Office ofthe President
February 21, 2012
Members, Board of Trustees:
AUTHORIZATION OF GROUND LEASE FOR STUDENT HOUSING
Recommendation: that the Board of Trustees authorize the President, or his designee, to enter
into a long-tenn ground lease with an affiliate of Education Realty Trust, Inc. ("EdR”)
guaranteed by Education Realty Operations Partnership, LLC for purposes of development and
potential management of a student housing project.
Background: At the Board of Trustees retreat on October 1 and 2, 2011, the Board identified the
need to expand and improve student housing facilities as a primary strategic priority. On
October 26, 2011, the University issued a Request for Proposal seeking developers with the
capacity and interest in partnering with the University to complete a long-tenn housing plan. On
December 13, 2011, the University announced that it would negotiate with EdR, a third-party
developer, to improve, expand, and potentially manage student housing beginning with
construction of two new buildings on Haggin Field.
According to Moody’s Investment Service, universities have been utilizing public-private
partnerships (P3) for student housing for nearly two decades. Such a strategy is appropriate for
UK given the advanced age of the student housing stock and the University’s desire to
modemize and expand it quickly while reserving debt capacity for other capital projects. The
University will maintain control over the Resident Life programs.
EdR is a publicly traded real estate investment trust headquartered in Memphis, Tennessee, with
more than 50 years of student housing experience. Since 2000, EdR has completed more than
$2.3 billion in collegiate housing transactions, including investing $1.3 billion in private equity.
EdR currently owns or manages 57 student housing properties with approximately 34,000 beds
in 23 states, including four facilities at the University of Louisville. EdR has proposed to
provide a 100 percent equity investment in UK’s student housing.
This project is the development of two buildings with a total of 601 undergraduate beds at
Haggin Field. The P3 arrangement will include a ground lease of Haggin Field to EdR for an
initial tenn of 50 years with two renewal options of 10 years and 15 years, respectively. The
ground lease will include maintenance standards for the facilities and parameters for the room
rental rates for the duration ofthe lease. In addition to receiving funds for the Resident Life
programs in the facilities, the University will receive a percentage of gross revenues and, after
EdR achieves a minimum intemal rate of retum, a share of net income.