Finding Its Place
The soft-spoken executive’s face lights up as he talks about his start in the student housing business. The enthusiasm is undeniable: “Hanging around 18 and 19 year-olds is a lot of fun,” he says animatedly. “It gets me back to college, which was the happiest time of my life by and large.”
Phillips’ knowledge of the industry dates back to the early ’80s, when he ran a merchant banking business called Phillips International. He represented foreign clients who invested in projects from student housing to savings and loans and golf courses. Phillips, however, was most intrigued by the student housing sector. “The more I looked at student housing, the more its demographics and opportunities appealed to me,” he says. So, in 1995, the entrepreneur went from financing to developing the niche when he founded Place Properties.
The company got its start by developing off-campus communities. The business plan made sense: Nationwide, between 75 percent and 80 percent of all student housing is located off-campus, Phillips explains. But the company quickly saw a real demand to bring new housing on campus with public dollars for schools quickly shrinking and enrollments skyrocketing. In fact, Georgia‘s governor had asked Phillips in the early ’90s–while Phillips was at Phillips International–if there was a way to privately finance on-campus housing. (Phillips has strong government ties, having served as executive assistant to a former Georgia governor after working as a private practice attorney for 10 years.) Always up for a challenge, Phillips used his government and financial know-how to pioneer privatized, tax-exempt, nonrecourse financing for on-campus housing. The first privatized project was approved in 1995 and now serves as a model for student housing developers everywhere, says Phillips.
“Until this model was developed, the only way you could get money for a new dorm was to go stand in line, apply for it with a board of regents, and work with government budgets,” says Phillips. “It would take three years to get design money, and then it would take another five years to get funding. Eight years later, construction costs had gone up so much you couldn’t afford what you designed.” The privatized process is streamlined, minimizes politics, and avoids big construction cost increases, he explains. “The shortest time frame from award of an RFP to commencement of construction has been 90 days, with 700 beds of student housing delivered 11 months later.”
Early in his housing career, Phillips also helped establish the single-bedroom lease with parental guarantee, which was a big change from the traditional apartment lease of renting by the unit. This tactic helped convince lenders that student housing was a sound investment option, says Mike Flanagan, senior vice president of Birmingham, Ala.-based Regions Bank, which provides Place with construction financing. “In the early ’90s, student housing was a real stepchild to the multifamily industry,” he says. “Baby boomers who then became lenders would say, ‘Student housing, no way. I was a student; I know what I did to that asset.'” Phillips helped change this mindset, he adds.
The executive’s early groundwork paved the way for a strong future. Last year alone, the company completed property acquisitions, dispositions, and refinancings totaling more than $500 million. Plus, the company manages more than $725 million in on- and off-campus student housing assets (including third-party contracts) that represent more than 18,000 beds in 12 states.