PRELIMINARY OFFICIAL STATEMENT DATED MAY 7, 2014

Transcription

1 The information contained in this Preliminary Official Statement is subject to completion and amendment. The Series 2014A Bonds may not be sold nor may an offer to buy be accepted prior to the time the Official Statement is delivered in final form. Under no circumstances shall this Preliminary Official Statement constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of the Series 2014A Bonds in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of such jurisdiction. PRELIMINARY OFFICIAL STATEMENT DATED MAY 7, 2014 NEW ISSUE BOOK ENTRY ONLY Ratings: See RATINGS herein S&P: AA (Insured - Expected)/ BBB- (Underlying) Moody s: A2 (Insured - Expected)/ Baa3 (Underlying) The delivery of the Series 2014A Bonds (as defined below) is subject to the opinion of Bond Counsel to the Issuer to the effect that, assuming compliance with certain covenants and based on certain representations, interest on the Series 2014A Bonds is excludable from gross income for federal income tax purposes under statutes, regulations, published rulings and court decisions existing on the date hereof, subject to the matters described under TAX MATTERS herein, including the alternative minimum tax on corporations. See TAX MATTERS herein. Dated: Date of Issue $111,535,000* New Hope Cultural Education Facilities Finance Corporation Student Housing Revenue Bonds (CHF Collegiate Housing College Station I, L.L.C. Texas A&M University Project) Series 2014A Due: April 1, as shown inside The New Hope Cultural Education Facilities Finance Corporation Student Housing Revenue Bonds (CHF-Collegiate Housing College Station I, L.L.C. - Texas A&M University Project) Series 2014A (the Series 2014A Bonds ) are being issued by the New Hope Cultural Education Facilities Finance Corporation (the Issuer ) pursuant to a Trust Indenture dated as of May 1, 2014 (the Indenture ) between the Issuer and Regions Bank, as Trustee (the Trustee). The proceeds of the Series 2014A Bonds are being loaned to CHF-Collegiate Housing College Station I, L.L.C., an Alabama limited liability company (the Borrower ), the sole member of which is Collegiate Housing Foundation, an Alabama non-profit corporation and an organization described under Section 501(c)(3) of the Internal Revenue Code of 1986, as amended, pursuant to a Loan Agreement between the Issuer and the Borrower dated as of May 1, 2014 (the Loan Agreement ). The Series 2014A Bonds are being issued to provide funds for financing and refinancing (i) the acquisition, development, financing, construction, furnishing and equipping of an approximately 1,274-bed student housing facility (the Student Housing Facility ) to be located on the campus of Texas A&M University (the University ) in College Station, Texas on land leased by the Borrower from the Board of Regents of The Texas A&M University System (the Board ) (collectively, the Series 2014A Project ), (ii) the payment of capitalized interest on the Series 2014A Bonds during construction and for up to six months following the scheduled completion of construction of the Series 2014A Project (but not in excess of two year s interest on the Series 2014A Bonds), (iii) the funding of the Debt Service Reserve Fund (as defined hereinafter) with respect to the Series 2014A Bonds, and (iv) the payment of the costs of issuance of the Series 2014A Bonds. The Bonds will be issued in fully registered form, registered in the name of Cede & Co., as nominee for The Depository Trust Company, New York, New York ( DTC ), which will act as securities depository for the Series 2014A Bonds. Individual purchases of beneficial ownership interests in the Series 2014A Bonds will be made in book entry form only, and individual purchasers will not receive physical delivery of bond certificates. Payments of the principal of, and interest on, the Series 2014A Bonds will be made by Regions Bank, as trustee (the Trustee ), to Cede & Co., as nominee for DTC, for disbursement to DTC participants and subsequent disbursement to the beneficial owners of the Series 2014A Bonds. The Series 2014A Bonds are being issued as fully registered bonds without coupons in denominations of $5,000 and any integral multiple thereof. The Series 2014A Bonds will bear interest from their date of issue, payable semiannually on each April 1 and October 1, commencing October 1, The scheduled payment of principal of and interest on the Series 2014A Bonds maturing on April 1 of the years and (the Insured Series 2014A Bonds ) when due will be guaranteed under an insurance policy to be issued concurrently with the delivery of the Insured Series 2014A Bonds by ASSURED GUARANTY MUNICIPAL CORP. See 2014A BOND INSURANCE. THE SERIES 2014A BONDS, TOGETHER WITH ALL PRINCIPAL AND INTEREST THEREON, AND PREMIUM, IF ANY, WITH RESPECT THERETO ARE SPECIAL, LIMITED OBLIGATIONS OF THE ISSUER SECURED BY THE INDENTURE, AND SHALL ALWAYS BE PAYABLE SOLELY FROM THE REVENUES AND INCOME DERIVED FROM THE LOAN AGREEMENT AND THE SECURITY (AS DEFINED IN THE INDENTURE), AND FROM CERTAIN FUNDS AND ACCOUNTS PLEDGED TO THE TRUSTEE UNDER THE INDENTURE AND DESCRIBED THEREIN. NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE BOARD, THE UNIVERSITY, THE STATE OF TEXAS (THE STATE ) OR ANY POLITICAL SUBDIVISION THEREOF INCLUDING BUT NOT LIMITED TO THE TOWN OF NEW HOPE IS PLEDGED TO THE PAYMENT OF THE SERIES 2014A BONDS. THE STATE IS NOT LIABLE ON THE SERIES 2014A BONDS AND THE SERIES 2014A BONDS ARE NOT A DEBT OF THE STATE. THE ISSUER HAS NO TAXING POWER. NO OWNER OF THE SERIES 2014A BONDS SHALL HAVE THE RIGHT TO COMPEL ANY EXERCISE OF THE TAXING POWER, IF ANY, OF THE ISSUER, THE STATE OR ANY OTHER POLITICAL SUBDIVISION THEREOF INCLUDING BUT NOT LIMITED TO THE TOWN OF NEW HOPE TO PAY THE PRINCIPAL OF, PREMIUM, IF ANY, OR INTEREST ON ANY SERIES 2014A BOND. THE HOLDERS OF THE SERIES 2014A BONDS SHALL NEVER HAVE THE RIGHT TO DEMAND PAYMENT THEREOF OUT OF MONEY RAISED OR TO BE RAISED BY TAXATION. UNDER THE TERMS OF THE INDENTURE, THE ISSUER MAY ISSUE ADDITIONAL BONDS WHICH MAY BE SECURED ON A PARITY WITH THE SERIES 2014A BONDS. The Series 2014A Bonds are subject to prior mandatory, optional, and extraordinary redemption as described herein. See THE SERIES 2014A BONDS herein. SEE CERTAIN BONDHOLDERS RISKS HEREIN FOR A DISCUSSION OF CERTAIN RISK FACTORS WHICH SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE SERIES 2014A BONDS. EACH PROSPECTIVE INVESTOR SHOULD CONSIDER THE RISKS INVOLVED TO DETERMINE THE SUITABILITY OF INVESTING IN THE SERIES 2014A BONDS. This cover page is for quick reference only. It is not a summary of this Official Statement. Investors must read the entire Official Statement to obtain information essential to the making of an informed investment decision. The Series 2014A Bonds are offered when, as, and if issued by the Issuer and received by the Underwriter and are subject to prior sale and the approval of legality by McCall, Parkhurst & Horton L.L.P., Dallas, Texas, Bond Counsel, and to certain other conditions. Certain legal matters will be passed upon for the Borrower by Hand Arendall LLC, Mobile, Alabama and Shackelford, Melton & McKinley, LLP, Dallas, Texas and for the Underwriter by Ballard Spahr LLP, Baltimore, Maryland. Delivery of the Series 2014A Bonds through the facilities of DTC in New York, New York is expected on or about May 29, * Preliminary. Subject to Change.

