GB5 Office of the President TO MEMBERS OF THE COMMITTEE ON : For Meeting of ACTION ITEM AMENDMENT OF THE BUDGET FOR STATE CAPITAL IMPROVEMENTS AND THE CAPITAL IMPROVEMENT PROGRAM AND APPROVAL OF EXTERNAL FINANCING, HILGARD GRADUATE STUDENT HOUSING, LOS ANGELES CAMPUS EXECUTIVE SUMMARY Campus: Project: Proposed Action: Total Cost: Project Summary: Los Angeles Hilgard Graduate Student Housing Approval of budget of $24,558,000 and external financing $24,558,000, to be funded by external financing ($14,000,000) and Campus Housing System Reserves ($10,558,000). The campus proposes to redevelop three owned off-campus properties on Hilgard Avenue by demolishing three 1930s-era former sorority houses and constructing 82 studio apartments for single graduate students on two sites. Issues: Approval of external financing of $14 million Properties currently accommodate 109 single undergraduate transfer and upper division students and will be replaced by facilities that house 82 single graduate students Due to the recent completion of 2,000 new on-campus residence hall beds for undergraduate students, the need to address the shortfall of affordable housing for single graduate students has become a higher priority. The two proposed project sites would be redeveloped for compatibility with the existing off-campus residential uses in density and scale. Building Cost per Studio Unit (excludes parking cost): $168,146.
COMMITTEE ON -2- GB5 The President recommends that: RECOMMENDATION 1. The 2007-08 Budget for Capital Improvements and the Capital Improvement Program be amended to include the following project: Los Angeles: Hilgard Graduate Student Housing preliminary plans, working drawings, construction, and equipment $24,558,000, to be funded from external financing ($14,000,000) and Campus Housing System Reserves ($10,558,000). 2. The President be authorized to obtain external financing not to exceed $14 million to finance the Hilgard Graduate Student Housing project, subject to the following conditions: A. Interest only, based on the amount drawn down, shall be paid on the outstanding balance during the construction period. B. As long as this debt is outstanding, Los Angeles Campus Housing System fees for the Los Angeles campus shall be established at levels sufficient to provide revenues sufficient to pay debt service and to meet the related requirements of the proposed financing. C. The general credit of The Regents shall not be pledged. 3. The Officers of The Regents be authorized to provide certification to the lender that interest paid by The Regents is excluded from gross income for purposes of federal income taxation under existing law. 4. The Officers of The Regents be authorized to execute all documents necessary in connection with the above. A Key to the abbreviations and the project description are attached. (Attachment)
COMMITTEE ON -3- GB5 KEY Capital Improvement Program Abbreviations S P W C E Studies Preliminary Plans Working Drawings Construction Equipment - State Funds (no abbreviation) F G HR I LB LR N R U X Federal Funds Gifts Hospital Reserve Funds California Institutes for Science and Innovation Bank Loans or Bonds (External Financing includes Garamendi, Bonds, Standby, Interim and Bank Loans) Regents Loans (Internal Loans) Reserves other than University Registration Fee (Housing and Parking Reserves) University Registration Fee Reserves Regents Appropriations (President s Funds, Educational Fund) Campus Funds CCCI California Construction Cost Index EPI Equipment Price Index
COMMITTEE ON -4- GB5 2007-08 Budget for Capital Improvements and Capital Improvement Program Scheduled for Regents Allocation, Loans, Income Reserves, University Registration Fee Reserves, Gift Funds, and Miscellaneous Funds Campus and Project Title (Total Cost) Approved Proposed 2007-08 Los Angeles Hilgard Graduate Student Housing --- P 915,000 N W 1,046,000 N C 14,000,000 LB C 8,162,000 N E 435,000 N ($24,558,000) DESCRIPTION The Los Angeles campus proposes to redevelop three owned off-campus residential properties on Hilgard Avenue, to provide 82 studio apartments for single graduate students totaling 29,907 asf (41,629 gsf) at a total project cost of $24,558,000. BACKGROUND In April 2003, The President approved the purchase of 726 Hilgard Avenue in Los Angeles, followed by Presidential approval of the purchase of 824 Hilgard and 720 Hilgard in November 2003 and May 2004, respectively. The purchase enabled the campus to address its institutional goals for the recruitment and retention of qualified students by providing them with affordable housing within walking distance to campus. The aggregated purchase price of $4.5 