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9 > Image 9 of Minutes of the University of Kentucky Board of Trustees, 2011-12-13

Part of Minutes of the University of Kentucky Board of Trustees

-9- The charge to this group was to select a developer to pursue a possible P3. We have not made the decision. When I saw the article in the Wall Street Journal, I kind of gasped a little at the first sentence. We have not said "yes, this is a done deal and we are moving forward. That is not it at all. We asked this committee to evaluate the proposals and pick one developer to start negotiations because these types of deals are so intricate that it is not feasible to actually go through negotiations with more than one developer at the same time. So, we have asked the committee to pick a developer to negotiate with and then we will evaluate which option we want to go. How did the committee evaluate these proposals? As I said before, it was based on the wherewithal to finance such a large project. Of course, we are also looking for a developer that has prior history with building and constructing large scale projects, and we wanted experience with managing student housing. The committee went through an extensive evaluation process. We had an educational session, and we toured our own facilities. We had a presentation on the status of housing. We even had assistance by extemal advisors. We had Anderson Strickler, who is a well-known education real estate consultant. And, we also called upon BKD, our extemal auditors, to help us evaluate the proposals and the impact on our financial statements, because that was one of our key goals through this examination. The committee had a comprehensive examination and discussion of each proposal. We did reference checks and had presentations and interviews. We short-listed the proposals and brought in three companies. We also perfonned site visits to some ofthe developments. I am pleased to tell you that the committee has recommended to President Capilouto that we pursue a possible P3 with Education Realty Trust. Education Realty Trust is a REIT or real estate investment trust. For those of you on the Investment Committee, this is very familiar. It is a publicly traded company. It has more than 50 years of experience in student housing, including four on- campus facilities with the University of Louisville. And, what is really amazing to us is they proposed a significant equity investment. It might be helpful if I take a few seconds to explain the history of these public/private partnerships. This is not new. Prior to 2008, the common practice was to fonn separate 50l (c) 3 corporations and issue l00 percent debt. It was a way to off balance sheet the debt. After the economic downtum, Moodys and S & P, as well as the accounting profession itself; said we have got to start recognizing this debt, both in tenns of bond ratings as well as possibly recording the debt on the balance sheet. So, the evolution of P3 arrangements has really changed over time. EDR, the companys stock symbol, proposed a l00 percent equity investment for Phase I and Phase II. It is likely unprecedented. Nonnally, today you can see up to about 35 percent equity investment, but EDR really sees this as a potential game changer for the industry, where we are not just going to do one or two donns, but we are really looking at how we can replace all of housing and do it in the most affordable way for students. EDR has experience with not only the University of Louisville but also the University of North Carolina at Chapel Hill, the Penn State System, and the University of Colorado. They have developed over 83,000 beds in the country. They also are very familiar with sustainability efforts. They have done many projects with gold and silver LEED certification, and they have proposed to look at the possibility of geothennal heating and cooling on our campus as well.