Cal Poly sought an advisor to support strategic planning, project vetting, partner selection and other matters related to the formulation and execution of P3s. Having been offered numerous P3 project recommendations from the private sector, Cal Poly’s leaders were skeptical of their feasibility. Cal Poly engaged A&M to employ our widespread expertise to educate its stakeholders on real estate and P3 processes and to make actionable and credible recommendations to stakeholders.
Beginning in 2015, A&M participated in Cal Poly’s Master Plan revision process and identified eleven “edge” and “core” campus sites with P3 monetization potential. Our team then determined the highest and best use for these sites and estimated the value to Cal Poly through land residual analyses. Considering development costs such as utilities and replacement costs of existing uses, as well as regulatory, environmental, community factors and compatibility with campus uses, we ranked and prioritized the sites and presented actionable advice and a timeline to monetize the sites to Cal Poly. A&M’s analyses included in-depth discussions with market participants to bring real-world metrics to the evaluation process. Our recommended process provides early successes and builds momentum as more difficult sites enter the pipeline.
Cal Poly and A&M are currently executing the first project in this strategy. The University is in the solicitation and transaction phase for the most highly ranked site, the 21.8 gross acre Slack Street and Grand Avenue multifamily site. Slack and Grand will be a market-rate multifamily development to provide suitable housing for Cal Poly faculty, staff and the community. A&M analyzed the site and prepared a market and feasibility study that we presented to the Board of Trustees. Following approval of the project, we drafted a request for qualifications/request for proposals for a master developer/lessee for the site and revised a ground lease template for the transaction, with specific emphasis on business point best practices based on our experience.
Cal Poly has a goal of housing more students on-campus but recent on-campus student housing projects have exhausted revenue funded debt capacity. A&M has begun iterative analyses of the feasibility and implications of P3 development of additional on-campus student housing at Cal Poly.
Our efforts thus far have resulted in a clear action plan to grow Cal Poly San Luis Obispo’s campus sustainably and with appropriate risk allocated to the University. A&M continues to work side by side with Cal Poly to execute the strategy and realize its vision for a modern, highly sought campus.