million represented land value for the three properties without building or site improvements. The properties currently accommodate approximately 109 single undergraduate transfer and upper-division students in former sorority houses built in the 1930s. The houses, representing 31,974 gsf, have no on-site parking and require costly seismic, life safety, accessibility and code upgrades, and replacement of building systems dating from the original construction, in order for the campus to retain them as part of its long-term housing inventory. An economic analysis showed that it would be more cost-effective to replace the houses rather than renovate them. Due to the recent completion of 2,000 new on-campus residence hall beds for undergraduate students, the need to address the shortfall of affordable housing for single graduate students has become a higher priority than using these properties for transfer students. Given the low vacancy
COMMITTEE ON -5- GB5 rates and high rents in West Los Angeles, the properties can help UCLA with recruiting and retention goals for single graduate students by providing units designed to assure affordability, privacy, and convenience proximate to the campus. The properties are ideally located for graduate students because they are close to university research laboratories, libraries, classrooms, and medical center facilities. Need for Graduate Housing The UCLA Student Housing Master Plan (SHMP) 2001-10, completed in 2001, provided programmatic linkages between housing and the academic enterprise while supporting the institutional objective of transforming UCLA from what was once a predominantly commuter campus to a residential university. The master plan identified a series of projects to accommodate the anticipated increases in enrollment and demand for student housing through 2010, including 2,000 beds for undergraduate students in new residence halls on the Northwest campus, and 2,000 beds for single graduate and professional students in apartment units on the Southwest campus. The campus subsequently completed construction of 1,382 beds for single graduate and professional students in 840 apartments on the Southwest campus in 2003, followed by the completion of 1,986 beds for undergraduate students on the Northwest campus in 2006. A second phase for the Southwest campus that would construct an additional 618 beds for graduate students is currently on hold due to schedule delays in relocating existing uses from the site. In 2007, after the addition of nearly 3,400 new undergraduate and graduate student beds to the on-campus housing inventory, there is still insufficient capacity to meet the goals of the SHMP 2000-10. In October 2007, an updated UCLA Student Housing Master Plan (SHMP) 2007-17 was completed and it reflects this increase in the projected shortfall of student beds. This updated master plan identifies a total projected demand for 5,138 graduate student beds, to be provided in apartment-style housing. Based on the existing inventory of 2,962 graduate student beds, there is a shortfall of 2,176 beds for graduate students. Of this total, 1,565 beds are needed for single graduate students and the remainder for graduate students with families, and residents and interns. Construction of 82 apartment units on the Hilgard properties would reduce the current shortfall of these single graduate spaces from 1,565 to 1,483. Project Description The proposed project would demolish the existing houses and construct a total of 82 studio apartment units with 53 below-grade parking spaces. The new construction would represent approximately 60,997 gsf of new construction, including 29,907 asf (41,629 gsf) of housing and 19,368 gsf of parking. The properties are located along the eastern border of the campus, bounded by a single family residential area to the east, sorority houses to the north and south, and campus Parking Structure 2 across Hilgard Avenue to the west. The properties at 720 and 726 Hilgard would be combined and developed as one site accommodating 54 studio units and 38 parking spaces. The property at 824 Hilgard would
