University of North Dakota
Forging North Dakota’s first student housing public-private partnership, for both renovated and newly developed student housing.
U3 was engaged by the University of North Dakota (UND) in 2018 to serve as its real estate advisor and develop a strategy to better activate University Avenue – a key corridor running through its main campus – through dynamic, new mixed-use development to be delivered by the private sector. As U3 and the UND project team began to better understand the needs and preferences of students and the goals and objectives of key State of North Dakota and University stakeholders, it became clear that a solution to address existing undergraduate student housing was an emerging priority. Improving the physical condition of UND’s existing housing would allow the University to be competitive with its peers and attract students to continue living on campus beyond their first year.
U3 quickly pivoted to help UND assess the possibility of entering into a public-private partnership to address all of the University’s existing housing (approximately 3,100 residence hall beds and 700 apartment units), through significant renovations in addition to new replacement housing to accommodate student demand for newer units. It was also important to design a solution that offered renovated and redeveloped housing at rates affordable to students, built in long-term reserves for capital renewal and reinvestment over time, and was financially neutral to the university.
U3 facilitated a Request for Qualifications process to shortlist qualified developers, who then received a Request for Proposals (RFP) that detailed UND’s programmatic and financial objectives. The solicitation attracted the interest of several regional and national developers. U3 worked closely with UND to evaluate the RFP responses, conduct interviews, visit prospective developer projects, conduct reference checks, and ultimately select the finalist team: Johnson Controls, Inc., Plenary, and Corvias (JCP).
U3, UND, and JCP worked together for more than 18 months to assess the feasibility of the proposed venture and develop a concept plan. “Right-sizing” was a major focus of the team’s work, as UND had a surplus of housing relative to demand. The project included plans for the demolition of older, outdated residential facilities over a defined time period as well as targeted investments in its core residence halls that are centered around the Wilkerson Dining Center – a major hub of undergraduate activity.
Simultaneously, U3 facilitated the negotiations between UND and JCP related to the financial transaction structure and definitive project agreements. While UND had initially sought a traditional P3 project where JCP would provide the financing to fund the housing improvements, constraints posed by existing revenue bonds as well as extremely low interest rate conditions during 2020-2021 resulted in UND funding the improvements itself. This allowed UND to maintain full control over rental rates and the student experience. The focus of the P3 shifted to construction and long-term facilities management, including maintaining the housing facilities to a specified condition at a fixed cost and establishing Key Performance Indicators (KPIs), with penalties to JCP for non-performance. In addition, U3 coordinated closely with UND to engage the North Dakota State Board of Higher Education and the State Attorney General in their review of the transaction, legal agreement, and financial structure, as well as to obtain the state approvals required to move forward with construction.
After a three-year journey, and despite changes in leadership and the ongoing COVID-19 pandemic, in August 2021 UND closed on $133 million in tax-exempt Certificates of Participation to fund improvements to its on-campus housing, including renovation and redevelopment of key buildings, new outdoor gathering space and building connections, and the demolition of outdated buildings. The investment will significantly improve the quality of freshman and sophomore on-campus housing, right-size the university’s inventory relative to demand, and remove over $200 million in deferred maintenance from the university’s books.
UND’s right-sized inventory will include 2,000 residence hall beds and 152 apartment units. The first phase of improvements will be completed by Fall 2022, with the second phase complete by Fall 2023.