renewal and replacement </li></ul></ul><ul><ul><li>Existing debt service </li></ul></ul><ul><ul><li>Low reserve balance </li></ul></ul><ul><li>Outcome: Minimal debt capacity exists to fund renovations and quality construction </li></ul>
    38. 38. Implementation Plan Financial Plan <ul><li>Creating Debt Capacity </li></ul><ul><ul><li>Increase rents faster than operating costs </li></ul></ul><ul><ul><li>Charge rental premiums for comprehensive renovations and new construction </li></ul></ul><ul><ul><li>Trim operating costs and non-operating transfers </li></ul></ul><ul><ul><li>Minimize capital expenses </li></ul></ul><ul><li>Outcome: Increased cash flow that can be leveraged to fund capital improvements </li></ul>
    39. 39. Implementation Plan Financial Plan <ul><li>Revenue Assumptions </li></ul><ul><ul><li>6% annual escalation through FY2009 all beds </li></ul></ul><ul><ul><li>45% premium in year following project completion </li></ul></ul><ul><ul><li>95% post-completion occupancy </li></ul></ul><ul><li>Operating Cost Assumptions </li></ul><ul><ul><li>Current operating results as baseline </li></ul></ul><ul><ul><li>3% annual inflation (i.e., 3% less than rents) </li></ul></ul><ul><ul><li>10% reduction in year following completion </li></ul></ul>
    40. 40. Implementation Plan Financial Plan <ul><li>Capital Improvements </li></ul><ul><ul><li>Capital Expenses </li></ul></ul><ul><ul><ul><li>25% of annual surplus, if available </li></ul></ul></ul><ul><ul><li>Construction Costs </li></ul></ul><ul><ul><ul><li>Based on input from planning team </li></ul></ul></ul><ul><ul><ul><li>$160 per gross square foot for new construction </li></ul></ul></ul><ul><ul><li>Development Budgets </li></ul></ul><ul><ul><ul><li>Include FF&E, design fees, development costs, contingency, and financing costs </li></ul></ul></ul><ul><ul><ul><li>Average markup 33% of construction costs </li></ul></ul></ul>
    41. 41. Implementation Plan Financial Plan <ul><li>Financing and Reserves (New/Reno) </li></ul><ul><ul><li>Bond coupon rate 5.5% 5.0% </li></ul></ul><ul><ul><li>Term 30 yrs 20 yrs </li></ul></ul><ul><ul><li>Earnings on reserves 2.5% </li></ul></ul><ul><ul><li>Reserves </li></ul></ul><ul><ul><ul><li>Balance of $1.0 million assumed as of 7/1/2005 </li></ul></ul></ul><ul><ul><ul><li>Operating surpluses are transferred to reserves </li></ul></ul></ul><ul><ul><ul><li>Operating deficits are funded from reserves </li></ul></ul></ul><ul><ul><ul><li>Provide backup debt service coverage </li></ul></ul></ul>
    42. 42. Implementation Plan Financial Plan <ul><li>Summary </li></ul>
    43. 43. Implementation Plan Financial Plan <ul><li>Bed Distribution </li></ul>
    44. 44. Implementation Plan Financial Plan <ul><li>Operating Budget </li></ul>
    45. 45. Implementation Plan Financial Plan <ul><li>Debt Service Coverage </li></ul>
    46. 46. Implementation Plan Financial Plan <ul><li>Reserves </li></ul>
    47. 47. Implementation Plan Summary Recommendations <ul><li>Establish advisory team to oversee the Plan </li></ul><ul><li>Collaborate with Academic Affairs to establish living/learning environments </li></ul><ul><li>Formalize inter-departmental business processes and agreements in support of full auxiliary status </li></ul><ul><li>Seek operational and programmatic efficiencies to reduce operating costs </li></ul><ul><li>Implement phased facilities renewal plan </li></ul><ul><li>Move oversight and control of ULP management to Residence Administration </li></ul>
    48. 48. Extra Slides Follow
    49. 49. Implementation Plan ULP Analysis <ul><li>Key Provisions of Partnership Structure </li></ul><ul><ul><li>Annual Rent </li></ul></ul><ul><ul><ul><li>Equal to the Net Available Cash Flow </li></ul></ul></ul><ul><ul><ul><li>Revenues less operating expenses, debt service, management fee (6%), and deposits to reserves </li></ul></ul></ul><ul><ul><li>Debt is non-recourse to the University </li></ul></ul><ul><ul><li>Purchase Option </li></ul></ul><ul><ul><ul><li>Purchase price equal to outstanding principal balance </li></ul></ul></ul><ul><ul><ul><li>Lessor responsible for loan recording fees and transfer taxes </li></ul></ul></ul>
    50. 50. Implementation Plan ULP Analysis <ul><li>Ground Rent Received </li></ul><ul><ul><li>Through FY2003, University reports $337,623 revenues received </li></ul></ul><ul><ul><li>For FY 2004, ULP financial statements report ground lease expenses (payments?) </li></ul></ul><ul><ul><ul><li>Bettie Johnson Hall $531,172 </li></ul></ul></ul><ul><ul><ul><li>Kurz Hall $435,494 </li></ul></ul></ul><ul><ul><li>Though less than projected because of early tenant issues, the properties now have the potential to return projected cash flow </li></ul></ul>
    51. 51. Implementation Plan ULP Analysis <ul><li>Purchase Option for Bettie Johnson Hall </li></ul><ul><ul><li>ULP Debt </li></ul></ul><ul><ul><ul><li>Outstanding principal balance $23,485,000 </li></ul></ul></ul><ul><ul><ul><li>Annual debt service $1,365,000 </li></ul></ul></ul><ul><ul><li>University annual debt service on refinancing </li></ul></ul><ul><ul><ul><li>$1,706,000 at 6.0% TIC </li></ul></ul></ul><ul><ul><ul><li>$1,528,000 at 5.0% TIC </li></ul></ul></ul><ul><ul><ul><li>$1,358,000 at 4.0% TIC </li></ul></ul></ul>
    52. 52. Implementation Plan ULP Analysis <ul><li>BJH Outstanding Balance and Refinancing </li></ul>
    53. 53. Implementation Plan ULP Analysis <ul><li>BJH Breakeven Analysis of Purchase </li></ul><ul><ul><li>Estimated revenue for FY2005 $2,600,000 </li></ul></ul><ul><ul><li>UL operating expense budget for FY2006 is $2,995/bed or $10.43/gsf </li></ul></ul>
    54. 54. Implementation Plan ULP Analysis <ul><li>Conclusions </li></ul><ul><ul><li>Housing will have difficulty operating within a cost structure necessary to breakeven </li></ul></ul><ul><ul><li>Current ground lease payments would have to be replaced, requiring an even more efficient operation </li></ul></ul><ul><ul><li>With planned renovations and new construction, the timing is not advantageous for taking on additional debt for the acquisition </li></ul></ul>
    55. 55. Implementation Plan ULP Analysis <ul><li>Recommendation for BJH </li></ul><ul><ul><li>Do not exercise purchase option until Housing can meet or exceed current operating results </li></ul></ul><ul><ul><li>In the near term, solve problem of split management systems through a re-engineering of processes rather than through acquisition </li></ul></ul><ul><ul><li>In the long term, reconsider acquisition when planned renovations and construction are complete and if advantageous financially and risk-wise </li></ul></ul>

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