A student-housing developer with a crushing debt load pressured Georgia to bring college kids back to campus so it could keep its dorms full and revenues up
- Privately-held real estate company Corvias has faced congressional scrutiny for its military housing.
- Now, the company is under fire for influencing return-to-campus plans for colleges in Michigan and Georgia.
- Documents made public this week show Corvias reminded the colleges of the hundreds of millions of dollars of debt it took on for their student housing projects, and that the real-estate company didn't agree with CDC guidelines on roommate numbers.
- Visit Business Insider's homepage for more stories.
Last year, real-estate group Corvias faced congressional scrutiny for shoddy work at military housing it operates across the country.
Now, the company is in the spotlight for student housing – not for bad work, but for how much it looked to influence return-to-campus plans during the coronavirus pandemic.
In late May, Corvias sent letters to Michigan's Wayne State University and the Board of Regents of the University System of Georgia (BOR) where it operates student housing to highlight the debt Corvias took on for the two student-housing partnerships as the schools sketched out fall-semester plans.
In the letter to Georgia, where the pandemic was infecting a few hundred people a day, Corvias said the board couldn't tell students not to return to the on-campus housing that the company manages for nine schools. And while the CDC said reducing density in student housing – making double rooms into singles, for example – could reduce infection, Corvias said it wasn't required to shift roommate numbers or overall building numbers.
Reducing the number of roommates and students would lead to lower revenues for privately-held Corvias. That comes as the student-housing sector in general is under pressure as colleges de-densify housing, some students opt to stay home, and colleges like Howard University – one of Corvias's partners – go all-online for the fall semester.
At Wayne State and the University System of Georgia, students are moving into dorms this month. Corvias' campuses at those schools are geared toward local students, so more could opt to live at home than usual this semester.
Read more: College students don't want to return in the fall, and it could cause many universities to collapse
Corvias' military and student work highlights what critics say are the perils of privatization, including loss of control for colleges that want to decide how to manage their students during a pandemic. US Sen. Elizabeth Warren has previously questioned Corvias' work with colleges, given its recent history with military homes. Her office declined immediate comment.
A representative for Wayne State declined to comment, and Georgia's BOR did not respond to requests for comment. Of the nine Georgia schools Corvias works with, two did not respond to requests for comment; two declined to comment; and five – Georgia State University, Dalton State College, Georgia Southern University, Georgia Southern, and the College of Coastal Georgia – emailed statements saying they were not influenced by external parties in return-to-campus decisions.
A spokeswoman for Corvias did not respond to multiple requests for comment.
Education-focused media outlet Inside Higher Ed reported on the letters to Georgia and Wayne State on Friday, saying the two were nearly identical. Business Insider has reviewed the Georgia documents, but Wayne State has not yet completed our Wednesday request for documents.
Students and staff at various Georgia colleges have voiced concerns in local media and online about Corvias' perceived influence on the university system's reopening plans.
One professor, who spoke on the condition of anonymity because her college president told faculty not to speak with the press about the housing controversy, said she worries that the influx of students and staff could put even more pressure on her town's local hospital, which has been operating at maximum capacity. The professor said colleagues have been talking about the Corvias documents as they draw up wills ahead of the fall semester.
Read more: Big investors poured billions into student housing — thinking it was a recession-proof bet. Then the pandemic emptied campuses and turned that thesis on its head.
Military work led to big student housing break
Corvias manages housing on 15 bases for the Army and Air Force, making it one of the largest private landlords for the military.
Reuters investigated the company and founder John Picerne in 2018, as military tenants complained of mold and other work problems that went unaddressed for months. Reuters found that children and their parents developed long-term health problems, and at least one soldier sought a medical discharge after he and his kids developed breathing problems that his doctors attributed to unmitigated mold in their home. The company now faces multiple lawsuits from military residents.
Corvias declined to address specific tenant complaints to Reuters. A spokeswoman told the outlet that the company had set up a phone hotline for residents and would begin a process review.
Corvias CEO Picerne, who owns a yacht and a 100-acre Irish estate with two mansions, among other luxury assets, was called to testify in front of US Congress in February 2019. In his prepared remarks, he did not apologize, but he said that the company had "slipped" and laid out an improvement plan.