2 SERIES 2014A BONDS MATURITY SCHEDULE* Maturity (April 1) Amount Coupon Yield CUSIP** 2017 $1,065, ,295, ,540, ,795, ,070, ,375, ,470, ,570,000 $14,510,000 % Term Bonds Due April 1, 2029 Yield % CUSIP No**: $17,890,000 % Term Bonds Due April 1, 2034 Yield % CUSIP No**: $22,355,000 % Term Bonds Due April 1, 2039 Yield % CUSIP No**: $41,600,000 % Term Bonds Due April 1, 2046 Yield % CUSIP No**: * Preliminary. Subject to Change. ** CUSIP Numbers have been assigned to the Series 2014A Bonds by Standard & Poor s, CUSIP Service Bureau, a division of the McGraw-Hill Companies, Inc. and are included solely for the convenience of the holders of the Series 2014A Bonds. The Issuer, the Underwriter and the Borrower are not responsible for the selection, uses or correctness (as listed above) of, or subsequent changes to, CUSIP numbers assigned to the Series 2014A Bonds.

3 No dealer, broker, salesman, or other person has been authorized to give any information or to make any representations other than those contained in this Official Statement, and, if given or made, such other information or representations should not be relied upon as having been authorized by the Issuer, the Borrower, the University or the Underwriter. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of the Series 2014A Bonds by any person in any state in which it is unlawful for such person to make such offer, solicitation, or sale. The information set forth herein relating to the Issuer under the headings THE ISSUER and LITIGATION -The Issuer has been obtained from the Issuer. All other information herein has been obtained by the Underwriter and other sources deemed by the Underwriter to be reliable, and is not to be construed as a representation by the Issuer or the Underwriter. The Issuer has not reviewed or approved any information in this Official Statement except information relating to the Issuer under the headings THE ISSUER and LITIGATION - The Issuer. The information herein is subject to change without notice, and neither the delivery of this Official Statement nor any sale made hereunder shall under any circumstances create any implication that there has been no change in the affairs of the Issuer or the Borrower since the date hereof. The Underwriter has reviewed the information in this Official Statement in accordance with, and as part of, its responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or completeness of such information. IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR EFFECT TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SERIES 2014A BONDS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. Assured Guaranty Municipal Corp. ( Assured, AGM or the 2014A Insurer ) makes no representation regarding the Series 2014A Bonds or the advisability of investing in the Series 2014A Bonds. In addition, AGM has not independently verified, makes no representation regarding, and does not accept any responsibility for the accuracy or completeness of this Official Statement or any information or disclosure contained herein, or omitted herefrom, other than with respect to the accuracy of the information regarding AGM supplied by AGM and presented under the heading 2014A BOND INSURANCE and in Appendix E Specimen Municipal Bond Insurance Policy.

4 TABLE OF CONTENTS INTRODUCTORY STATEMENT... 1 ESTIMATED SOURCES AND USES OF FUNDS... 3 THE SERIES 2014A BONDS... 4 ANNUAL DEBT SERVICE REQUIREMENTS SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2014A BONDS A BOND INSURANCE THE ISSUER THE SERIES 2014A PROJECT THE GROUND LEASE THE DEVELOPER THE DEVELOPMENT AGREEMENT THE MANAGER AND THE MANAGEMENT AGREEMENT THE DESIGN/BUILDER AND THE DESIGN/BUILD CONTRACT THE BORROWER NONRECOURSE OBLIGATION OF THE BORROWER S MEMBER OR OFFICERS THE UNIVERSITY UNIVERSITY NOT LIABLE FOR SERIES 2014A BONDS CASH FLOW FORECAST MARKET STUDY CERTAIN BONDHOLDERS RISKS LITIGATION TAX MATTERS UNDERWRITING RATINGS LEGAL MATTERS RELATIONSHIP OF PARTIES CONTINUING DISCLOSURE MISCELLANEOUS Page APPENDIX A APPENDIX B APPENDIX C APPENDIX D APPENDIX E MARKET STUDY SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE AND LOAN AGREEMENT FORM OF OPINION OF BOND COUNSEL FORM OF CONTINUING DISCLOSURE AGREEMENT SPECIMEN MUNICPAL BOND INSURANCE POLICY

5 OFFICIAL STATEMENT $111,535,000* NEW HOPE CULTURAL EDUCATION FACILITIES FINANCE CORPORATION STUDENT HOUSING REVENUE BONDS (CHF-COLLEGIATE HOUSING COLLEGE STATION I, L.L.C. TEXAS A&M UNIVERSITY PROJECT) SERIES 2014A INTRODUCTORY STATEMENT This Official Statement, including the cover page and the Appendices hereto, is provided to furnish certain information in connection with the issuance and sale by the New Hope Cultural Education Facilities Finance Corporation (the Issuer ) of its $111,535,000* New Hope Cultural Education Facilities Finance Corporation Student Housing Revenue Bonds (CHF-Collegiate Housing College Station I, L.L.C. - Texas A&M University Project) Series 2014A (the Series 2014A Bonds ), to be issued by the Issuer pursuant to a Trust Indenture dated as of May 1, 2014 (the Indenture ) between the Issuer and Regions Bank, as trustee (the Trustee ) for the purpose of providing funds to CHF-Collegiate Housing College Station I, L.L.C. an Alabama limited liability company (the Borrower ), the sole member of which is Collegiate Housing Foundation, a nonprofit corporation (the Foundation ) and an organization described under Section 501(c)(3) of the Internal Revenue Code of 1986, as amended (the Code ) for (a) financing and refinancing the costs of the acquisition, development, financing, construction, furnishing and equipping of an approximately 1,274-bed student housing facility (the Student Housing Facility ) to be located on the campus of Texas A&M University (the University ) in College Station, Texas on land leased by the Borrower from the Board of Regents of The Texas A&M University System (the Board ) (collectively, the Series 2014A Project ), (ii) the payment of capitalized interest on the Series 2014A Bonds during construction and for up to six months following the scheduled completion of construction of the Series 2014A Project (but not in excess of two year s interest on the Series 2014A Bonds), (iii) the funding of the Debt Service Reserve Fund (as defined hereinafter) with respect to the Series 2014A Bonds, and (iv) the payment of the costs of issuance of the Series 2014A Bonds. Definitions of certain terms used in this Official Statement are set forth in Appendix B hereto. The Issuer will lend the proceeds of the Series 2014A Bonds to the Borrower pursuant to a Loan Agreement dated as of May 1, 2014 (the Loan Agreement ) between the Issuer and the Borrower. The Borrower will be obligated pursuant to the Loan Agreement to pay to the Issuer such payments as will always be sufficient to pay when due the principal of, premium, if any, and interest on the Series 2014A Bonds. Except as provided below, it is the obligation of the Borrower under the Loan Agreement to keep the Series 2014A Project properly insured and to pay all taxes, assessments, and other charges levied or assessed against or with respect to the Series 2014A Project. The Board, in its capacity as Ground Lessor, has committed to repair and rebuild damaged or destroyed portions of the Series 2014A Project, as provided in the Ground Lease. For as long as the Board remains obligated to pay the cost of repairing and rebuilding the Series 2014A Project, and to offset loss of revenue to the extent necessary to pay debt service and other recurring costs during the period prior to completion of such repair and rebuilding, all as contemplated by the Ground Lease, the Borrower will not be required to obtain casualty and business interruption insurance. The Board may elect to terminate its obligation to repair and rebuild under certain conditions, in which event the Borrower will be required to maintain casualty and business interruption insurance. See THE GROUND LEASE Ground Lessor Commitment to Repair and Replace the Series 2014A Project and University Work herein. The Issuer has no responsibility for the operation, maintenance, condition or insuring of the Series 2014A Project. The Series 2014A Project will be constructed on land leased to the Borrower by the Board pursuant to a Ground Lease Agreement dated as of May, 2014 (the Ground Lease ). The Series 2014A Project will be managed by the University pursuant to the Management Agreement dated as of May, 2014 (the Management Agreement ) by and between the University and the Borrower. * Preliminary. Subject to Change.

