University System of Georgia’s private housing contract leads to big money, big trouble
University System of Georgia’s private housing contract leads to big money, big trouble
We all have to live somewhere.
Unless you’re in the construction business or are a bonafide 19th century lumberjack powered by manliness (or womanliness), you won’t be building a house yourself. You definitely won’t when you’re a large-scale university, which is where companies like Corvias come in – to help your big picture be your only focus!
What is Corvias?
Corvias is a project management company, which, in fancy speak means they organize other company’s resources in efficient ways so that the client company can focus on other things. Since its founding in 1998, Corvias has partnered with multiple colleges and military bases around the U.S. These partnerships are for building homes, dorms, community centers and developing municipal projects like the Clean Water Partnership in Maryland.
Corvias’s prerogative is to help corporations help residents live better by building high-quality living and community spaces, so colleges and military bases focus on the important work of educating or staying combat ready.
They’re doing the very same thing in Georgia. Corvias has partnered with the Board of Regents (BOR) of the University System of Georgia in a public-private partnership (P3) or privatized student housing. They have a 40-year contract that started in 2015 that allows them to design, build and maintain new and existing dorm buildings and facilities.
The contract includes the construction of 3,753 new beds and maintaining 6,195 existing beds over 3 million square feet with nine “Phase 1” schools including Abraham Baldwin Agricultural College, Armstrong State University, College of Coastal Georgia, Columbus State University, Dalton State College, East Georgia State College, Augusta University, Georgia State University and the University of North Georgia.
The contract has a lot of money put into it, about $548.3 million in taxable bonds and $13.1 million in Corvias equity. The contract also got rid of around $311.5 million in University System of Georgia’s (USG) existing debt and freed up $550 million in credit for future use. What do these mind-boggling numbers mean?
Long story short, Corvias spent a lot and took on a lot of debt to build facilities for participating Georgia institutions and free the USG from quite a bit of debt. The figures don’t seem too troubling for a single student. But it should.
A lot of money is set to go back to the USG and help revitalize areas around participating universities. Students should be aware of the influence Corvias could have over the institutions they study and live at. Especially in times like these.
Why it matters
In August, a letter from Corvias to the Board of Regents (BOR) and a BOR agenda circulated online. The letter, sent in May to the Vice Chancellor of USG Finances, stated that participating Phase 1 institutions and the Board of Regents had “no unilateral right” to discourage students housing on campus or limit the number of rooms available in any way that might interfere with Corvias’s operation.
And while the BOR and institutions had the freedom to determine how students could occupy their rooms, they could not “… either (i) limit the number of students who can occupy the Phase 1 Student Housing, or (ii) reduce the semester housing fees (due to a shortened semester or otherwise) for which the Concessionaire has a contractual right to receive per the Phase 1 Student Housing MCA.”
The letter goes on to detail the debt Corvias took on for the University System and how the debt defeased was secured by Corvias’s right to receive housing revenue. While Corvias accepted the risk of fluctuating demand, “… they have not accepted the risk of unilateral actions by the BOR that would negatively impact Phase 1 Student Housing fee revenues.”
As a for-profit partner, Corvias did what’s called off-balance sheet borrowing. It’s a form of borrowing that doesn’t show up in financial statements. Deals like this are structured so that the company, Corvias, is paid back over time through shares of rent and housing fees the universities collect.
The agenda [dated for June 10] that came with the letter discusses four major points of housing concerns and risks: Room capacity or rate reduction, housing refunds, cancellation opportunities and amendments to P3 housing agreements.
And most of the solutions to these points involved the universities refunding or paying money to Corvias.
Room capacity or rate reduction
Although universities have the ability to make room assignments, they can’t change occupancy. That actually rests with Corvias, the P3 operative. When the June agenda was made, the USG was operating under the assumption that Georgia State University (GSU) would have an occupancy of 75 percent – below Corvias’s projections.
Corvias wouldn’t generate enough cash flow to fund their projects.
The available options to resolve the issue included leasing all beds, getting Corvias’s permission to reduce capacity with the promise to reimburse them or negotiate with Corvias on capacity and rates.
Corvias isn’t required to issue refunds for housing. They didn’t for spring 2020 when USG campuses closed down and universities refunded students $13.4 million in housing funds without Corvias’s aid. It doesn’t seem like Corvias is going to do the same for fall 2020, but that’s because they may take legal action for any loss incurred.
Corvias’s P3 reserves were all spent to build and maintain spring housing. It all falls unto the Phase 1 USG institutions, unless there are some negotiations between the schools and Corvias.
Windows of opportunity
Most institutions have “windows of opportunities,” or a period when students can cancel their housing contracts without any penalty fees.
The June agenda states that Corvias doesn’t allow partner universities to allow such a window. Any university that does is doing so at their own risk, which would “… likely invite a Corvias dispute and legal challenge.”
Amendments to P3 housing agreements
Participating universities won’t likely catch a break when it comes to revising housing agreements. Phase 1 institutions are stuck between provisions that shift risk to Corvias and shift risk away from Corvias and onto them. Unless they negotiate or agree (as they have in other provisions) to make up for Corvias’s shortfalls, their positions won’t change.
At first glance, none of that looks good.
On second glance, it still looks like bad.
It appears that Corvias was breathing down the USG’s throat to get their dues by putting Georgia students at risk.
While institutions may have control over student dorms, Corvias lurks with a potentially viable “legal action” at any moment. It’s not surprising that speculations of Georgia schools kicking their students out of campus housing, but keeping the student’s fees, percolated in these conditions.
Although the USG stated that Corvias’s demands were not considered when Georgia institutions made and submitted their campus housing plans for fall 2020, the pressure remains.
Corvias has contracts all around the country, and Georgia is its most valuable education contract.
Georgia State University is the biggest chunk of Corvias’s Georgia portfolio at a whopping 30 percent. It includes 3,474 beds and $28.5 million in developmental costs. In 2016 they built a dorm building, Piedmont Central, with 1,152 beds, office and storage space, laundry areas and group rooms. Essentially, everything a university needs to create a functional, safe living environment for its students.
But if the company that controls the place you live at insists on full occupancy during a pandemic – that functional, safe living space stops being all that safe. While the USG and Corvias might financially benefit from the millions that housing will produce in the next 40 years, there are still students and faculty that’d have to navigate their dangerous new normal.
Nothing looks particularly good for current students.
Those of us living on campus should be wary of the moves their institutions are making. Universities and colleges aren’t the only corporations that turn to private third party companies to build and maintain buildings (in fact, they contract out a lot of stuff).
It’s a logical step when funding doesn’t support the increasing number of students and infrastructure necessary to appeal to new students and faculty. But the problem arises when private companies – not universities – control student housing.
Normally, we’d like to give our readers news with actionable, achievable solutions. But this situation is as unique as the pandemic that created it. There are no easy outs. We can, however, hope y’all stay up to date as things go forward. (And we’ll do our part in keeping you informed on the important noise.)
A school might save money, which will go back into funding projects, various ventures and different departments. It might go into revitalizing campuses. But predicaments like these don’t just come from the uniquely shitty situation COVID-19 has created. The USG’s decisions have come back to bite them.
The problem of not controlling your own student housing is that you don’t control your most valuable assets’ living situation.
COVID-19 has done more than just disrupt our way of life. It has made all sorts of industries reconsider their costs and face unprecedented personal and financial losses and stressors.
Of course, everyone (including universities and non-educational corporations) needs to make money. But educational institutions shouldn’t be on the list of screwing young people over.
As Corvias has shown, there will be parties more concerned with their bottom line than with the safety, security and future of the students they’re housing.