Need to save some money? Try private accommodation

As state cash dries up, university plots £200m deal to outsource campus halls. Simon Baker reports

May 5, 2011

A university is looking to hand over the running of its campus accommodation to a private company in a £200 million landmark deal being described as "the direction of travel" for a sector starved of government investment.

Under the plan, the student accommodation office at the University of Reading and more than 4,000 rooms will be managed by University Partnerships Programme (UPP).

It would be the largest residential investment by a company into a UK university to date and would make Reading the first in the sector to form a long-term partnership with the private sector for its entire on-campus student accommodation estate.

Sean O'Shea, chief executive of UPP, said the Reading deal - which is still subject to contract - was a "pathfinder". The university was being a "pioneer", he added, by committing to a project that would last for decades.

UPP already provides more than 20,000 student rooms across 11 UK universities. A common arrangement is for an institution to lease land to UPP, which then develops the student accommodation and collects the rental income it generates. In return, the university receives a lump sum and sheds construction and maintenance costs.

The Reading plan would take the model a stage further: UPP would take over the day-to-day running of accommodation, although the institution would still be responsible for student welfare, grounds maintenance, security, IT and catering.

Alex Massey, author of a recent Policy Exchange report on how universities can save money by outsourcing, said such arrangements would become "increasingly common" as capital expenditure by government dried up.

"By outsourcing student accommodation management, universities can save money and focus resources more closely on the core functions of teaching and research," he said.

Mr O'Shea said UPP was talking with universities about extending its "product offering" to cover academic and social facilities.

He added that private investors were increasingly interested in the "steady" long-term returns from such projects. He also raised the prospect of academics themselves taking a key stake in such schemes through their own pension funds putting up capital.

"I certainly think that pension funds will be looking to invest in higher education because it is a very high-value sector, it is an ethical thing to do and it produces steady, predictable returns - and there are not many other sectors that do that at the moment."

Mr O'Shea also insisted that staff who were transferred to the private sector as part of the projects would not lose out on terms and conditions. "Keeping them motivated, trained and skilled is fundamental to the successful delivery of our business," he said.

If UPP, which is currently the "preferred bidder" for the Reading project, completes the deal, it would start by taking over the operation of 2,623 rooms in the next academic year before going on to manage almost 900 new rooms being built for 2012-13.

It would then develop a further 650 new rooms and catering hubs to complete the current Whiteknights campus project.

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