6 To secure the Borrower s obligations to the Issuer under the Loan Agreement and the Series 2014A Note, the Borrower will, subject to Permitted Encumbrances, (i) grant to the Trustee a deed of trust on the Borrower s interest in the Series 2014A Project and the land leased to the Borrower and assign and pledge to the Trustee the Borrower s interest in the General Revenues from the Series 2014A Project and any improvements thereto or expansions thereof pursuant to a Leasehold Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing (the Leasehold Deed of Trust ) dated as of May, 2014 by the Borrower for the benefit of the Trustee, (ii) grant to the Trustee a first priority security interest in the accounts, documents, chattel paper, instruments and general intangibles held by the Borrower arising in any manner from the Borrower s ownership or operation of the Series 2014A Project and any improvements thereto or expansions thereof, in the inventory, if any, located thereat or thereon and in the Equipment pursuant to a Security Agreement (the Security Agreement ) dated as of May, 2014 between the Borrower and the Trustee, and (iii) conditionally assign to the Trustee, inter alia, its rights under the Management Agreement and the Project Development Agreement dated as of May, 2014 (the Development Agreement ) between the Borrower and BBCS Development, LLC (the Developer ) pursuant to a Borrower Collective Collateral Assignment Agreement dated as of May, 2014 (the Borrower Collateral Assignment ) by the Borrower in favor of the Trustee; and the Developer will conditionally assign to the Trustee, its rights under the Design/Build Contract (as defined herein) and all contracts entered into by the Developer relating to the design and construction of the Series 2014A Project pursuant to a Developer Collective Collateral Assignment Agreement dated as of May, 2014 (the Developer Collateral Assignment and the Borrower Collateral Assignment are collectively referred to as the Assignment of Agreements and Documents ) by the Developer in favor of the Trustee. Pursuant to the Indenture, the Issuer will assign, pledge and grant a security interest in all of its right, title and interest in the Loan Agreement (except for Reserved Rights, as defined in the Indenture), the Series 2014A Note and certain funds and accounts held under the Indenture to the Trustee which, on behalf of the owners of the Series 2014A Bonds, will exercise all of the Issuer s rights with respect thereto (except for Reserved Rights). See SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2014A BONDS herein. This Official Statement and the Appendices hereto contain brief descriptions of, among other matters, the Issuer, the Borrower, the Developer, the Series 2014A Project, the Manager, The Texas A&M University System ( System ), the University, the Series 2014A Bonds, the Loan Agreement, the Series 2014A Note, the Ground Lease, the Leasehold Deed of Trust, the Assignment of Agreements and Documents, the Indenture, the Management Agreement and the Development Agreement. Such descriptions and information do not purport to be comprehensive or definitive. All references herein to the Loan Agreement, the Ground Lease, the Leasehold Deed of Trust, the Assignment of Agreements and Documents, the Indenture, the Management Agreement and the Development Agreement (collectively, the Bond Documents ) are qualified in their entirety by reference to such documents, and references herein to the Series 2014A Bonds are qualified in their entirety to the form thereof included in the Indenture. The scheduled payment of the principal of and the interest on the Series 2014A Bonds maturing on April 1 of the years and (the Insured Series 2014A Bonds ) when due is to be guaranteed under a Municipal Bond Insurance Policy (the Bond Insurance Policy ) to be issued concurrently with the issuance of the Insured Series 2014A Bonds by Assured Guaranty Municipal Corp. ( Assured, AGM or the 2014A Insurer ). See 2014A BOND INSURANCE and THE SERIES 2014A BONDS Payment of Debt Service Payments With Respect to the Insured Series 2014A Bonds Under Series 2014A Insurance Policy. The Series 2014A Bonds, together with all principal and interest thereon, and premium, if any, with respect thereto are special, limited obligations of the Issuer secured by the Indenture, and will always be payable solely from the revenues and income derived from the Loan Agreement and the Security (as defined in the Indenture), and from certain funds and accounts pledged to the Trustee under the Indenture and described therein. Neither the faith and credit nor the taxing power of the Board, the University, the State of Texas (the State ) or any political subdivision thereof including but not limited to the Town of New Hope is pledged to the payment of the Series 2014A Bonds. The State is not liable on the Series 2014A Bonds and the Series 2014A Bonds are not a debt of the State. The Issuer has no taxing power. No owner of the Series 2014A 2

7 Bonds has the right to compel any exercise of the taxing power, if any, of the Issuer, the State or any other political subdivision thereof including but not limited to the Town of New Hope to pay any principal of, premium, if any, or interest on any Series 2014A Bond. The Holders of the Series 2014A Bonds will never have the right to demand payment thereof out of money raised or to be raised by taxation. Under the terms of the Indenture, the Issuer may issue Additional Bonds which may be secured on parity with the Series 2014A Bonds. SEE CERTAIN BONDHOLDERS RISKS HEREIN FOR A DISCUSSION OF CERTAIN RISK FACTORS WHICH SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE SERIES 2014A BONDS. EACH PROSPECTIVE INVESTOR SHOULD CONSIDER THE RISKS INVOLVED TO DETERMINE THE SUITABILITY OF INVESTING IN THE SERIES 2014A BONDS. The Market Study (as defined herein) relating to the Series 2014A Project is attached hereto as Appendix A. Summaries of certain provisions of the Indenture and Loan Agreement and definitions of certain terms relating to the Series 2014A Bonds are attached hereto as Appendix B. The proposed form of opinion of Bond Counsel is attached hereto as Appendix C. The proposed form of Continuing Disclosure Agreement is attached hereto as Appendix D. The Specimen Municipal Bond Insurance Policy is attached hereto as Appendix E. ESTIMATED SOURCES AND USES OF FUNDS* The schedule below contains the estimated sources and uses of funds resulting from the sale of the Series 2014A Bonds (exclusive of investment earnings): Series 2014A Bonds Sources of Funds: Par Amount of Series 2014A Bonds $111,535, Original Issue Discount (951,696.40) Original Issue Premium 1,200, Total Sources of Funds $111,783, Uses of Funds: Deposit to Construction Fund $91,639, Deposit to Capitalized Interest Account 1 8,569, Deposit to Debt Service Reserve Fund 2 7,192, Deposit to Issuance Costs Fund 3 4,381, Total Uses of Funds $111,783, Interest will be capitalized through February 2016, which is approximately six months following the expected delivery of the Series 2014A Project. Equal to the Debt Service Reserve Requirement for the Series 2014A Bonds. Includes amounts to be paid for Trustee fees, Issuer fees, rating agency fees, bond insurance premium, legal counsel fees, printing costs and other fees and expenses. Includes the Underwriter s Discount, which will not be deposited into the Issuance Costs Fund. * Preliminary. Subject to Change. 3

8 THE SERIES 2014A BONDS General Description The Series 2014A Bonds will bear interest at the rates shown on the inside of the cover page of this Official Statement payable on October 1, 2014, and semiannually thereafter on April 1 and October 1 of each year (the Interest Payment Dates ) until paid, in an amount equal to the interest accrued from the most recent Interest Payment Date to which interest has been paid or provided for, or, if no interest has been paid, from the date of issuance of the Series 2014A Bonds, or unless, as shown by the records of the Trustee, interest on the Series 2014A Bonds is in default, in which event it will bear interest from the date to which interest has been paid in full at the Interest Rate specified on the inside front cover of the Official Statement. Interest on the Series 2014A Bonds will be computed on the basis of a 360-day year comprised of twelve 30-day months. The Series 2014A Bonds will be issued as fully registered bonds without coupons in the denominations of $5,000 and any integral multiple thereof ( Authorized Denominations ). Payment of the Series 2014A Bonds The principal of, premium, if any, and interest on the Series 2014A Bonds are payable in any currency of the United States of America that at the time of payment is legal tender for the payment of public and private debts, and such principal and premium, if any, is payable when due at the Operations Office of the Trustee upon presentation and surrender thereof. Payment of the interest on any Bond is required to be made to the person appearing on the Bond Register as the registered owner thereof as of the close of business on the Regular Record Date and is required to be paid: (i) by check or draft mailed to such Bondholder on the Interest Payment Date at such Bondholder s address as it appears on the Bond Register; or (ii) in the case of an interest payment to any owner of $500,000 in aggregate principal amount of the Series 2014A Bonds, at such Bondholder s option and upon agreement of the Bondholder to pay wire transfer charges, by wire transfer to such Bondholder upon written notice from such Bondholder containing the wire transfer address to which such Bondholder wishes to have such wire directed, which written notice is received prior to close of business on such Regular Record Date. Notwithstanding the foregoing, while the Series 2014A Bonds are held in the book-entry-only system described in the following section, all principal, premium, if any, and interest will be paid by DTC (as hereinafter defined) or its nominee by wire transfer. Book-Entry-Only System for Series 2014A Bonds The Indenture directs the Issuer, the Trustee, the Borrower and certain other persons to deem and treat the person in whose name any Bond is registered in accordance with the Indenture on the registration books maintained pursuant to the Indenture as the Owner thereof for all purposes. Notwithstanding the prior sentence, so long as the Series 2014A Bonds are held under a book-entry system, transfers and exchanges of beneficial ownership of the Series 2014A Bonds will be effected on the books of The Depository Trust Company ( DTC ), New York, New York or its successor as securities depository for the Series 2014A Bonds, pursuant to its rules and procedures. The description that follows of the procedures and recordkeeping with respect to beneficial ownership interests in the Series 2014A Bonds, payments of principal of and premium, if any, and interest on the Series 2014A Bonds to DTC, its nominee, Direct and Indirect Participants (as defined below) or Beneficial Owners, confirmation and transfer of beneficial ownership interests in the Series 2014A Bonds and other bond-related transactions by and between DTC, Direct and Indirect Participants and Beneficial Owners is based solely on 4

