Sector Profiles
Privatized Student Housing
ACA Capital will consider insuring student housing projects that have strong demand characteristics, university involvement and participation in the marketing and referral to the facility, and management that is experienced with the unique features of the student tenant. In addition, for new construction projects, ACA Capital requires that other debt service guaranties, or capital, cover completion and "ramp-up" risks.
Key Credit Factors
In order to make a preliminary determination of insurability, ACA Capital will review the Privatized Student Housing project for the following key characteristics:
- The educational institution itself, student demand, financial operations, balance sheet and occupancy rates at existing student housing facilities
- Market and feasibility study addressing demand for on-campus housing, competing off-campus housing alternatives, and the affordability of proposed rental rates
- The developer and general contractor, their prior experience and strength of their financial guaranties
- Assumptions underlying pro-forma cash flows
Key Legal and Covenant Provisions
Typical security and covenant provisions for ACA Capital insured Privatized Student Housing financings include the following:
- Lease hold or fee-simple mortgage
- First lien on gross revenues
- Interest during construction capitalized from bond proceeds
- Construction completion guaranties
- 1.20x rate covenant from net project revenues
- Fully funded debt service reserve account
- Renewal and replacement account funded annually
- Limitations on construction of additional student housing
Essential Documentation
The following information is essential for an ACA Capital review of a proposed Privatized Student Housing financing:
- Preliminary Official Statement
- Financing Documents
- Phase I environmental report
- Developer and construction contracts
- Management agreements
- Marketing plan for project lease-up
- Five years of audited financial statements for the institution, information describing its programs, its administration and its market
- Five years of student applications, acceptances, admissions, retention and graduation rates
