1. Cass Business School
London
Nicholas Beyts
Nicholas.Beyts.1@city.ac.uk

2. New Partnerships to Improve
Education?
***

3. New Rooms for Old?
or
Create Finance to Build the
University Experience
Can a university use a Public Private Partnership (PPP) to
acquire the use of residential accommodation, which offers it
the prospect of a sustainable advantage as a provider of access
and success in higher education?

4. What is PFI?
1. Private Finance Initiative.
Announced in The House of Commons, 1992.
1. Public Private Partnerships are Projects
2. To get better Value for Money for taxpayers than other
arrangements

5. PFI - Partnership Projects Based on Four Principles
1. Risk Allocation. The partner who can best manage a
risk is the partner to manage it on the project.
2. Value for Money (VFM). PFI should provide better
value for money than other ways of procurement.
3. The Partnership is based on principles not on rules.
4.PFI Projects are excluded from the PSBR (Public
Sector Borrowing Requirement.

6. PFI is Controversial
Advocates of PFI claim Opponents of PFI claim
• It offers VFM • PFI is an expensive form of
• NAO says property projects hire-purchase.
perform well PFI • Contractors make excessive
• Goverrnments around the profits from the public purse.
world have adopted • We are mortgaging our
PFI/PPP children’s future
• Europe exceeds Euro 60 • Government is neglecting its
billion in PFI/PPP Projects public service duties
• PFI is misused as lease • PFI - no public service ethos
back, which it is not
• The media stigmatise PFI

7. To
The contractor undertakes The university undertakes
to: to:
• Design, Build, Finance and • For the 25 years of the
Operate (DBFO) the hall for contract the university will
the university for an agreed tell it students and staff
period e.g. 25 years about the property
• On a student by student
• After 25 years the contract arrangement when a
may is renewed or dissolved student takes a room the
in a prearranged fashion e.g. university guarantees the
the asset is sold or it passes student will pay the rent
to the university. makes good the rent to the
contractor.

8. PPP and Higher Education
• Partnerships. PFI – partnership projects between the
public and the private sector based on four principles
• Controversial. PPP is controversial
• Reputation. PPP enables a reputable university or
college to have the prospect of acquiring the use of
purpose built student accommodation, regardless of its
wealth or poverty.
• Global. University or college could be in any one of many
countries around the world which have adopted PPP

9. To Build a Hall of Residence
• A company (a Special Purpose Vehicle – SPV) is formed
bringing together architects , builders, financiers and
facilities management for the purpose of the project. It is
bankruptcy remote. They assess the project and the
reputation of the university as a partner
• The university identifies what type of hall of residence it
wants and assesses the SPV as the provider and its
prospective partner.

10. A Case Study
Example

11. Darwin Hall
• Number of study bedrooms 220
• Cost per Study Bedroom* £30,000
• Capital Cost of Darwin Hall £6,600,000
• *Rolled up cost

12. Estimated Annual Income per Study Bedroom
Rent from students £82pw x 40 weeks £3,280
Vacation Letting £100pw x 4 weeks £400
[remaining weeks are void]
Charges for utilities and services £680pa £(680)
Income per study bedroom net of £3,000
ancillary charges
Annual Income for Hall, net of ancillary
charges £660,000

13. Structure Table A
Capital Cost £6,600,000
Loan 80% £5,280,000
Equity 20% £1,320,000

14. Structure Table B
Loan 80% Interest Rate pa 8% £422,400
Equity 20% Hurdle Rate 17% £224,400
£646,800
Interest Cover 1.56 Income £660,000

15. Institutional Investors
e.g. A Pension Fund
Example A
After period of y years income is £646,800pa*
Pension Fund requires interest of £6.5% pa 6.50%
Income from the premises £646,800 £646,800
As part of a portfolio a fund will pay up to £9,950,769
If the SPV sold the revenue to the pension fund
it would achieve a pre tax profit or surplus £3,350,769
*excluding growth, inflation and tax

16. A Name
• What is in a name?
Save & Prosper
Manchester Nuts & Bolts Ltd
Levi Jeans
Intel
IBM

17. Co-Brand
PPP may provide a university with purpose built
student accommodation which offers the university
the prospect of a sustainable advantage in securing
equity in access and success in higher education.
2 + 2 = 5?
The accommodation may be branded and then co-
branded with the university’s brand to publicise the
university’s brand as a provider of equity in access
and success in higher education.
With acknowledgement to Leuthesser et al 2003

18. The University and Living Learning Communities
• Themed Student Housing - University with co-brand
• The professions - University with co-brand , Lincoln
• A case, civil engineering - University with co-brand
• International Students - University with co-brand
• Living Learning Communities

19. The University and Living Space
• Architecture - Design for Wow! (Chiddick, 2004)
• Themed Living Space
Profession - University with co-brand , Lincoln
A faculty, civil engineering - University with co-brand
• International Students - University with co-brand
• Living Space in IHE’s (Silver 2004)
• The University and Living Learning Communities
• Independent and Affinity Groups

20. Forming Partnerships – Faculty & Resident Life
Professionals
• Association of College and University Housing Officers-
International April 2002
• Educational Programming and Student Learning in
College and University Residence Halls Schuh J (1999)
San Francisco: Jossey-Bass
• La Trobe University, Australia; Harvard University, USA;
University of New Brunswick, Canada.
• Recruitment & Retention (O Connor, 2003)
• AIU02SRHE08Lcobrand009CR04

21. New Rooms for Old?
or
Create Finance to Build the
University Experience
Can a university use a Public Private Partnership (PPP) to
acquire the use of residential accommodation, which offers it
the prospect of a sustainable advantage as a provider of access
and success in higher education?