A Case Study of Master-Planned University Development in Africa: An open canvas for investors where sustainability practices directly enhance economic returns.
Sustainable University Development
The Role of Private Capital in
Addressing Public Sector Needs
Green Real Estate TBLI Amsterdam November, 2008
International Targets For Higher Education Enrollment in Africa
• Target University Gross Enrollment Ratios: 10%
• Estimated Cost to Deliver Facilities to Meet Target Gross 2015
Enrollment Ratio: $10.85 billion
• Projected International Funding Allocated to Facilities:
$350 million 2020
• Total Number of New Seats Needed to Deliver 98,263,803
Enrollment Goals: 6,204,259
Model of University Mixed-Use Development
University Cities Educational Villages
Waste-to-Energy Mixed-Income Mixed Income
And Water Community Community
Facilities Housing Housing
Small Scale Microfinance
Staff and Enterprise
Schools Health Clinic
Schools Enterprises Commercial
Health Facilities Small scale
Commercial Small Scale
and Research Agro-Business
Importance of Quality of Life and Design to Human Productivity
• Major human productivity gains
through enhanced natural light,
indoor air quality, and acoustics
in learning environments.
• Poorly maintained facilities have
a negative psychological impact
on student and teacher
• Increase in temperature of 10
degrees (Fahrenheit) above
moderate can decrease
achievement by 30%.
• Quality design aesthetics in
learning environments have been
linked to enhanced achievement
through increased confidence and Faculty retention and migration studies show
sense of pride in endeavors. teachers must be paid 40% higher salaries to
prevent migration towards better facilities and
more convenient locations.
Benefits to University From BOT Public-Private Partnerships
• Off balance sheet financing allows
universities access to additional
capital without the debt burden.
• Private sector partners build faster
and at lower costs.
• Cost savings can be applied to
additional amenities or facilities.
• Private asset management allows
universities to focus more resources
on building their academic brand.
• Private developers bring core
expertise in other development
sectors including commercial and
residential, which enhances the
quality of life for the university
Promote Environmentally Sensitive Development
Solar Orientation & Passive Solar Shading:
• Reduces heating/cooling loads by 15% – 35%.
• No moving parts to ‘break down’ with ultra-low
maintenance . Shading Devices
• Key component to passive survivability.
Medium Density Massing
• Substantially reduces construction costs.
• Relies more heavily on local materials and labor.
• Facilitates more efficient use of sustainable energy Medium Density Massing
• Reduces maintenance and replacement costs.
Natural Day Lighting (Energy Systems)
• ‘Free’ lighting reduces peak electric power demand. Daylight/Passing Cooling
• Increased occupant comfort, productivity and
• Recycled/recyclable materials conserve natural
resources. Regional Materials
• Locally sourced materials & labor lowers embodied
• Supports local/regional economy.
Focus on Transit Oriented Development
• Frequent and convenient mass transit
dramatically increases quality of life for
residents through reduced traffic, pollution,
and urban noise.
• Affordable mass transit increases mobility of
low-income workforce encouraging
• Reduced vehicular traffic supports shopping
and dining with pedestrian-friendly
• Accessible university public transit
throughout downtown promotes
consumerism among university affiliates. With congestion remaining the primary
quality of life issue in most major African
cities such as Nairobi and Dar es Salaam,
• Well-managed and sustainable public transit thoughtful and accessible public transit
can create significant revenues for the city systems throughout campus development
and the university. schemes can substantially enhance the
Integration of Public and Private Facilities to Promote Smart Growth
• Reduces overall cost to public
institutions as private facilities cross-
finance public uses. dorms above
• Enhances project economics and long- conserves land
term asset value by drawing consumers future
to public facilities such as libraries, complementary
theaters, municipal administration
buildings, schools and leisure centers.
• Increases tax revenues to municipalities increase their annual
as there are fewer tax-exempt land operating revenues by
leasing auditoriums and
parcels. other public facilities to
private companies when
• Creates a more desirable urban context commercial office
for long-term development of the city. tenants. Other possible
revenues include leasing
as hotel rooms during
• Promotes casual interactions among conferences held on
diverse socio-economic and age groups campus.
which promotes student development.
Social Impact of Constructing 50,000 Additional University Seats
in Africa through Public-Private Partnerships
Short-term Social Impact Long-term Social Impact
• 20,107 new jobs created directly • Increase of 6% in the survival rate of
by university. children under age 5.
