Private group assuming all costs on WVU-Sunnyside project
CHARLESTON, W.Va. - Funding for a new student housing and retail complex in Morgantown will come entirely from the private developers involved in the deal.
West Virginia University announced Friday it had partnered with Paradigm Development Group to create a nearly 300,000-square-foot complex in the Sunnyside area near downtown. The complex will have 265 student apartments, a grocery store and possibly coffee shops, bookstores and a restaurant.
While the university will issue $14.6 million in revenue bonds for the property, Paradigm is on the hook for the entire $70 million developers estimate it will take to build the complex.
Paradigm has not secured any of that funding yet, said Brian Helmick, an attorney representing the holding company. However, he said the developers have been creating "private banking relationships" and are confident they'll be able to receive a $70 million loan.
"Banks are at the table and very interested in financing (the project)," Helmick said.
Paradigm was created in February by Ryan Lynch, David Martinelli and Jim Brown. Martinelli is a professor of civil engineering at WVU, and Brown owns a private contracting company in Fairmont.
This is the first development project Paradigm has undertaken, Helmick said.
He said the anticipated revenue and WVU's involvement "bolster the value of the project," making the group a more appealing candidate for a loan.
University spokesman John Bolt confirmed WVU is not going to pay any construction or development costs.
"WVU has no role in the finances, but we also have no concern with (Paradigm) being able to acquire it," Bolt said.
Helmick said the university has been "diligent" in discussions with Paradigm in making sure they will be able to finance the build.
Under the terms of the agreement, all revenue from student and commercial rental agreements will essentially go into a community pot, Helmick said. After the operational costs and debt service is paid, WVU and Paradigm will split the remaining revenue.
Weese said they anticipate charging $675 per unit. While he said that's more expensive than typical student housing, it might not be the case in two years. The units also come with a kitchen, living room, Internet, and laundry facilities.
There will be a management committee consisting of three people from the university and three representing the developers that will oversee the daily operations and costs of the building, including rent, he said.
For the first 10 years of operations, WVU will receive 69 percent of that money and Paradigm will receive 31 percent, said Narvel Weese, WVU vice president of administration and finance. During the three decades after that time period Paradigm's share of the revenue jumps to 51 percent.
At that point everything on the site becomes the property of WVU, Weese said.
"After 40 years there's no private partner," Weese said.
WVU expects to make close to $1 million the first year the complex is up and running, Weese said.
That would leave Paradigm with roughly $400,000, Helmick said, adding there are still many factors that could affect that amount.
Paradigm approached the university in May with details of the plan. However, Helmick said it had been working for months before to reach sales agreements with Sunnyside property owners. The sales between the former property owners and Paradigm were completed Thursday.
WVU bought the land from Paradigm on Friday.
"For purposes of this closing, it was very much like a pass through," Helmick said.
Paradigm did not make a profit selling the land to WVU, Helmick said. The $14.6 million the university is using to purchase the land will come from revenue bonds: Weese said the revenue from the development itself would cover the bonds.
Combined, the appraised value of the property is roughly $4.3 million. However, university general counsel Bill Hutchens said there is a large difference between the appraised value, which is used for tax purposes, and the fair market value.
He said there is a formula to compute the fair market value; although he said he didn't know what it was off the top of his head, it nevertheless shows the appraised value of a property is "dramatically lower" than market value.
"Market value, really the way I define it . . . is what a willing seller is willing to take and willing buyer is willing to pay," Hutchens said.
Both Hutchens and Weese said public-private ventures are commonplace for universities. WVU and other institutions would have a tough time coming up with all of the capital to make such a project a reality, Hutchens explained.
"This particular model is not something we've invented," Hutchens said. "As higher education across the country is squeezed more and more budget-wise . . . they've been doing this in many other states, and this has become the model."
Paradigm plans to start demolition work by late December or early January, Helmick said. Financing will be secured by that time: he decline to discuss the details of current loan conversations between the developers and banks, but anticipated Paradigm receiving a loan it would repay over the course of 25 to 30 years.
Maryland-based Grimm and Parker Architects designed the building. Helmick said the company has a reputation for creating similar student housing projects. The company has already spoken with a number of contractors and more specific information about the building process should be available in the next few weeks, Helmick said.
The development is slated to be ready for students by the 2014 fall semester.