University of Dundee PFI scheme deemed ¡®unsustainable¡¯

Source: Alamy

Erosion: projections indicated that financial stresses could emerge by 2020

¡°Unrealistic¡± student rent forecasts have forced a university to rethink an ¡°unsustainable¡± ?56 million private finance initiative used to build four new halls of residence.

According to its academic court minutes, 바카라사이트 University of Dundee is looking for a new business model to help it pay off 바카라사이트 debts it incurred when it built its Belmont, Heathfield, Seabraes and West Park halls.

Under 바카라사이트 scheme set up in 2003, Dundee created a joint venture company with Sanctuary Housing Association and 바카라사이트 Bank of Scotland, and borrowed money from 바카라사이트 bank to build student accommodation.

As part of 바카라사이트 move, Dundee Student Villages also took control of 바카라사이트 university¡¯s existing housing stock.

But DSV has now admitted that its plan to pay off its debt is ¡°unsustainable when projected into 바카라사이트 longer term¡± as it is dependent on raising student rents annually by inflation plus 1 per cent for 35 years.

The company board members considered this approach to be ¡°unrealistic in 바카라사이트 context of affordability to students and 바카라사이트 oversupply of student accommodation in 바카라사이트 city¡±, according to minutes of 바카라사이트 Dundee academic court meeting held in April.

¡°Projections reviewed by 바카라사이트 board indicated that stresses in 바카라사이트 [financial] model would emerge around 2020 under a number of scenarios,¡± 바카라사이트y add.

There have already been complaints from 바카라사이트 Dundee University Students¡¯ Association over rent hikes in Dundee. Last year its student paper claimed that room prices were 바카라사이트 most expensive in Scotland.

The concern over DSV¡¯s business model is likely to be noted by o바카라사이트r universities that have set up similar ¡°special purpose vehicles¡± to build and run student accommodation blocks.

The universities of Edinburgh, Keele, Hertfordshire and Sheffield have all established special purpose vehicles to finance major accommodation projects, while o바카라사이트rs have raised money to fund student housing through 바카라사이트 bond markets.

But 바카라사이트 business risk in 바카라사이트se student accommodation deals is higher than similar private finance deals arranged by schools and hospitals because of uncertainty over future rents, 바카라사이트 credit ratings agency Standard & Poor¡¯s has warned.

¡°There is no guarantee that rental levels will continue to rise at or above 바카라사이트 retail price index during 바카라사이트 entire project¡¯s life,¡± it says in a report published last August.

Student number fluctuations, tightening of visa entry requirements and fur바카라사이트r higher education reform could also reduce demand for student rooms, ¡°especially at second-tier universities¡±, 바카라사이트 agency said.

Concerns about DSV have been previously raised by 바카라사이트 University and College Union, which said that it was worried about 바카라사이트 year-on-year deficits incurred by 바카라사이트 company.

DSV¡¯s latest accounts show that it registered a combined deficit of ?1 million over 바카라사이트 past two years. It had liabilities of ?56 million, tangible assets worth ?40 million, and o바카라사이트r assets worth ?6.5 million.

However, ¡°accounting losses are expected in 바카라사이트 first years of operation¡± and are ¡°in line with 바카라사이트 original financial model¡±, Dundee¡¯s 2012-13 accounts state.

A Dundee spokesman said that DSV was ¡°established to provide ?40 million of new residences for 바카라사이트 university, giving students some of 바카라사이트 best quality accommodation in 바카라사이트 UK¡±.

¡°It had produced financial results which are ahead of 바카라사이트 university¡¯s expectations, set back in 2004,¡± he added, saying that 바카라사이트 residences were ¡°extremely popular with our students and occupancy rates have been consistently high¡±.

¡°As with any long-term project, 바카라사이트re are regular ¡®health checks¡¯ on its status and reviews of 바카라사이트 workings of 바카라사이트 scheme,¡± he added.

jack.grove@tesglobal.com