COMMITTEE ON -6- GB5 accommodate 28 studio units and 15 parking spaces. Each studio unit would accommodate a living/sleeping area, kitchen, and bathroom in approximately 400 square feet. Each site would be provided with a shared laundry room. Parking Structure 2 would accommodate any additional parking needed by residents. The scope of work would include site preparation including demolition, excavation, grading, and construction of retaining walls; provision of utilities; installation of paving, landscaping, irrigation, site drainage, lighting, and fire/life safety systems; installation of communications conduit and cabling, cable television and security systems; and provision of finishes. Group 2 and 3 equipment would include procurement and installation of kitchen appliances. Prior to construction, students would move out of the existing buildings according to the terms of their housing contract at the end of the school year in mid-june 2008. No relocation assistance is required. Returning students in Fall 2008 would be offered accommodations in other campus facilities. Construction is scheduled to commence in August 2008 with completion by May 2010. Separate contracts would be bid and awarded for demolition and construction of the buildings. Site Redevelopment Issues Demand for graduate student housing at UCLA has historically exceeded supply for decades. Analysis of the waiting list for housing demonstrates that single graduate students overwhelmingly prefer studio accommodations. Experience with the recently-completed Southwest Campus Graduate Student Housing project confirms that studio apartments are preferred over shared two-bedroom units. The proposed sites for graduate student housing would be redeveloped for compatibility with existing off-campus residential uses, in density and scale. The Hilgard sites directly abut multi-million dollar single family homes, and are on a street that consists of 1920s era private group-living and apartment houses, many of which accommodate UCLA sorority chapters. In this context, the proposed project reflects the campus typical off-campus development approach, which has been to make a good faith attempt to comply with local development requirements. The proposed project density of 82 studio apartment units maximizes the use of the sites while being sensitive to the scale of the surrounding neighborhood. During the project development process, the campus investigated the option of using third-party developers. Information gained during this effort confirmed that this project would not be of interest to these entities due to its scale. Therefore, the campus has determined that the design-bid-build delivery method is the most appropriate for a project of this scale and type. Policy on Sustainable Practices This project will comply with the University of California Policy on Sustainable Practices. As required by this policy, the project will adopt the principles of energy efficiency and
COMMITTEE ON -7- GB5 sustainability to the fullest extent possible, consistent with budgetary constraints and regulatory and programmatic requirements. Specific information regarding energy efficiency and sustainability will be provided when the project is presented for design approval CEQA Classification Pursuant to the California Environmental Quality Act (CEQA) and the University Procedures for implementation of CEQA, the potential environmental effects of the proposed project would be analyzed in an Initial Study, leading to a likely Mitigated Negative Declaration. Financial Feasibility The total project cost of $24,558,000 at CCCI 5698 will be funded from external financing ($14,000,000) and from Campus Housing System Reserves ($10,558,000). The $10,558,000 cash contribution is available primarily from net proceeds from the sale of Barrington Manor apartments approved by the Office of the President in May 2005 and completed in March 2007. Based on long-term debt of $14,000,000 amortized over 30 years at 5.75 percent interest, the estimated annual debt service will be $990,000. Payment of the debt service would be from student rents generated by the project and revenue from existing campus housing system bed spaces. The campus rate structure for all other Campus Housing System facilities would not be increased to support this project, due primarily to savings from the recent refinancing of the remaining Pool Revenue Bonds. The external financing will be paid from specific revenues sources specified in the external finance documents. Therefore, the general credit of The Regents shall be pledged. Table 1 summarizes the impact of this project on rental rates. Table 1 Rate Increase Associated with Proposed Project (as well as Planned Projects) Increase Associated Year Operating Increase with Approved Projects Not Yet On-Line Increase Associated with This Project Increase Associated with Future Projects Total Rate Increase (%) 2008-09 3.0% 0.0% 3.0% 2009-10 3.0% 0.0% 3.0% 2010-11 3.0% 0.0% 3.0% 2011-12 3.0% 0.0% 3.0% 2012-13 1.5% 0.0% 1.5% 2013-14 1.5% 0.0% 1.5% 2014-15 1.5% 0.0% 1.5% Total (%) 16.5% 0.0% 0.0% 0.0% 16.5% Includes information up to and including second full year of operation of subject project.
