LOS ANGELES - The University of California, Merced, is closing in on formal execution of a $1.1 billion public-private partnership to nearly double the physical capacity of the campus by 2020.
The university announced earlier this month that Plenary Properties Merced (PPM) was the winning bidder for the school's next major phase of campus development, which the UC Board of Regents gave conceptual approval to last November. The new facilities will be built within a 219-acre site that currently supports the existing campus and its 6,700 students. UC Merced Chancellor Dorothy Leland said that the Board of Regents will be asked in July to review and approve the project's conceptual design and to approve the required external financing, clearing the way for completion and execution of the formal contract in August. Financing for the project will include up to $600 million in regents-issued revenue bonds, pending approval, with the rest coming from the developer and UC Merced's own funds.
"The 2020 Project effectively leverages private capital in conjunction with UC funds to both cover project costs and allow UC to make efficient use of our own financial resources," said UC chief financial officer Nathan Brostrom.
The project expects to add significant new academic and research space, 1,700 beds of student housing, recreation, dining and student life amenities including an NCAA-II class competition pool and competition field, as well as 1,500 parking spaces. The project site includes 136 acres of undeveloped land adjacent to the existing campus featuring two unlined agricultural irrigation canals operated by the Merced Irrigation District (MID) and fed by Lake Yosemite.
The university issued an RFQ for the project dated Sep. 25 2014, which attracted bids from not only Plenary but also from some of the world's largest infrastructure developers active in the P3 space, including Australian giant Macquarie Capital Group and the Swedish firm Skanska. The school then narrowed the list of candidates to three in January 2015 before getting conceptual approval and eventually selecting PPM.
PPM is a consortium of design, engineering, construction, maintenance, operations and financial partners, anchored by lead developer, equity provider and financial arranger Plenary Group, an international infrastructure developer and investor in public-private partnership projects across North America, the partners said in a release. PPM's lead contractor is Webcor Builders, a San Francisco-based firm whose previous projects include California Memorial Stadium at UC Berkeley, Zuckerberg San Francisco General Hospital and the California Academy of Sciences. Johnson Controls is providing the operations, maintenance and renewal services to the project throughout the 39-year contract term.
"We are impressed by the creativity, efficiency and aesthetic qualities evident throughout the winning proposal," Leland said in a statement. "Plenary Properties Merced has produced a compact, environmentally sensitive design that blends beautifully with our existing campus, facilitates our multi-disciplinary teaching and research methods, and provides flexibility for future changes in building usage. Most important, it's a cost-effective way of building out our campus."
The project is unique in being the first major project in the in the UC system to use a single private development team for a multi-year, multi-building undertaking.
"UC Merced, the youngest campus in our system, is poised to become a model for our other campuses as we look for the most efficient ways to construct, operate and maintain facilities that enable us to pursue our teaching, research and public service missions," UC President Janet Napolitano said. "As the first public research university to be created in the 21st century, UC Merced is prepared to build on its remarkable academic achievements as the campus itself is built out to accommodate future growth."
Plenary representatives expressed hope that the deal could be a trendsetter for others, in a P3 higher education market that is heating up.
"It could help lay the groundwork for more projects like this in other jurisdictions," said Mike Schutt, assistant vice president at plenary.
"The UC Merced 2020 Project will put UC Merced at the forefront of higher-education design and delivery in the U.S.," said Dale Bonner, executive chairman of Plenary Concessions. "Plenary is delighted to be a part of this partnership."
Fitch Ratings earlier this month cited the UC Merced project as a primary example of how colleges and universities are increasingly finding P3s an attractive option for financing their campus infrastructure. College campuses provide public services that can generate revenues attractive to private investors, the rating agency pointed out, also noting that large flagship universities with strong credit ratings are less likely to go the P3 route because they have ready access to low-cost borrowing through traditional muni market access. UC Merced remains tiny by the standards of the UC System's largest campuses. UCLA, in Los Angeles, claims more than 40,000 students. UC Merced expects to add faculty and student support services by 2020 to accommodate enrollment growth.
Leland said in a release that the university's expansion will "significantly strengthen its capacity to achieve its critical mission as the first UC campus in the San Joaquin Valley" – increasing college-going rates within the region's highly diverse, largely underserved population while serving as a powerful engine of economic development. The campus has already pumped more than $1.3 billion into the regional economy ($2.5 billion statewide) since start-up operations began in 1999, she said.
The new buildings are expected to support UC Merced's environmental sustainability objectives, including its "Triple Net Zero" goal (zero net energy usage, zero landfill waste and zero net greenhouse gas emissions by 2020). The project is expected to create more than 10,000 construction jobs in the San Joaquin Valley (more than 12,000 statewide) during the four-year construction period. The one-time economic benefit to the region will be an estimated $1.9 billion ($2.4 billion statewide). PPM's design is also intended to provide the school with flexibility to adapt its buildings to different uses over time, allowing the campus to better fulfill its mission. The school estimates that by 2022, the ongoing operations of the 2020 Project will increase spending by over $200 million per year in the state.
