UAF, private partner, work on Wood Center expansion


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Construction spending at the University of Alaska Fairbanks got a boost this summer from a public-private partnership to finance and build an expansion at the Wood Center.

A team of partners are building a 34,000-square foot expansion of the center’s dining facilities. Once completed, the expanded area will be the primary dining facilities on campus replacing the Lola Tilly Commons.

The total project cost, according to Board of Regents documents, is about $28 million. That will create a Marche-style dining facility with about 420 seats. About 9,000 square feet of existing space, including facilities for several student organizations such as Outdoor Adventures, the Concert Board and the student newspaper, will also be renovated.

The private team will pay most of that cost, largely through bonds it sold earlier this year. Then, over 30 years years, UAF will lease the facility back and pay off the bonds, in addition to management costs.

That private-public partnership model, known as P3, is used elsewhere in the nation, especially by universities where it can be difficult to get up front funding for necessary construction projects. But this is the first time its been used by the University of Alaska. The next phase at UAF calls for an upgrade to student housing.

The team was formed in response to UAF’s request for proposals in 2011.

Community Properties Alaska, Inc. and Lorig Associates are at the helm of the project, with CHEMM Co. and Perkins+Will as the contractor and engineer, respectively.

The project team says it is the first time they’ve done a P3 project in the state.

Community Properties Alaska, or CPA, will own the new dining facility, and is responsible for the financing side.

Lorig Associates is the development manager. That means the firm is under a contract with the owner and does work on its behalf, said Joe Borden, Lorig’s director of real estate development. The work is everything from helping hammer out the design to ensuring the project is on schedule.

“We’ve done a lot,” Borden said. Lorig’s work is done on behalf of CPA.

The National Development Council, or NDC, is a nonprofit focused on housing and economic development for state and local government. It created CPA, and staffs and manages the organization, said NDC’s John Finke.

NDC has experience with the P3 model throughout the country, but this is its first Alaska project, Finke said.

CPA will lease the land from UAF and own the expansion until it is paid back, at which time it will be gifted back to UAF.

 “We technically own the new facility and lease it at cost (debt service) to UAF,” Finke wrote in an email.  “We will gift it to the University when the debt is retired and if they so choose the University can pay off our bonds whenever they want.”

That financing is one of the major reasons the P3 model is attractive.

UAF had a minimal upfront contribution to the project, including some preliminary spending and deferred maintenance funds. Then, NDC pays for the project, and UAF is responsible for yearly payments for up to 30 years.

The yearly lease cost is easier to get funding for than a big capital budget appropriation at the outset.

Under the terms of the agreement, UAF will pay $1.45 million a year until the facility is paid off, or for about 30 years, less than the $1.6 million approved by the Board of Regents. That fee includes bond payments of about $1.37 million per year, and additional rent that covers CPA’s management fees.

If it takes 30 years to repay, the project will cost UAF about $43.5 million.

NDC and CPA sold the bonds on behalf of UAF, and Finke said the sale went well, hitting the absolute lowest point in the market.

Financing is not the only advantage to a P3 project.

The model “allows the university to access the best of what’s available in the private sector,” Borden said, and match that with low-cost funding and ownership at the end.

The P3 advantages include a shorter project time frame for the private sector and greater flexibility, Borden said. By the nature of the project, the design can be adjusted if needed throughout the process, he said.

The partnership also enables the university to limit its exposure to risk and cost overruns, because the private partners will absorb issues that come up during the building process.

“Many universities see that as a big plus,” Borden said.

Despite those assurances for UAF, Finke noted that NDC has never had a project go over time or have a cost overrun.

The project also goes more quickly, from concept to design to open doors, because it doesn’t have to go through the same process as a traditionally funded building, Borden said.

In this case, UAF did preliminary work including programming and site selection, and received project approval in June 2011. Then, it spent a year working with the team on much of the design and details, and received schematic design approval in September 2012. Bonds were sold in December 2012, and construction started in April. Occupancy is planned for August 2014.

Borden said the facility is expected to be done by in August 2014, and ready for the 2014-2015 school year.

Work started in the spring, with the student activities offices vacated at that time and personnel temporarily relocated.

Right now, the contractors are working to finish the outside of the building so that come winter, they can do inside work, Borden said.

“We are on track,” Borden said. “...We have an excellent local team.”

Although it is their first Alaska project, both Lorig and NDC have experience with P3 funding elsewhere.

Finke said that NDC has done more than 7 million square feet, and $3 billion dollars, in such projects.

Borden said Lorig has done eight or nine P3 projects, mostly at academic institutions. Lorig has worked on housing in addition to other dining expansions, Borden said.

Lorig is a broad based real estate firm that’s been doing a wide-range of business out of Seattle since the mid-1990s, including work with nonprofits and governments, Borden said.

Molly Dischner can be reached at molly.dischner@alaskajournal.com.

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