1. Colleges and universities are allowed to have a new housing facility constructed on their campus without undertaking any obligation to repay the loans made to construct the facility. The issuerís sole right to be repaid is from the student rental payments and other revenue generated by the facility. As a result, the financing for the housing facility does not affect either the debt capacity of the college or university or its financial ratings.
2. As a 501(c)(3) tax-exempt entity, the Foundation is able to finance the housing facility for the college or university at tax-exempt rates and, under most states laws, is allowed to have the facility exempted from any ad valorem taxes. These tax savings allow the college or university to provide its students or faculty housing at more affordable rental rates.
3. The college or university is relieved of the burden of having to own the housing facility yet still retains the right to all of the surplus revenue derived from the facility as well as the unconditional right to have the facility donated to it upon repayment of the financing indebtedness.
4. The college or university is given the flexibility to structure the Foundationís interest in the housing facility either as an outright ownership interest or as a leasehold interest.
5. The college or university is given the flexibility to decide whether to involve a developer or manager of its choice or alternatively, to develop or manage the housing facility itself.
6. By having the Foundation assume responsibility, the college or university is freed from the administrative burden of monitoring and maintaining compliance with the numerous financial covenants and other post-closing obligations imposed by the financing documentation.
7. By having participated in so many different projects, the Foundation has developed a breadth of experience that allows it to help colleges and universities avoid the problems that inevitably arise in a complicated financing transaction. This expertise is significantly enhanced by the experience the Foundation has assembled on its Board of Directors which includes a former Chancellor of the University of Maryland System, a former Chairman of the Board of the University of Alabama System, and a former Vice President of Finance for the University of Delaware who actually oversaw the Foundationís involvement in a major project at the University of Delaware.
8. The reputation established by the Foundation from its involvement in so many different projects and from having its operations validated by the IRS not only gives colleges and universities the certainty and assurance of dealing with an experienced and reputable organization, but also gives them the benefit of lower interest rates that result from the Foundationís proven acceptance in the bond market.
9. Using the Foundation instead of creating a new 501(c)(3) organization or using another 501(c)(3) organization with less experience will translate into less expense for the college or universityís housing project since all of the costs for establishing the Foundation have already been absorbed and since all of the costs of continuing to maintain and operate the Foundation will be shared among the numerous colleges and universities that use the Foundation instead of being borne by just one institution.
10. As one of the major players in the housing market, the Foundation has the advantage of being able to acquire many products and services, including insurance, at significantly reduced rates. In a study commissioned by the Foundation, it was determined that insurance policy rates ranged from 69% to 137% less than identical facilities owned by newly created 501(c)(3)'s or owned by foundations with much smaller property portfolios. Colleges and universities may realize significant savings on insurance premiums if ownership is transferred to Collegiate Housing Foundation from 501(c)(3)'s created solely for the purpose of owning their new student housing facility.