The Herald-Sun: UNC Fields Privatization Feelers On Student Housing

CHAPEL HILL – UNC gets regular feelers from companies, including the one that manages Granville Towers, that are trying to gauge its interest in outsourcing some or all of its student housing, its business affairs chief says.

To date, none of the feelers have put numbers or a firm offer on the table, said Matt Fajack, UNC-Chapel Hill’s vice chancellor for finance and administration.

“There are some that come in and say, ‘Hey, we could take over all this for you,’” Fajack said during a break in this week’s UNC Board of Trustees meetings. “But nothing has gotten at all serious, and I haven’t followed up with any of them that I would even talk to Carol [Folt, UNC’s chancellor] about it.”

Fajack was responding to a question that’s been floating around since January.

It cropped up then after a key member of the UNC system’s Board of Governors, Harry Smith, during a meeting said a couple of the system’s large campuses were “in the preliminary stages” of considering a privatization of student housing.

Smith, then chairman of the board’s budget committee, didn’t identify the campuses at first. But in February, he said he’d meant Appalachian State University and UNC-Chapel Hill.
Since then, privatization talk has surfaced at Appalachian State.

In June, Randy Edwards, then chief of staff of the Boone campus, told trustees that officials were thinking of using public-private partnerships to redevelop some of Appalachian’s old dormitories.
App State is in the midst of asking the system for permission to label a bigger part of itself as a “millennial campus,” which would greatly expand its authority to negotiate development contracts with private-sector firms.

The label change would cover all the dorms on the west side of ASU’s campus, the Watauga Democrat newspaper reported.

Also, faculty sources at ASU suspect a strategy disagreement was one of the reasons for the recent and controversial firing of a well-entrenched student affairs chief by the school’s chancellor, Sheri Everts.

The ousted vice chancellor, Cindy Wallace, was “trying to maintain the status quo as far as how the university does the business of housing, the cafeteria and the bookstore,” said Leslie Jones, a professor who spoke in June shortly before her scheduled retirement.
Everts, she added, is keen to “move in the direction of wanting to privatize those things,” Jones said.

As for Chapel Hill, following Smith’s original January comments, officials from Folt on down denied there’s any major move in the works for the housing operation.
That remained the case this week.

“This is not a big issue that we’re discussing in any kind of detail here,” Folt said.
But she was quick to add that UNC officials “are part of the conversation that talks about everything.”

Given budget pressures, “I’m not saying that in the future we wouldn’t consider everything,” Folt said. “Because every [university] is thinking about how is it going to be most effective in making all its functions efficient and high quality.”

Fajack, interviewed separately, indicated that privatization feelers come up regularly when he meets with officials from EdR, the Tennessee company that manages Granville Towers.
Granville, located off West Franklin Street, was for many years a set of private-sector dorms. EdR’s corporate predecessors built and operated them. The company stayed on as operator after UNC bought the property, through a foundation, in a $45.8 million deal in 2008.

EdR’s only business is student housing, and most of its national holdings are off campus.
It owns or has a hand in such projects as University Towers in Raleigh near N.C. State University, and Bell West End, a new apartment complex in Durham near Duke University that until recently went by the name 605 West.

But the firm also touts its ability and willingness to develop or operate things on campus. It’s done a big project with the University of Kentucky, for example, to redevelop or rework much of the Lexington institution’s housing.

A publicly traded real estate investment trust, EdR recorded a $19.9 million profit in 2015, off $255.2 million in revenue. It had assets worth $2 billion.

Fajack said he sits down with EdR officials twice a year to go over Granville’s performance. “They always are coming up with ideas, and they talk about things they could do, more of what they’re doing,” he said. “They’re always selling that.”

But he said the company’s stopped well short of putting an offer on the table.

“It’s always more general: ‘Are we doing a good job, is there more of this we could do, we’re professionals,’” Fajack said. “It’s been very, I don’t want to say vague, but it’s not been specific about what exactly they could do. But they are selling.”

Nor is EdR necessarily the only company that’s weighed in. Fajack indicated the university’s business staff gets cold calls and feelers all the time, from a range of would-be vendors.
“It goes the whole spectrum from just managing it – some of them are just software systems to help us better manage it – all the way up to ‘Let us buy housing from you and we’ll run it,’” he said.

He added that in all those inquiries, companies have shown no interest in taking responsibility for the sort of things UNC’s student affairs staff oversees – the in-house residential advisers, counselors and programming that’s there watch over and guide students.

Nonetheless, “I listen to them,” he said. “You have to listen to those opportunities. You never know what’ll come up.”

Fajack said Smith would probably have heard about EdR’s feelers because he knows people with the company or one of its partners.

And he was clear that no one’s given officials the kind of unsolicited, hard-dollars offer that last year prompted the Folt administration to launch a privatization of the campus bookstore.
That ultimately led to officials hiring Barnes & Noble Education – an offshoot of the Barnes & Noble bookstore chain – to take over the operation.

Administrators left little doubt, ahead of time, that they weren’t satisfied with the store’s profits, which underwrite scholarships, or confident they understood the fast-changing bookstore industry.

Housing, by contrast, is something UNC has handled as long as it’s been a university. The first building on campus, Old East, served then and now as a dormitory and opened in 1795.

Ray Gronberg

The Herald-Sun (7/23/16)