9 information furnished by DTC. None of the Issuer, the Trustee, the Borrower, the University or the Underwriter assumes any responsibility for the accuracy or adequacy of the information included in such description. DTC will act as securities depository for the Series 2014A Bonds. The Series 2014A Bonds will be issued as fully-registered securities registered in the name of Cede & Co. (DTC s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered 2014 Bond will be issued for each maturity of the Series 2014A Bonds, in the aggregate principal amount of such maturity, and will be deposited with DTC. DTC, the world s largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a banking organization within the meaning of the New York Banking Law, a member of the Federal Reserve System, a clearing corporation within the meaning of the New York Uniform Commercial Code, and a clearing agency registered pursuant to the provisions of Section 17A of the Securities Exchange Act of DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-u.s. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC s participants ( Direct Participants ) deposit with DTC. DTC also facilitates the posttrade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-u.s. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation ( DTCC ). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-u.s. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ( Indirect Participants ). DTC has a Standard & Poor s rating of AA+. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at Purchases of Series 2014A Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Series 2014A Bonds on DTC s records. The ownership interest of each actual purchaser of each Series 2014A Bond ( Beneficial Owner ) is in turn to be recorded on the Direct and Indirect Participants records. Beneficial Owners will not receive written confirmation from DTC of their purchases. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Series 2014A Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Series 2014A Bonds, except in the event that use of the book-entry system for the Series 2014A Bonds is discontinued. To facilitate subsequent transfers, all Series 2014A Bonds deposited by Direct Participants with DTC are registered in the name of DTC s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Series 2014A Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Series 2014A Bonds; DTC s records reflect only the identity of the Direct Participants to whose accounts such Series 2014A Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of Series 2014A Bonds may wish to take certain steps to 5

10 augment the transmission to them of notices of significant events with respect to the Series 2014A Bonds, such as redemptions, tenders, defaults and proposed amendments to the documents relating to the Series 2014A Bonds. For example, Beneficial Owners of the Series 2014A Bonds may wish to ascertain that the nominee holding the Series 2014A Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the Trustee and request that copies of notices be provided directly to them. Redemption notices are required to be sent to DTC. If less than all of the Series 2014A Bonds are being redeemed, DTC s practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to the Series 2014A Bonds unless authorized by a Direct Participant in accordance with DTC s MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the Issuer as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co. s consenting or voting rights to those Direct Participants to whose accounts the Series 2014A Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy). Payments on the Series 2014A Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC s practice is to credit Direct Participants accounts upon DTC s receipt of funds and corresponding detail information from the Authority or Trustee, on the payable date in accordance with their respective holdings shown on DTC s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in street name, and will be the responsibility of such Participant and not of DTC, the Trustee, or the Issuer, subject to any statutory or regulatory requirements as may be in effect from time to time. Payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) are the responsibility of the Issuer or the Trustee, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants. DTC may discontinue providing its services as depository with respect to the Series 2014A Bonds at any time by giving reasonable notice to the Issuer or the Trustee. Under such circumstances, in the event that a successor depository is not obtained, Series 2014A Bond certificates are required to be printed and delivered. The Issuer may decide to discontinue use of the system of book-entry transfers through DTC (or a successor securities depository). In that event, Series 2014A Bonds will be printed and delivered to DTC. THE ISSUER AND THE TRUSTEE WILL NOT HAVE ANY RESPONSIBILITY OR OBLIGATION TO ANY PARTICIPANT OR ANY BENEFICIAL OWNER OF THE SERIES 2014A BONDS WITH RESPECT TO: (1) THE SERIES 2014A BONDS; (2) THE ACCURACY OF ANY RECORDS MAINTAINED BY DTC OR ANY PARTICIPANT; (3) THE PAYMENT OF ANY AMOUNT DUE TO ANY PARTICIPANT OR BENEFICIAL OWNER IN RESPECT OF THE PRINCIPAL OF, PREMIUM, IF ANY, OR INTEREST ON THE SERIES 2014A BONDS; (4) THE DELIVERY BY DTC TO ANY DIRECT PARTICIPANT, OR BY ANY PARTICIPANT TO ANY BENEFICIAL OWNER OF ANY NOTICE WHICH IS REQUIRED OR PERMITTED UNDER THE TERMS OF THE SERIES 2014A BONDS TO BE GIVEN TO BOND OWNERS; (5) THE SELECTION OF BENEFICIAL OWNERS TO RECEIVE PAYMENT IN THE EVENT OF ANY PARTIAL REDEMPTION OF THE SERIES 2014A BONDS; OR (6) ANY CONSENT GIVEN OR OTHER ACTION TAKEN BY DTC AS BONDHOLDER. Limited Obligations of the Issuer THE SERIES 2014A BONDS, TOGETHER WITH INTEREST THEREON, SHALL BE SPECIAL, LIMITED AND NOT GENERAL OBLIGATIONS OF THE ISSUER GIVING RISE TO NO PECUNIARY LIABILITY OF THE ISSUER, SHALL BE PAYABLE SOLELY FROM THE 6

