Sustainable University Development
in Africa:

The Role of Private Capital in
Addressing Public Sector Needs




Green Rea...
International Targets For Higher Education Enrollment in Africa



                                                       ...
Model of University Mixed-Use Development




               University Cities                                            ...
Importance of Quality of Life and Design to Human Productivity


  •     Major human productivity gains
        through en...
Benefits to University From BOT Public-Private Partnerships


                                               • Off balance...
Promote Environmentally Sensitive Development

Solar Orientation & Passive Solar Shading:
• Reduces heating/cooling loads ...
Focus on Transit Oriented Development




•      Frequent and convenient mass transit
       dramatically increases qualit...
Integration of Public and Private Facilities to Promote Smart Growth

• Reduces overall cost to public
  institutions as p...
Social Impact of Constructing 50,000 Additional University Seats
in Africa through Public-Private Partnerships
   Short-te...
Project Cash Flow Chart: Target Return of 25%




                                                Revenues to Investors   ...
Short-term and Long-term Exit Strategies

1. Securitization of long-term cash flows with
credit-enhancing guarantees:

Inf...
Key Risks and Mitigation Strategies for University Housing Investments




  Challenges and Risks                       Mi...
Projected Financial Returns

                   MIXED USE DEVELOPMENT            KENYA          TANZANIA           SIERRA ...
A New Vision for Higher Education in Africa




        Commercial Office
         Incubator Space
                       ...
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A Case Study of Master-Planned University Development in Africa: An open canvas for investors where sustainability practices directly enhance economic returns.

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A presentation by Andrea Christie Pizziconi at TBLI CONFERENCE EUROPE 2008.

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A Case Study of Master-Planned University Development in Africa: An open canvas for investors where sustainability practices directly enhance economic returns.

  1. 1. Sustainable University Development in Africa: The Role of Private Capital in Addressing Public Sector Needs Green Real Estate TBLI Amsterdam November, 2008
  2. 2. International Targets For Higher Education Enrollment in Africa Eligible Population 2005 69,932,500 2010 • Target University Gross Enrollment Ratios: 10% 78,804,184 • Estimated Cost to Deliver Facilities to Meet Target Gross 2015 Enrollment Ratio: $10.85 billion 88,309,793 • 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
  3. 3. Model of University Mixed-Use Development University Cities Educational Villages Waste-to-Energy Mixed-Income Mixed Income And Water Community Community Facilities Housing Housing Primary Primary Schools Schools Waste-to-energy Small Scale Microfinance Staff and Enterprise Student Housing Universities Secondary Staff Housing Secondary Schools Health Clinic Microfinance Schools Enterprises Commercial Development Small Scale Clean Water Health Facilities Small scale Commercial Small Scale and Research Agro-Business Laboratories Development p. 3
  4. 4. 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 confidence. • 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. p. 4
  5. 5. 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 community. p. 5
  6. 6. 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 systems. • 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 health. Regional Materials: • Recycled/recyclable materials conserve natural resources. Regional Materials • Locally sourced materials & labor lowers embodied energy. • Supports local/regional economy. p. 6
  7. 7. 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 economic development. • Reduced vehicular traffic supports shopping and dining with pedestrian-friendly streetscape. • 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 consumer draw. p. 7
  8. 8. Integration of Public and Private Facilities to Promote Smart Growth • Reduces overall cost to public institutions as private facilities cross- Locating student finance public uses. dorms above retail space • Enhances project economics and long- conserves land resources for term asset value by drawing consumers future to public facilities such as libraries, complementary development. theaters, municipal administration buildings, schools and leisure centers. Universities can • 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 co-located with • Creates a more desirable urban context commercial office for long-term development of the city. tenants. Other possible revenues include leasing dormitories off-season as hotel rooms during • Promotes casual interactions among conferences held on diverse socio-economic and age groups campus. which promotes student development. p. 8
  9. 9. 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%. on campus. • 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 increases 35%.
  10. 10. 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 & Non-profit Partner University Endowments Development Fund Universities & Local Partners Secondary Schools 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. p. 10
  11. 11. Short-term and Long-term Exit Strategies 1. Securitization of long-term cash flows with credit-enhancing guarantees: 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 Funds: First-mover advantage and unique access to deals is attractive to regional investment firms seeking medium-term investments with diversified sources of risk/return. 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.
  12. 12. 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 lacking. 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 areas. 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 feasibility studies. p. 12
  13. 13. 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% p. 13
  14. 14. A New Vision for Higher Education in Africa Commercial Office Incubator Space Staff Housing Student Housing University Medical and Business Schools Business and Medical Magnet Secondary Schools Adult Learning and ICT Center Local Merchant Retail and Services p. 14

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