To define a project and determine whether or not a Public-Private Partnership (P3) project is feasible, you will need to research and prepare the following:
The California State University Board of Trustees is responsible for reviewing Public-Private Partnership projects to ensure such projects are in the best interest of the CSU. This review includes assessing the project's contribution to the educational mission of the university. The campus or auxiliary organization should therefore identify the proposed Real Property Partnership project's connection to the educational mission.
Examples of contributing to the educational mission include:
Chancellor's Office staff have prequalified real estate financial advisory firms with whom they have executed master enabling agreements (MEAs). Campuses and auxiliary organizations can make use of these agreements after negotiating the scope of services they will require and fees. These MEAs are listed below in the Resources section.
The campus or auxiliary organization will develop the business case for utilizing a Public-Private Partnership for a particular project with the assistance of these external advisors, as appropriate, to ensure a complete analysis.
The Public-Private Partnership financial advisor will coordinate with key personnel from the Chancellor’s Office, the campus and/or the auxiliary organization to evaluate the pros and cons, risks and rewards, trade-offs, and limitations associated with different delivery methods, including the public-private partnership structure, the traditional CSU Systemwide Revenue Bond program, and the alternative financing structure to determine which would be the best fit for the proposed real property development project.
A Market Demand Study has the following components:
One of the first steps during the concept stage of a project is to complete a feasibility study to analyze the viability of a proposed project for a given location. A feasibility study will give focus to the project; analyze alternatives; explore new opportunities; identify reasons to proceed or not proceed; and provide documentation that all options were thoroughly investigated.
A feasibility study has the following components:
The projected financial plan should include an analysis of the concept that compares self-funding the project using Systemwide Revenue Bonds (SRB) with privately-arranged financing. Projects eligible for SRB funding that should be compared with privately-arranged financing include student housing, parking facilities, health centers, recreation centers, student unions, health facilities, classrooms and extended education facilities. All other types of projects would not be subject to this requirement to compare self-funding the project with privately-arranged financing.
SRB financing should be compared against the following depending on which privately arranged financing structures are being considered for the project:
The projected financial plan should be an Excel spreadsheet covering the same number of years as the ground lease and should show ground rent payments to the campus or the auxiliary organization and cash flow after debt service and/or payment of returns to equity investors. The financial model prepared by the developer during
Due Diligence (Stage 4) will be much more detailed as described therein.
The campus or auxiliary organization should develop an outline schedule for the project that includes the CSU approval process and CEQA requirements. An example of a high-level schedule for a student housing project is shown here (format may vary):
The campus or auxiliary organization should ensure that the university or auxiliary organization will receive "fair market value" for the use of property intended for the project. Market value can be defined as the highest price in terms of money that a property would bring in a competitive and open market under all conditions requisite to a fair sale, with the buyer and seller each acting prudently and knowledgeably and under the assumption that the price is not affected by undue stimulus.
An appraisal is an expert opinion of the value of the property by an appraiser. The campus or auxiliary is advised to coordinate with its Public-Private Partnership financial advisor and the Chancellor's Office staff to define a set of instructions and scope of work for the appraiser to incorporate in its valuation to ascentain the fair market value of the property and expected fair return on the ground lease payments from their private partner.
The appraisal will include a description and analysis with some or all of the following:
The appraiser in determining an opinion of value will consider three approaches to value and use one or possibly all three to confirm conclusions:
Chancellor's Office staff have prequalified real estate appraisal firms and executed master enabling agreements with them; these are listed in the Resources section of this page.
Property Appraisal Service Agreements are available on the Systemwide Master Enabling Agreements page in The Hub.
Real Estate Financial Advisory Service Agreements are available on the Systemwide Master Enabling Agreements page in The Hub.