His company entered the student-housing business in 2012 through a deal with the Alabama College of Osteopathic Medicine. Its big break came when Georgia's BOR wanted to outsource some housing, particularly for small, largely commuter campuses that sought to attract more live-in students. Georgia looked for companies with previous experience running military housing, said a former employee, who spoke on the condition of anonymity.
Student housing can take a number of forms. Some groups manage student-focused apartment buildings in campus towns, without much input from the school. Others, like Corvias, ink partnerships to take over buildings or even colleges' entire on-campus housing stock for decades. Schools like Corvias's type of agreement – called a public-private partnership, or a P3 in industry jargon – because they can outsource real-estate management and often transfer debt.
Though Corvias had only one other student housing agreement, Georgia's BOR agreed in 2014 to a 65-year partnership that would see Corvias manage nearly 6,200 beds and, in its first phase of construction, build nearly 3,700 new beds across nine campuses, per an announcement at the time.
In P3s, a private company often takes on the public group's debt and then syndicates it, plus additional capital for construction. Per the agreement, Georgia's BOR transferred $311 million in debt to Corvias in 2015, and Corvias then took on $548 million in debt, according to the May letter to the BOR.
The company would pay Georgia $8 million in rent and $500,000 in repair funds annually starting in 2016, with rent and repair increasing 3% each year, according to a 2014 joint report about the deal.
Across its student housing partnerships, Corvias has issued tens of millions of dollars of debt to insurance groups including Pacific Life, Massachusetts Mutual Life Insurance, and Genworth Life Insurance, according to bond records from those groups.
Over the 65-year agreement, the BOR said it would receive over $8 billion from rent and other funds, while Corvias would be paid an unspecified rate based on performance.
Since the start of its Georgia partnership, Corvias worked closely with various schools to add on-campus residents, helping to craft rules like requiring an on-campus visit for orientation and an athletic live-on policy at East Georgia State, per a company presentation.
Because of the scrutiny around Corvias following the Reuters investigation, the company hasn't focused on expanding in student housing, instead putting resources toward cleaning up its military portfolio, a former executive who spoke on the condition of anonymity said.
Last year, Corvias applied to build three men's prisons in Alabama, but later withdrew its application, said a former employee who spoke on the condition of anonymity.
Corvias hasn't – and won't – cover student rent refunds
In June, Georgia Tech senior Kelly ONeal was concerned about the University System of Georgia's reopening plan, which included a mandate that no schools, including her own, require masks on campus. She said she filed a Freedom of Information Act Request to understand who was behind that decision, but a week after her request, the school system changed course and encouraged masks.
ONeal received her requested records this week, which included the May 29 letter from Corvias and an agenda for a June 10 committee meeting where a committee deliberated on how to work with Corvias.
The documents show that some of the ways Corvias has approached student housing during the pandemic run counter to how bigger operators told Business Insider in late May that they were preparing for the summer and fall. For example, American Campus Communities, the only publicly-traded student housing operator, gave $4.3 million in rent relief in April and May to residents on a case-by-case basis.
In the spring, Georgia's BOR closed campus housing and provided $13.4 million in rent refunds, depleting its reserves, per the June document.
"Corvias did not cover or share in responsibility for this refund nor indicated a willingness to do so for Fall 2020 if housing is similarly closed for public health measures," the document said.
ACC's CEO, Bill Bayless, told Business Insider in the spring that he was talking with schools about turning multi-student rooms into singles, one of the strategies Corvias rejected, per the June 10 agenda.
For the fall semester, one Corvias campus, Georgia State University, planned in June to reopen dorms at 75% capacity and convert double rooms to single rooms, charging the higher single occupancy rate, the June agenda said. Lowering the dorms to 75% occupancy would mean a $3.1 million decline in gross revenues, and unless Corvias or the BOR provided some funding, the loan would default.
The June 10 document said Corvias, after sending the May 29 letter, requested a meeting to discuss return to campus plans. There are no public records of such a meeting, and Georgia's BOR has not responded to a Freedom of Information Act request.
Ultimately, student preferences may influence occupancy rates more than school policy. Spokespeople for Georgia State University and Dalton State said fewer students returning to their campuses made any debate about occupancy parameters moot.
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