COMMITTEE ON -8- GB5 The expected monthly rent per apartment for this facility would be approximately $1,169 for the second full year of operations. This includes housing, utilities, cable television, and internet connectivity, currently valued at $121 per student. Parking permits for this facility, on a space available basis, are expected to be $63 per month. In October 2006, UCLA received the results from an independent market rate survey conducted by an MAI Certified General Appraiser. At the time UCLA rental rates for Weyburn Terrace studio apartments were 29 percent to 34 percent below market for comparable units adjacent to campus. Given current market conditions for rental housing, the campus believes that opening day rates for Hilgard studio apartments will be 29 percent to 34 percent below private sector rates for comparable units. The combination of strong demand, adjacency to the campus, and below market rates will make these units extremely attractive to future generations of single graduate and professional students. Additional financial feasibility information may be found on Attachment 2. (Attachments)
ATTACHMENT 1 PROJECT STATISTICS HILGARD GRADUATE STUDENT HOUSING CAPITAL IMPROVEMENT BUDGET LOS ANGELES CAMPUS CCCI 5698 Cost Category Housing Parking Total % of Total Site Clearance $ 834,000 $ 209,000 $ 1,043,000 4.3% Building 13,788,000 3,554,000 17,342,000 71.9% Exterior Utilities 269,000 87,000 356,000 1.5% Site Development 369,000 92,000 461,000 1.9% A/E Fees 1,248,000 312,000 1,560,000 6.5% Campus Administration 540,000 135,000 675,000 2.8% Surveys, Tests 478,000 120,000 598,000 2.5% Special Items (a) 488,000 122,000 610,000 2.5% Contingency 1,183,000 295,000 1,478,000 6.1% Total $ 19,197,000 $ 4,926,000 $ 24,123,000 100% Group 2 & 3 Equipment 435,000 435,000 Total Project $ 19,632,000 $ 4,926,000 $ 24,558,000 Statistics Housing Parking Gross Square Feet (gsf) (b) 41,629 19,368 Assignable Square Feet (asf) (b) 29,907 N/A Ratio asf/gsf (%) 72% N/A Building Cost/gsf (b) $331 $183 Building Cost per Studio Unit (excludes parking cost) $168,146 Comparable University Projects at CCCI 5698 There are no comparable projects of this size (approximately 100 units or less) that consist entirely of studio apartment units for single graduate students. (a) (b) Special items to construct the building include environmental documentation, presentation materials, specialty consultants, agency reviews, hazardous materials survey and monitoring, independent cost estimate, independent structural review, value engineering/constructability review, messenger, environmental mitigations totaling $421,000; and interest expense totaling $189,000. Gross square feet (gsf) is the total area, including usable area, stairways, and space occupied by the structure itself. Assignable square feet (asf) is the net usable area.
ATTACHMENT 2 SUMMARY FINANCIAL FEASIBILITY ANALYSIS Project Title: Hilgard Graduate Student Housing, Los Angeles Campus Estimated Project Cost: $24,558,000 Proposed Funding: External Financing $14,000,000 Campus Housing System Reserves 10,558,000 $24,558,000 Project Financing Terms: Interest Rate: 5.75% Duration: 30 years Project Statistics: Studio Apartments: 82 units Parking: 53 spaces Estimated Academic Year Rents (2011-12) Estimated Monthly Apartment Rental Rate: $1,169 Estimated Monthly Parking Permit: $63 Estimated UCLA-Campus Housing System Revenue (2011-12) 1 Gross Revenue from New Apartments 82 Income Producing Apartments x $1,169 @ 96.0% Occupancy $1,089,000 Miscellaneous Revenue (Parking Permits) 40,000 Revenue from Existing Campus Housing System Facilities 36,545,000 Total Revenue $37,484,000 Estimated UCLA-Campus Housing System Expenses (2011-12) Expense from New Apartments $483,000 Expenses from Existing Campus Housing System Facilities 16,498,000 Total Expenses $16,981,000 Estimated UCLA-Campus Housing System Debt Service (2011-12) Hilgard Graduate Student Housing $990,000 Prior Hilgard Property Debt 2 291,000 Principal and Interest from Existing Campus Housing System 12,476,000 Total Principal and Interest $13,757,000 Estimated UCLA-Campus Housing System Surplus for Major Maintenance (2011-12) $6,746,000 UCLA-Campus Housing System Summary Information (2011-12) Estimated Annual Net Revenues 3 $20,503,000 Estimated Annual Debt Service 13,757,000 Estimated Annual Surplus for Major Maintenance 6,746,000 Average Debt Service Coverage 1.49X 1. First full year of Project Debt Service (2011-12) 2. Includes debt associated with initial acquisition of Hilgard properties 3. Excludes estimated interest income