Five years ago, Arizona State University opened a major new campus in downtown Phoenix, a 20-minute drive from its main campus in Tempe. ASU, now at 77,000 students, is projected to grow to 100,000 by 2020. With a pressing need to construct new classroom and lab space downtown and at three other campuses, money for new housing was scarce.
After a few successful public/private housing partnerships on the Tempe campus, the university turned to Capstone Management to help the school build its first downtown campus housing project, the 366,000-sf Taylor Place residence hall.
“During a period of incredible growth, our bond capacity has to be used for academic and research facilities,” says Michael Coakley, associate vice president of educational outreach and student services. Private financing will be used whenever possible for housing and auxiliary services. “We have aggressively looked for third-party partnerships in a variety of configurations,” he says.
In earlier partnerships, private LLCs were established to own the properties. These corporations issued bonds, assumed financial responsibility, and collected the rent, while the university managed the buildings. In more recent projects, the developer put in all of the equity without issuing bonds.
For Taylor Place, the university has leased the land to Capstone for 65 years. “The developers are responsible for maintaining the property in Class A condition, but if they fail to do so, we have the right to buy it out if we want to,” says Coakley. So far, that has not been a consideration.