11 SECURITY, INCLUDING THE REVENUES AND RECEIPTS DERIVED FROM OR IN CONNECTION WITH THE SERIES 2014A PROJECT, INCLUDING ALL MONEYS RECEIVED UNDER THE LOAN AGREEMENT, WHICH ARE REQUIRED TO BE SET APART AND TRANSFERRED TO THE BOND FUND AND THE REDEMPTION FUND, WHICH REVENUES AND RECEIPTS (EXCEPT FOR THE RESERVED RIGHTS) ARE SPECIFICALLY PLEDGED AND ASSIGNED TO THE TRUSTEE FOR THE EQUAL AND RATABLE PAYMENT OF THE SERIES 2014A BONDS AND ANY ADDITIONAL BONDS THAT MAY BE ISSUED PURSUANT TO THE INDENTURE AND SHALL BE USED FOR NO OTHER PURPOSE THAN TO PAY THE DEBT SERVICE PAYMENTS ON THE SERIES 2014A BONDS AND ANY ADDITIONAL BONDS THAT MAY BE ISSUED PURSUANT TO THE INDENTURE, EXCEPT AS MAY BE OTHERWISE EXPRESSLY AUTHORIZED IN THE INDENTURE. NO AGREEMENTS OR PROVISIONS CONTAINED IN THE INDENTURE AND NO AGREEMENT, COVENANT OR UNDERTAKING BY THE ISSUER CONTAINED IN ANY DOCUMENT EXECUTED BY THE ISSUER IN CONNECTION WITH THE ISSUANCE, SALE AND DELIVERY OF THE SERIES 2014A BONDS SHALL GIVE RISE TO ANY PECUNIARY LIABILITY OF THE ISSUER OR A CHARGE AGAINST ITS GENERAL CREDIT, OR SHALL OBLIGATE THE ISSUER FINANCIALLY IN ANY WAY, EXCEPT WITH RESPECT TO THE FUNDS AVAILABLE UNDER THE INDENTURE AND THEIR APPLICATION AS PROVIDED IN THE INDENTURE. NO FAILURE OF THE ISSUER TO COMPLY WITH ANY TERM, COVENANT OR AGREEMENT IN THE INDENTURE OR IN ANY DOCUMENT EXECUTED BY THE ISSUER IN CONNECTION WITH THE INDENTURE, THE LOAN AGREEMENT OR THE SERIES 2014A BONDS, SHALL SUBJECT THE ISSUER TO LIABILITY FOR ANY CLAIM FOR DAMAGES, COSTS OR OTHER FINANCIAL OR PECUNIARY CHARGE EXCEPT TO THE EXTENT THAT THE SAME CAN BE PAID OR RECOVERED FROM THE FUNDS AVAILABLE UNDER THE INDENTURE. NOTHING IN THE INDENTURE SHALL PRECLUDE A PROPER PARTY IN INTEREST FROM SEEKING AND OBTAINING, TO THE EXTENT PERMITTED BY LAW, SPECIFIC PERFORMANCE AGAINST THE ISSUER FOR ANY FAILURE TO COMPLY WITH ANY TERM, CONDITION, COVENANT OR AGREEMENT IN THE INDENTURE; PROVIDED, THAT NO COSTS, EXPENSES OR OTHER MONETARY RELIEF SHALL BE RECOVERABLE FROM THE ISSUER EXCEPT AS MAY BE PAYABLE FROM THE FUNDS AVAILABLE THEREUNDER. THE SERIES 2014A BONDS AND THE OBLIGATION TO PAY PRINCIPAL, PREMIUM, IF ANY, AND INTEREST THEREON, ARE SPECIAL, LIMITED OBLIGATIONS OF THE ISSUER, SECURED AS PROVIDED IN THE INDENTURE AND PAYABLE SOLELY OUT OF THE PAYMENTS MADE PURSUANT TO THE LOAN AGREEMENT AND THE SECURITY AND AS OTHERWISE PROVIDED IN THE INDENTURE AND THE LOAN AGREEMENT. NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE SYSTEM, THE UNIVERSITY, THE STATE OR ANY POLITICAL SUBDIVISION THEREOF IS PLEDGED TO THE PAYMENT OF THE SERIES 2014A BONDS. THE STATE IS NOT LIABLE ON THE SERIES 2014A BONDS AND THE SERIES 2014A BONDS ARE NOT A DEBT OF THE STATE. THE ISSUER HAS NO TAXING POWER. NO OWNER OF THE SERIES 2014A BONDS SHALL HAVE THE RIGHT TO COMPEL ANY EXERCISE OF THE TAXING POWER, IF ANY, OF THE ISSUER, THE STATE OR ANY POLITICAL SUBDIVISION THEREOF TO PAY THE PRINCIPAL OF, PREMIUM, IF ANY, OR INTEREST ON THE SERIES 2014A BONDS. NEITHER THE MEMBERS OF THE ISSUER NOR ANY PERSON EXECUTING THE SERIES 2014A BONDS SHALL BE LIABLE PERSONALLY ON THE SERIES 2014A BONDS BY REASON OF THE ISSUANCE THEREOF. THE HOLDERS OF THE SERIES 2014A BONDS SHALL NEVER HAVE THE RIGHT TO DEMAND PAYMENT THEREOF OUT OF MONEY RAISED OR TO BE RAISED BY TAXATION. UNDER THE TERMS OF THE INDENTURE, 7

12 THE ISSUER MAY ISSUE ADDITIONAL BONDS WHICH MAY BE SECURED ON A PARITY WITH THE SERIES 2014A BONDS. NO RECOURSE UNDER OR UPON ANY OBLIGATION, COVENANT, OR AGREEMENT CONTAINED IN THE INDENTURE, OR IN THE SERIES 2014A BONDS, OR FOR ANY CLAIM BASED THEREON, OR UNDER ANY JUDGMENT OBTAINED AGAINST THE ISSUER OR THE TRUSTEE, OR BY THE ENFORCEMENT OF ANY ASSESSMENT OR PENALTY OR OTHERWISE OR BY ANY LEGAL OR EQUITABLE PROCEEDING BY VIRTUE OF ANY CONSITUTION, RULE OF LAW OR EQUITY, OR STATUTE OR OTHERWISE OR UNDER ANY OTHER CIRCUMSTANCES, UNDER OR INDEPENDENT HEREOF, MAY BE HAD AGAINST ANY INCORPORATOR, MEMBER OR OFFICER AS SUCH, PAST, PRESENT OR FUTURE OF THE ISSUER OR THE TRUSTEE, OR ANY INCORPORATOR, MEMBER OR OFFICER OF ANY SUCCESSOR CORPORATION, AS SUCH, EITHER DIRECTLY OR THROUGH THE ISSUER OR THE TRUSTEE OR ANY SUCCESSOR CORPORATION, OR OTHERWISE, FOR THE PAYMENT FOR OR TO THE ISSUER OR ANY RECEIVER THEREOF, OR FOR OR TO THE TRUSTEE AS TRUSTEE FOR THE BONDHOLDERS OR OTHERWISE, OR ANY SUM THAT MAY BE DUE AND UNPAID BY THE ISSUER UPON THE SERIES 2014A BONDS. ANY AND ALL PERSONAL LIABILITY OF EVERY NATURE WHETHER AT COMMON LAW OR IN EQUITY, OR BY STATUTE OR BY CONSTITUTION OR OTHERWISE, OF ANY SUCH INCORPORATOR, MEMBER OF OFFICER, AS SUCH, TO RESPOND BY REASON OF ANY ACT OR OMISSION ON HIS OR HER PART OR OTHERWISE, FOR THE PAYMENT FOR OR TO THE ISSUER OR ANY RECEIVER THEREOF, OR FOR OR TO THE TRUSTEE AS TRUSTEE FOR THE BONDHOLDERS OR OTHERWISE, OF ANY SUM THAT MAY REMAIN DUE AND UNPAID UPON THE BONDS, IS HEREBY EXPRESSLY WAIVED AND RELEASED AS A CONDITION OF AND IN CONSIDERATION FOR THE EXECUTION AND THE ISSUANCE OF THE SERIES 2014A BONDS. Additional Bonds So long as there is no Event of Default existing under the Indenture (or so long as such Event of Default will be cured upon the issuance of the Additional Bonds), Additional Bonds may be issued pursuant to the Indenture by the Issuer upon the written request of the Borrower to provide funds to pay any one or more of the following: (i) the costs of completing a Project; (ii) the costs of making such additions or alterations to the Series 2014A Project or any additional project (collectively, the Project ) as the Borrower may deem necessary or desirable and as will not impair the nature of the Project as a student housing facility and as will be located on the Property; (iii) the costs of refunding any Bonds; (iv) the costs of the acquisition, equipping, and construction of additional property and housing (including related buildings and ancillary facilities) to be utilized for the benefit of the University, including the acquisition of equipment and real property, provided, however, that such additional housing must be located on the campus of the University in the area bounded by Raymond Stotzer Parkway, Discovery Drive, Horticulture Street and Adriance Lab Road and cannot exceed 3,250 beds without the prior written consent of the Series 2014A Insurer, and (v) in each such case, the costs of the issuance and sale of the Additional Bonds and capitalized or funded interest for such period and such other costs reasonably related to the financing as are agreed upon by the Borrower and the Issuer. Such Additional Bonds will be issued on a parity with the Series 2014A Bonds and any Additional Bonds theretofore or thereafter issued, will be secured by the lien and security interests granted by the Leasehold Deed of Trust relating to the Series 2014A Project and the Security Agreement relating to the Series 2014A Bonds, equally and ratably with the Series 2014A Bonds and any Additional Bonds theretofore or thereafter issued, and will be payable from the Bond Fund and the Redemption Fund. An amount equal to the Debt Service Reserve Requirement for such Additional Bonds is required to be deposited into a separate Account of the Debt Service Reserve Fund or, if provided for in a supplemental indenture, into the Account established under the Indenture 8

