EKU will use private developers to build $75 million in new dorms

Martin Hall at EKU will be torn down to make way for a new residence hall.
Martin Hall at EKU will be torn down to make way for a new residence hall. Eastern Kentucky University

Following other state universities, Eastern Kentucky University is getting into the private development business.

Last week, President Michael Benson announced a letter of intent with two private developers to build two new residence halls on campus. The $75 million project will house 1,100 beds to open in fall 2017. The two new halls will replace Martin Hall and Brockton Block on Kit Carson Drive.

One of the two companies is no stranger to EKU: Grand Campus Properties, which is headed by former state senator Ed Worley and Lexington developer Brent Rice, already builds and rents private student housing in Richmond. They are teaming up with F2 Companies, a construction company in Columbus, Ohio.

The contract will not be finalized until January, said spokeswoman Kristi Middleton.

EKU officials said they received responses from several national firms. The deal will also have to be approved by the General Assembly because it’s over $600,000.

“These new facilities will change the face of our university forever,” Benson said in a news release. “Additions such as these new residence halls are part of our revitalization program which is totally focused on improving and enhancing the student experience.”

On Wednesday, Worley said he had worked with F2 on other construction projects, and because of his Richmond base and long association with EKU, it was natural to put in a proposal. Worley also said that other companies interviewed for the deal included EdR Campus Housing and American Campus Communities.

Both of those companies have far more experience in building student housing than Grand Campus. EdR is in the process of building more than $400 million in new residence halls at the University of Kentucky, and American Campus Communities is the nation’s largest student housing developer. Both EdR and ACC are publicly traded companies.

EdR representatives declined to comment on whether it put in a proposal. ACC did not return a query from the Herald-Leader. EKU would not confirm the names of other companies that submitted proposals because the contract is not yet final, they said.

Public-private partnerships are gaining more traction in higher education because of recurring cuts in state funding. The University of Louisville was the first state school to start building privately-owned dorms on campus. In UK’s case, EdR has provided all the equity for construction, and will eventually share some profits with UK. All the dorm management is left with UK.

However, the issue has also brought up problems with property taxes. Initially the new dorms were owned by EdR, so Fayette County PVA put them on the tax rolls. Then UK and the state Department of Revenue came up with an alternate plan to change the terms of the deal so UK owned the buildings and would not owe property taxes.

EKU has run into similar, but unresolved problems with a private property built by Worley and Rice. The $9.5 million student apartment facility is on Lancaster Drive, close to EKU’s campus.

EKU and state revenue officials argued that because the building is under EKU’s control, the school should not pay property taxes on it.

Madison County PVA Billy Ackerman disagreed and appealed the case to the Kentucky Board of Tax Appeals, which is scheduled to hear it next April, Ackerman said.

As for these new dorms, Ackerman said he had not seen the contract’s terms as to who actually owns the buildings, so he could not comment on the property tax issue.

“Each case will be considered separately,” he said. “The lease needs to be as clear as possible.”

Worley also declined to comment on the property tax issue, referring all questions to EKU. Worley, an EKU graduate and former Richmond city manager, served most recently as the community member on the search committee that chose Benson, the current EKU president, in 2013.

Linda Blackford: 859-231-1359, @lbblackford