Student Housing
Basics of privatized student housing. In addition to the conventional financing of student housing as university debt, conduit private activity bonds may be issued by a governmental issuer to finance student housing projects. These projects are usually on land owned by a university and leased to a nonprofit corporation, designated as a 501(c)(3) organization under federal tax law. The projects are often apartment-style residences for upper level students. The lease structure generally provides that while the bonds are outstanding the project is owned by the Borrower, but after the final maturity of the bonds ownership reverts to the university. The bonds issued to finance the project are not a debt of the university, but of the non-profit corporation, which preserves the university's debt capacity, but also provides flexibility in construction. The projects fill a need for quality student housing, close to campus, with flexibility in construction, management and dedication of excess revenues.
Ownership of privatized student housing. The student housing facilities can be (i) owned and operated by the educational institution; (ii) owned by the educational institution but managed by a third-party entity; (iii) owned and operated by an entity other than the educational institution; (iv) owned by an entity other than the educational institution, but managed by the educational institution; or (v) owned by an entity other than the educational institution and managed by still a third-party entity.
Meeting the requirements for tax-exemption. Our transaction attorneys, supported by our strong Tax Department, use their years of experience with private activity bonds, to perform the detailed analysis necessary for the tax-exempt qualification of such bonds. Such bonds must satisfy the (1) general federal tax rules applicable to all tax-exempt bonds; (2) certain of the special federal tax rules for private activity bonds; and (3) particular federal tax rules for qualified 501(c)(3) bonds. There are additional state and federal requirements which must also be met in order to issue the bonds and continuing restrictions which must be complied with in order to maintain the tax-exempt status of the bonds.
Selection of an issuer. State law determines which governmental issuers may issue bonds for this purpose. We have served as bond and underwriter's counsel for such bonds issued by entities such as counties, city and county development authorities and housing authorities in several states.
Innovative attorneys. As one notable example of the innovative perspective of Peck Shaffer attorneys,
Jerry G. Peterson (Partner – Atlanta office) served as bond counsel for the first student housing project in Georgia that was owned by a 501(c)(3) organization and built on land on a university campus that was leased from the Board of Regents of the University System of Georgia. That financing, for the benefit of Southern Polytechnic State University, created the model for the various on-campus student housing projects for universities within the University System of Georgia that have been completed since that date. For over a year prior to concluding the first financing, Mr. Peterson worked with lawyers in the Georgia Department of Law to work through the legal issues surrounding this form of financing.