13 for the Series 2014A Bonds, in which case, the Account is required to be a shared Account benefitting the Series 2014A Bonds and any Additional Bonds identified in such supplemental indenture. Such Additional Bonds are required to be issued in such series and principal amounts, are required to be dated, are required to bear interest at such rate or rates, are required to be subject to redemption at such times and prices and are required to mature in such years as the indenture supplemental hereto authorizing the issuance thereof will fix and determine and are required to be authenticated as provided in the Loan Agreement. Except to provide funds to pay the costs of completing a Project, no Additional Bonds may be issued pursuant to the Indenture unless and until there is furnished to the Trustee written confirmation from each Rating Agency then rating the outstanding Bonds that subsequent to the issuance of such Additional Bonds, the existing rating or ratings on any series of the outstanding Bonds will not be lowered, suspended or withdrawn. Except to provide funds to pay the costs of completing a Project, the Borrower may not incur any additional Indebtedness without evidence in the form of a Financial Consultant s report that (i) the Fixed Charges Coverage Ratio for the most recent Annual Period prior to the incurrence of such additional Indebtedness was at least 1.20, (ii) the projected Fixed Charges Coverage Ratio for the first two full Annual Periods immediately succeeding completion of the financed additions or improvements to the Project by such additional Indebtedness would be at least 1.20 (including the proposed additional Indebtedness), and (iii) to the extent applicable, the occupancy of all projects was at least 95% in the preceding Annual Period. Notwithstanding the foregoing and without regard to the historical Fixed Charges Coverage Ratio referenced in the preceding clause (i) or the occupancy requirement referenced in the preceding clause (iii), the Borrower may incur additional Indebtedness securing Additional Bonds issued by the Issuer related to the acquisition, equipping, and construction of additional property and housing (including related buildings and ancillary facilities) to be utilized for the benefit of the University upon the delivery of evidence in the form of a Financial Consultant s report that the projected Fixed Charges Coverage Ratio for the first three full Annual Periods immediately succeeding completion of such additional property and housing would be at least 1.20 (including the proposed additional Indebtedness and the outstanding Indebtedness). The Borrower may not incur any additional Indebtedness in the form of guarantees or derivatives in the form of credit default swaps or total-rate-of-return swaps or similar instruments. Currently it is anticipated that the Borrower may undertake to construct additional residence hall units to be financed through the issuance of Additional Bonds on parity with the Series 2014A Bonds. See THE SERIES 2014A PROJECT Phase II Project and Additional Projects herein. Payment of Debt Service Payments With Respect to the Insured Series 2014A Bonds Under Series 2014A Insurance Policy If, on the third Business Day prior to the related Bond Payment Date for scheduled Debt Service Payments there is not on deposit with the Trustee, after making all transfers and deposits required under the Indenture, money sufficient to pay the principal of and interest on the Insured Series 2014A Bonds due on such Bond Payment Date, the Trustee is required to give notice to the 2014A Insurer and to its designated agent (if any) (the Insurer s Fiscal Agent ) by telephone or telecopy of the amount of such deficiency by 12:00 noon, New York City time, on such Business Day. If, on the second Business Day prior to such Bond Payment Date for scheduled Debt Service Payments, there continues to be a deficiency in the amount available to pay the principal of and interest on the Insured Series 2014A Bonds due on such Bond Payment Date for scheduled Debt Service Payments, the Trustee is required to make a claim under the Series 2014A Insurance Policy and give notice to the 2014A Insurer and the Insurer s Fiscal Agent (if any) by telephone of the amount of such deficiency, and the allocation of such deficiency between the amount required to pay interest on the Insured Series 2014A Bonds and the amount required to pay principal of the Insured Series 2014A Bonds, confirmed in writing to the 2014A Insurer and the Insurer s Fiscal Agent by 12:00 noon, New York City time, on such second Business Day by the filling in the form of Notice of Claim and Certificate delivered with the Series 2014A Insurance Policy. 9

14 The Trustee will designate any portion of payment of principal on the Insured Series 2014A Bonds paid by the 2014A Insurer, whether by virtue of mandatory sinking fund redemption, maturity or other advancement of maturity, on its books as a reduction in the principal amount of Insured Series 2014A Bonds registered to the then current Owner of the Insured Series 2014A Bond, whether DTC or its nominee or otherwise, and will issue a replacement Insured Series 2014A Bond to the 2014A Insurer, registered in the name of Assured Guaranty Municipal Corp. in a principal amount equal to the amount of principal so paid (without regard to Authorized Denominations); provided that the Trustee s failure to so designate any payment or issue any replacement Insured Series 2014A Bond will have no effect on the amount of principal or interest payable by the Issuer on any Insured Series 2014A Bond or the subrogation rights of the 2014A Insurer. The Trustee will keep a complete and accurate record of all funds deposited by the 2014A Insurer into the Policy Payments Account (defined below) and the allocation of such funds to payment of interest on and principal of any Insured Series 2014A Bond. The 2014A Insurer has the right to inspect such records at reasonable times upon reasonable notice to the Trustee. Upon payment of a claim under the Series 2014A Insurance Policy, the Trustee will establish a separate special purpose trust account for the benefit of Owners of the Insured Series 2014A Bonds referred to in the Indenture as the Policy Payments Account and over which the Trustee will have exclusive control and sole right of withdrawal. The Trustee is required to receive any amount paid under the Series 2014A Insurance Policy in trust on behalf of the Owners of the Insured Series 2014A Bonds and to deposit any such amount in the Policy Payments Account and distribute such amount only for purposes of making the payments for which a claim was made. Such amounts are required to be disbursed by the Trustee to the Owners of the Insured Series 2014A Bonds in the same manner as principal and interest payments are to be made with respect to the Insured Series 2014A Bonds under the sections in the Indenture regarding payment of Insured Series 2014A Bonds. It will not be necessary for such payments to be made by checks or wire transfers separate from the check or wire transfer used to pay debt service with other funds available to make such payments. Notwithstanding anything in the Indenture to the contrary, the Issuer has agreed to pay, but solely from the Trust Estate under the Indenture and amounts made available therefor by the Borrower, to the 2014A Insurer (i) a sum equal to the total of all amounts paid by the 2014A Insurer under the Series 2014A Insurance Policy (the 2014A Insurer Advances ); and (ii) interest on such 2014A Insurer Advances from the date paid by the 2014A Insurer until payment thereof in full, payable to the 2014A Insurer at the Payment Rate per annum (collectively, the 2014A Insurer Reimbursement Amounts ). The Issuer has covenanted and agreed under the Indenture that the 2014A Insurer Reimbursement Amounts are secured by a lien on and pledge of the Trust Estate and payable from such Trust Estate on a parity with Debt Service Payments on the Insured Series 2014A Bonds. Funds held in the Policy Payments Account will not be invested by the Trustee and may not be applied to satisfy any costs, expenses or liabilities of the Trustee. Any funds remaining in the Policy Payments Account following a Bond Payment Date will promptly be remitted to the 2014A Insurer. The 2014A Insurer will, to the extent it makes any Debt Service Payment on the Insured Series 2014A Bonds, become subrogated to the rights of the recipients of such payments in accordance with the terms of the Series 2014A Insurance Policy (which subrogation rights will also include the rights of any such recipients in any insolvency proceeding). Each obligation of the Issuer to the 2014A Insurer under the Bond Documents will survive discharge or termination of such Bond Documents. Amounts paid by the 2014A Insurer under the Series 2014A Insurance Policy will not be deemed paid for purposes of the Indenture and the Insured Series 2014A Bonds relating to such payments will remain outstanding and continue to be due and owing until paid in accordance with the Indenture. The Indenture will not be discharged unless all amounts due or to become due to the 2014A Insurer have been paid in full or duly provided for. The 2014A Insurer will be entitled to pay principal and interest on the Insured Series 2014A Bonds that will become Due for Payment but will be unpaid by reason of Nonpayment by the Issuer (as such terms are defined in the Series 2014A Insurance Policy) and any amounts due on the Insured Series 2014A Bonds as 10

