Universities, the Newest Trend in Public Partnerships

Kennedy Wilson purchase University Glen, an apartment complex with 386 units and houses for both students and faculty.

LOS ANGELES—In an effort to find yield, institutional investor demand for public-private partnerships is increasing. Earlier this month, Metro announced that it is looking to forge private partnerships with developers to boost transit-oriented development, and the latest manifestation of these trend is Kennedy Wilson ‘s recent $81 million deal with California State University, Channel Islands . While public entities looking for private partnerships is nothing new, the increasing demand for these partnerships on the private side is, and we can expect to see even more of these partnerships from unique public institutions, like the California State University system, in the future . When asked about the demand for these transactions, Javier Rivera , managing director at JLL , says it is “Absolutely” rising, telling GlobeSt.com, “We believe that these types of projects are becoming more mainstream.” Rivera represented the seller in the Kennedy Wilson and Channel Islands transaction, along with JLL managing director Bob Hunt . The sales team ran a competitive bidding process for the transaction, ultimately receiving 10 competitive offers and a final round of three groups. “We started a very public RFP process, which included newspaper ads and additional outreach,” adds Rivera. “At the end of the day, we probably reached out to more than 5,000 groups over a 45-day period Kennedy was one of the first groups that saw it, became very interested and understood it deeply.” The interest is a great example of the demand for these types of partnerships, but winning them isn’t always about being the highest bidder, as it typically is in a real estate sale. These deals are about forging long-term partnerships that benefit both parties over the term. “It is different from a sale, so it is more than just price,” says Rivera. “You are looking at a partnership that is going to span generations, and in many ways it is about finding a group that is going to help the university keep their mission in place, not just the ownership of the real estate, but the academic mission of the university. A lot of care went into selecting the buyer and setting the partnership between the buyer and the university.” Still, these partnerships aren’t for every investor. Rivera is seeing the highest demand for public partnerships from institutional investors specifically. This is especially true because of the longer timeline it takes to close these deals. For the Kennedy Wilson deal, Rivera and Hunt selected Kennedy Wilson in March but didn’t close the deal until August. “It takes a little bit more of a patience and an ability to understand how you can place your capital over a longer period of time,” Rivera says. “Sometimes you identify an opportunity one year and don’t close it until the next year. That is why we blended our public institutions approach with our capital markets approach.”