• Teachers trained for 20,000 • Decrease maternal deaths from
additional student seats annually. childbirth by 44 per 100,000.
• 5,741 new jobs for women; • Long-term financial support for
25,000 new women university 7,000 full tuition scholarships
graduates; 10,000 new girls in annually for BOP students from
primary school. proceeds of university endowment.
• Commercial space for over 600 • Each additional year of education in
incubator companies and over Africa increases annual income by
2,200 local retailers co-located 11%.
• University education has a multiplier
• Student housing for 50,000
students plus an additional 500 effect (2.54 for men and 2.17 for
mixed-income residential units. women) on average earnings.
• 98,800 additional temporary • When higher education graduates
and permanent jobs. increase by 1%, long-term GDP
output grows between 0.42% and
0.63% while industrial output
Project Cash Flow Chart: Target Return of 25%
Revenues to Investors Investment Capital
Grants & Foreign Aid
Target 25% IRR & Financing
Portion of Revenues to Investment &
University Endowments Development Fund
Development of Schools
University Revenue Resources Local Market Demand
& Co-Located Uses
After distributing project cash flows to investors, a portion of income proportionate Capital
to replacement reserves will be distributed to a university endowment fund created Revenue
and managed by the investment fund manager for the duration of the project.
Short-term and Long-term Exit Strategies
1. Securitization of long-term cash flows with
Infrastructure projects based on Build-Operate-
Transfer model create long-term
stable cash flows where securitization is the optimal
exit strategy for investors.
2. Portfolio sale of non-institutional facilities
to Regional Private Equity and Pension
First-mover advantage and unique access to deals is
attractive to regional investment firms seeking
medium-term investments with diversified sources of
3. IPO of Operating Enterprises: University areas of major cities in Africa already
boast some of the most desirable commercial and
Economies of scale within the school/university residential districts in their cities. Mlimani City
network will provide a convenient infrastructure to at the University of Dar es Salaam is the premier
scale up operating companies that provide critical shopping district in Dar es Salaam, Tanzania.
services to university markets.
Key Risks and Mitigation Strategies for University Housing Investments
Challenges and Risks Mitigation Strategies
Rigorously utilize external consultants
1. Investment model is unprecedented
(international and local) to create clarity of analysis
and reliable empirical data is
on local conditions. Develop valuations with
information from historical circumstances in other
relevant international markets and asset classes.
Work closely with international governments,
2. Corruption is prevalent especially foundations, bilateral and multilateral
in sectors heavily reliant on organizations who have established a track record
government agencies. for successfully combating corruption in local target
Make investment decisions that rely on extensive
3. Some potential investments have due-diligence to identify opportunities with only
unproven market conditions. extremely pent-up demand and constrained supply
that has been proven through reliable third-party
Projected Financial Returns
MIXED USE DEVELOPMENT KENYA TANZANIA SIERRA LEONE
STUDENT DORMITORY SF 86,250 207,000 230,000
ACADEMIC FACILITIES SF 160,000 20,000 20,000
COMMERCIAL OFFICE SF 287,500 5,750 8,650
COMMERCIAL RETAIL AND FOOD SF 132,000 11,000 11,000
SECONDARY SCHOOL FACILITIES SF 21,500 N/A 21,000
TOTAL BUILDING AREA 1,138,250 246,625 269,625
ANNUAL GROSS REVENUES $ 8,245,000 $ 2,126,150 $ 2,486,500
ANNUAL OPERATING EXPENSES $ (727,175) $ (410,829) $ (479,625)
NET OPERATING INCOME $7,517,825 $ 1,630,275 $ 1,917,405
ANNUAL DEBT SERVICE ($1,333,572) ($1,063,180) $ (1,081,363)
CASH FLOW AFTER DEBT SERVICE $ 6,184,253 $ 567,095 $ 826,051
TOTAL DEVELOPMENT COSTS $67,552,571 $14,217,238 $ 14,460,388
TOTAL DEBT $41,688,976 $10,662,928 $ 8,676,233
TOTAL EQUITY $24,412,345 $3,554,309 $5,784,155
RATE FOR SECURITIZATION 10% 6% 6%
IRR 42% 81% 66%
RETURN ON EQUITY 119% 67% 44%
A New Vision for Higher Education in Africa
and Business Schools
Business and Medical Magnet
and ICT Center Local Merchant
Retail and Services