15 a result of acceleration of the maturity thereof in accordance with this Indenture, whether or not the 2014A Insurer has received a Notice of Nonpayment (as such terms are defined in the Series 2014A Insurance Policy) or a claim upon the Series 2014A Insurance Policy. Redemption Optional Redemption. The Series 2014A Bonds maturing on or after April 1, 2025* are subject to redemption in Authorized Denominations prior to maturity upon the written request of the Borrower on and after April 1, 2024*, in whole or in part on any date at a Redemption Price equal to 100% of the principal amount of the Series 2014A Bonds to be redeemed, plus interest accrued to the redemption date. Mandatory Sinking Fund Redemption. The Series 2014A Bonds maturing on April 1, 2029,* April 1, 2034*, April 1, 2039*, and April 1, 2046*, are subject to mandatory sinking fund redemption prior to maturity in part, at a Redemption Price equal to 100% of the principal amount thereof plus interest accrued thereon to the redemption date, in the following principal amounts and on the dates set forth below: Series 2014A Bonds Maturing on April 1, 2029* April 1 of the Year* Principal Amount* ,670, ,785, ,900, ,015, ,140,000 Stated Maturity Series 2014A Bonds Maturing on April 1, 2034* April 1 of the Year* Principal Amount* 2030 $3,270, ,420, ,570, ,730, ,900,000 Stated Maturity * Preliminary. Subject to Change. 11

16 Series 2014A Bonds Maturing on April 1, 2039* April 1 of the Year* Principal Amount* 2035 $4,075, ,265, ,460, ,670, ,885,000 Stated Maturity Series 2014A Bonds Maturing on April 1, 2046* April 1 of the Year* Principal Amount* 2040 $5,110, ,365, ,635, ,915, ,210, ,520, ,845,000 Stated Maturity On or before the 45th day immediately preceding any April 1 on which Series 2014A Bonds are to be retired pursuant to the applicable Sinking Fund Requirement, the Borrower may (i) deliver to the Trustee for cancellation Series 2014A Bonds or portions thereof in any aggregate principal amount desired, or (ii) receive a credit with respect to the Sinking Fund Requirement for any Series 2014A Bonds that before said date have been purchased or redeemed (other than through mandatory sinking fund redemption) and cancelled by the Trustee and not theretofore applied as a credit against such Sinking Fund Requirement. Each such Series 2014A Bond or portion thereof so delivered or previously purchased or redeemed and cancelled by the Trustee is required to be credited by the Trustee at 100% of the principal amount thereof against future Sinking Fund Requirements for the Series 2014A Bonds in such order as may be selected by the Borrower, and the principal amount of the Series 2014A Bonds is required to be accordingly reduced. Extraordinary Optional Redemption. The Series 2014A Bonds will also be subject to redemption upon the written request of the Borrower, in full if: (i) the Series 2014A Project has been destroyed or damaged to such an extent that in the opinion of the Borrower and the University expressed in a certificate filed with the Trustee (A) it cannot reasonably be restored within a period of 12 months to the condition thereof immediately preceding such destruction or damage, or (B) the Borrower will thereby be prevented from carrying on its normal operations thereat for a period of 12 consecutive months, or (C) the cost of restoration or replacement would exceed the Net Proceeds of insurance payable in respect of such destruction or damage; or (ii) title to, or the temporary use of, a substantial portion of the Series 2014A Project has been taken under the exercise of the power of eminent domain by any governmental authority or person, firm, or corporation acting under governmental authority to such an extent that in the opinion of the Borrower and the University expressed in a certificate filed with the Trustee (A) it cannot be * Preliminary. Subject to Change. 12

17 reasonably restored or replaced within a period of twelve (12) months to substantially the condition thereof immediately preceding such taking, or (B) the Borrower will thereby be prevented from carrying on its normal operations thereat for a period of twelve (12) consecutive months, or (C) the cost of restoration or replacement would exceed the total amount of compensation for such taking. The Series 2014A Bonds will also be subject to redemption at the option of the Issuer upon the written request of the Borrower, in part in the event of partial condemnation or destruction of, or partial damage to, the Series 2014A Project from the Net Proceeds received by the Borrower as a result of such taking, destruction, or damage to the extent such Net Proceeds are not used for the restoration of the Series 2014A Project or for the acquisition of substitute property suitable for the Borrower s operations at the Series 2014A Project as such operations were conducted prior to such taking, damage, or destruction if the Borrower furnishes to Trustee and the Issuer (i) a certificate of the Borrower and the University stating (A) that the property forming a part of the Series 2014A Project that was taken, damaged, or destroyed is not essential to the Borrower s use or occupancy of the Series 2014A Project at substantially the same revenue-producing level prior to such taking, destruction, or damage, or (B) that the Series 2014A Project has been restored to a condition substantially equivalent to its condition prior to the taking, damage, or destruction, or (C) that the Borrower has acquired improvements that are substantially equivalent to the property forming part of the Series 2014A Project that was taken, destroyed, or damaged and (ii) a written report of a Financial Consultant filed with the Trustee that the Fixed Charges Coverage Ratio for each of the two Annual Periods following the Annual Period following such taking, destruction, or damage will not be less than the lesser of (a) 1.20 and (b) the average Fixed Charges Coverage Ratio for the two most recent Annual Periods prior to such taking, destruction, or damage for which Audit Reports are available. If the Series 2014A Bonds are called for redemption upon the occurrence of any of the events described in the two immediately preceding paragraphs, the Series 2014A Bonds may be redeemed on any date for which the requisite notice of redemption can be given within 180 days of such event at a Redemption Price equal to 100% of the principal amount thereof plus interest accrued to the redemption date. Other Redemptions at Par. The Series 2014A Bonds will also be subject to redemption prior to maturity in Authorized Denominations in whole or in part at any time and as expeditiously as reasonably possible upon the deposit of money in the Redemption Fund required by the Loan Agreement as set forth below in a principal amount equal to such deposit and at a Redemption Price equal to one hundred percent (100%) of such principal amount thereof plus interest accrued thereon to the redemption date: (i) any Net Proceeds of title insurance on the Series 2014A Project paid to the Trustee to the extent such net proceeds are not used to acquire or construct replacement or substitute property; or (ii) any Net Proceeds of insurance received by the Borrower as a result of destruction of or damage to the Series 2014A Project to the extent such net proceeds are not used to restore the Series 2014A Project and/or to acquire or construct replacement or substitute property; or (iii) any Net Proceeds received by the Borrower as a result of the taking of the Series 2014A Project or any part thereof under the exercise of the power of eminent domain to the extent such net proceeds are not used to restore the Series 2014A Project and/or to acquire or construct replacement or substitute property. In all instances where the Trustee is directed by the terms of the Indenture to redeem Series 2014A Bonds from money deposited into the Redemption Fund, the Trustee is required to redeem the maximum principal amount of Series 2014A Bonds that may be redeemed in accordance with the provisions of the preceding paragraph, and any excess money will remain in the Redemption Fund. Mandatory Redemption at Upon Failure to Obtain Permits. The Series 2014A Bonds are also subject to mandatory redemption prior to maturity in whole prior to February 28, 2015 from the LD Payment (as defined below) received by the Borrower from the Developer and deposited into the Redemption Fund as required by the Loan Agreement, plus amounts transferred to the Redemption Fund as described below, at a 13

