Photo: Ross Coope-Thwaite/Coope-Thwaite Photography The Vista del Sol Community Center opened in August 2008.

By Allen Kenney

Typical perks for college honors students might include special privileges such as registering for classes before the rest of their fellow students. Student housing REIT American Campus Communities (NYSE: ACC) and Arizona State University's (ASU) Barrett Honors College are together adding a new level of distinction for honor students displaying academic excellence. Thanks to American Campus, Barrett students will have a pleasant surprise awaiting them at the beginning of the 2009 school year: a brand new $126.5 million campus all to themselves.

The Barrett campus is the second of three development phases in a partnership between ASU and American Campus. The university previously contracted with the REIT on Vista del Sol, a new housing complex that opened in the fall of 2008. American Campus began construction work on Vista del Sol, which contains nearly 2,000 beds, in January 2007. American Campus broke ground on the Barrett project in the southeast corner of ASU's Tempe campus in November 2007, and the new facilities are slated to open in August 2009.

The company has yet to release details on the third phase, but once all three phases are completed, they will offer more than 5,000 student beds. The entire project is expected to cost $370 million.

"We are extremely honored to serve as an instrumental resource for [ASU] President Michael Crow in fulfilling his vision to provide an unparalleled living experience conducive to academic excellence," says American Campus CEO Bill Bayless.

With Honors

"Barrett combines the caring and advocacy of a small, residential four-year college with the vast resources of a large Pac-10 research university," says Mark Jacobs, the college's dean. "This new campus will stand alone among honors colleges around the country for the size of the campus and the comprehensiveness of services arranged in one place for honors students."

The Arizona Board of Regents created the Honors College at ASU in 1988 for students who excelled in the classroom. In 2000, school officials decided to name the college after two of its major donors, Intel Chairman Craig Barrett and his wife, Barbara.

A rendering of Barrett Honors College, slated to open in August 2009.

Today, Barrett remains the only public university honors college with its own campus.

As of the 2007 fall semester, Barrett had an enrollment of almost 3,000 students, including nearly 600 National Merit Scholars. Typically, Barrett freshmen finished in the top 6 percent of their high school class and held a high school grade point average of 3.8.

The new Barrett campus will provide housing for 1,700 students. Additionally, the site will feature a host of new facilities such as its own dining hall, classrooms, administrative offices and activity spaces. The campus also will have an amphitheater, fitness center, garden and computer lounge.

"This isn't just a large residential community," says Jason Wills, American Campus' senior vice president of on-campus development. "It operates like a small liberal arts college within a large research institution."

Wills says that the wide array of stakeholder groups on a college campus has proven to be the biggest challenge related to the ASU projects. When American Campus' planners began sketching out designs for the Barrett campus, they decided to create a "user group" consisting of representatives from all facets of the college to help guide the process. Consequently, American Campus has been able to incorporate a wide variety of perspectives into the new design, creating a campus tailored to the needs of the people who use the facilities most.

For example, Wills notes that the Barrett campus is being built to meet the U.S. Green Building Council's (USGBC) standards for environmental sustainability. The goal is for Barrett to conform to the USGBC's Leadership in Environmental Energy and Design (LEED) principles. These include measures such as installing low-flow plumbing fixtures and rigorously monitoring consumption.

ACE in the Hole

American Campus is building the ASU projects as part of its American Campus Equity Program (ACE), which the company bills as "the optimal solution for universities looking to develop or sell student housing while preserving their credit capacity to fund core infrastructure."

A rendering of an aerial view of Barrett Honors College.

Under the program, American Campus uses its own equity to finance a major chunk of a project's total cost. That way, schools don't have to borrow heavily to finance the construction, which preserves their debt capacity and enables them to maintain their credit rating. American Campus also forgoes fees on its ACE projects. In the end, the arrangement means that American Campus is the school's lone financial, development and operating partner. The universities, in turn, retain their ability to borrow as a way to finance academic infrastructure development.

The biggest difference between American Campus' ASU project and past undertakings is sheer size, according to Wills. Looking at the company's developments around the United States, most appear to hold between 500 and 1,000 beds.

Despite the size of the project, Wills contends that a number of favorable factors reduce the assets' risk profile. For example, the residences benefit from their location on the Tempe campus. Additionally, according to Wills, the special status of residences like Barrett creates the potential for strong net operating income growth. "The students and parents of students view these as preferred places to live," he says.

Going forward, Wills says American Campus hopes to develop more long-term relationships with universities like the one it has with ASU. Taking the time to get to know each other has helped create a strong dynamic between the company and the school, according to Wills. It's a hallmark of the way American Campus does its business.

"It's a matter of understanding how to work with the universities to put together the right solutions for their needs," Wills says. "We feel our collaboration with Arizona State has been fantastic."