18 price equal to 100% of the original issue price of such Series 2014A Bonds plus interest accrued thereon to the redemption date. Upon receipt of the proceeds received by the Borrower from the Developer, the Trustee is required to transfer all amounts from all Funds (except the Rebate Fund) established pursuant to the Indenture to the Redemption Fund and such amounts, together with the deposit referenced above, are required to be used to redeem the Series 2014A Bonds. The Trustee is required to cause such Series 2014A Bonds to be called for redemption at the earliest possible date following the date on which it has received amounts it expects to receive in accordance with the Development Agreement and the Loan Agreement. As used herein, LD Payment means the amount equal to the difference between (i) 100% of the original issue price of such Series 2014A Bonds plus interest accrued thereon to the redemption date of all Series 2014A Bonds subject to mandatory redemption pursuant to the Indenture as calculated by the Trustee through the date of redemption selected by the Trustee, and (ii) the amounts held in all Funds under the Indenture other than the Rebate Fund as calculated by the Trustee as of the date the Trustee gives notice to the Borrower, the Board and the Developer. Within two Business Days of receipt of notice from the Borrower in accordance with the Loan Agreement to the effect that the Developer failed to obtain the requisite permits or has elected to stop work, the Trustee is required to calculate the LD Payment (defined above) and provide such calculation, in writing, to the Developer, the Board and the Borrower. Selection of Series 2014A Bonds to be Redeemed. If less than all of the Series 2014A Bonds of any maturity are to be called for redemption, the Trustee, except as otherwise provided herein, is required to select by lot the Series 2014A Bonds of such maturity to be redeemed in Authorized Denominations. Notwithstanding the foregoing, if less than all of the Series 2014A Bonds are called for redemption (other than through mandatory sinking fund redemption), the Borrower has the right to designate the maturity of such Series 2014A Bonds to be called for redemption and to designate the Sinking Fund Requirement to which such redemption is credited. If a Bond of any series is in an amount greater than an Authorized Denomination, a portion of such Bond may be redeemed, but such Bond may be redeemed in part only in an Authorized Denomination and only if the unredeemed portion thereof is an Authorized Denomination. So long as all of a series of Bonds is maintained under a book-entry system with DTC or any other securities depository in accordance with the Indenture: (i) if fewer than all of such series of Bonds of any one maturity is called for redemption, DTC, or such other securities depository, and not the Trustee, will select the particular accounts from which series of Bonds or portions thereof will be redeemed in accordance with DTC s or such other securities depository s standard procedures for redemption of obligations such as such series of Bonds; and (ii) if part, but not all, of a Bond is for redemption, the owner of such Bond may elect not to surrender such Bond in exchange for a new Bond in accordance with the provisions of the Indenture and such Bond, and in such event will be required to make a notation indicating the principal amount of such redemption and the date thereof on the payment grid attached to such Bond. For all purposes, the principal amount of each Bond outstanding at any time will be equal to the lesser of the principal sum shown on the face thereof and such principal sum reduced by the principal amount of any partial redemption of such Bond following which the owner thereof has elected not to surrender such Bond in accordance with the provisions of the Indenture and such Bond. The failure of the owner of a Bond to note the principal amount of any partial redemption on the payment grid attached thereto, or any inaccuracy therein, will not affect the payment obligation of the Issuer under such Bond or the Indenture. THEREFORE, IT CANNOT BE DETERMINED FROM THE FACE OF A BOND WHETHER A PART OF THE PRINCIPAL THEREOF HAS BEEN PAID. Notice of Redemption; Cessation of Interest. If any of the Series 2014A Bonds are called for redemption, notice thereof identifying the Series 2014A Bonds or portions thereof to be redeemed is required to be given by the Trustee by mailing a copy of the redemption notice by first class mail (postage prepaid) not less than 20 days nor more than 60 days prior to the date fixed for redemption to the 2014A Insurer and the Owner of each Series 2014A Bond to be redeemed at the address shown on the Bond Register at the close of business on the day preceding the date of the mailing; provided, however, that failure to give such notice by 14

19 mailing to the 2014A Insurer and any Owner of Series 2014A Bonds, or any defect therein, will not affect the validity of any proceedings for the redemption of any other Series 2014A Bonds with respect to which no such failure or defect occurred. Each notice is required to specify the CUSIP numbers of the Series 2014A Bonds being called, the numbers of the Series 2014A Bonds being called, if less than all of the Series 2014A Bonds are being called, the redemption date, the Redemption Price, and the place or places where amounts due upon such redemption will be payable. Such notice will further state that payment of the applicable Redemption Price will be made upon presentation and surrender of the Series 2014A Bonds to be redeemed and that on the redemption date, the Redemption Price will become due and payable upon each Series 2014A Bond to be redeemed and that interest thereon will cease to accrue on and after such date, provided collected funds for the redemption of the Series 2014A Bonds to be redeemed are on deposit with the Trustee at the place of, and the time for, payment at that time. Any notice mailed as provided in the Indenture will be conclusively presumed to have been duly given, whether or not the Owner of such Series 2014A Bonds actually receives such notice. Any notice of redemption may, at the direction of the Borrower, state that the redemption to be effected is conditioned upon the receipt by the Trustee on or prior to the redemption date of sufficient and legally available funds to pay the Redemption Price of the Series 2014A Bonds to be redeemed and that if such funds are not so received or are not so legally available such notice will be of no force or effect and such Series 2014A Bonds will not be required to be redeemed. If such notice contains such a condition and sufficient funds to pay the Redemption Price of such Series 2014A Bonds are not received by the Trustee on or prior to the redemption date, the redemption will not be made and the Trustee is required to give notice, in the manner in which the notice of redemption was required to have been given, that such funds were not so received and that the redemption is to be or was cancelled. Except as provided in the Indenture, on the date fixed for redemption, notice of redemption having been given as described above, the Series 2014A Bonds or portions thereof called for redemption will be due and payable on the date fixed for redemption at the Redemption Price provided for in the Indenture. On such date, if money or defeasance obligations, or a combination of both, sufficient to pay the Redemption Price of the Series 2014A Bonds or portions thereof to be redeemed, are held by the Trustee in trust for the Owners of Series 2014A Bonds or portions thereof to be redeemed, interest on the Series 2014A Bonds or portions thereof called for redemption will cease to accrue; such Series 2014A Bonds or portions thereof will cease to be entitled to any benefits or security under the Indenture or to be deemed outstanding; and the Owners of such Series 2014A Bonds or portions thereof will have no rights in respect thereof except to receive payment of the Redemption Price thereof. Purchase in Lieu of Redemptions. If any Series 2014A Bond is called for optional redemption or extraordinary optional redemption in whole or in part, the Borrower may elect to have such Series 2014A Bond purchased in lieu of redemption in accordance with the Indenture. Purchase in lieu of redemption will be available to all Series 2014A Bonds called for optional or extraordinary optional redemption or for such lesser portion of such Series 2014A Bonds as constitute Authorized Denominations. The Borrower may direct the Trustee to purchase all or such lesser portion of the Series 2014A Bonds so called for redemption. Any such direction to the Trustee must: (i) be in writing; (ii) state either that all the Series 2014A Bonds called for redemption are to be purchased or, if less than all of the Series 2014A Bonds called for redemption are to be purchased, identify those Series 2014A Bonds to be purchased by maturity date and outstanding principal amount in Authorized Denominations; and (iii) be received by the Trustee no later than 12:00 noon, Central Time, one business day prior to the scheduled redemption date thereof. If so directed, the Trustee is required to purchase such Series 2014A Bonds on the date which otherwise would be the redemption date of such Series 2014A Bonds in accordance with the standard policies and procedures of 15

20 DTC. Any of the Series 2014A Bonds called for redemption that are not purchased in lieu of redemption are required to be redeemed as otherwise required by the Indenture on such redemption date. On or prior to the scheduled redemption date, any direction given to the Trustee pursuant to the Indenture may be withdrawn by the Borrower by written notice to the Trustee. Subject generally to the Indenture, should a direction to purchase be withdrawn, the scheduled redemption of such Series 2014A Bonds is required to occur (unless also withdrawn). If the purchase is directed by the Borrower, the purchase will be made for the account of the Borrower or its designee. The purchase price of the Series 2014A Bonds will be equal to the outstanding principal of, accrued and unpaid interest on and the redemption premium, if any, which would have been payable on such Series 2014A Bonds on the scheduled redemption date for such redemption. To pay the purchase price of such Series 2014A Bonds, the Trustee is required to use such (i) funds deposited by the Borrower with the Trustee into the Bond Fund or a separate fund created for such purpose and (ii) funds, if any, in Funds held under the Indenture, if any, that the Trustee would have used to pay the outstanding principal of, accrued and unpaid interest on and the redemption premium, if any, that would have been payable on the redemption of such Bonds on the scheduled redemption date. The Trustee will not purchase the Series 2014A Bonds pursuant to the Indenture if by no later than the redemption date, sufficient money has not been deposited with the Trustee, or such money is deposited, but is not available. No notice of the purchase in lieu of redemption will be required to be given to the Owners (other than the notice of redemption otherwise required under the Indenture). No Insured Series 2014A Bond may be purchased in lieu of redemption without the prior written consent of the 2014A Insurer unless such Insured Series 2014A Bond so purchased is cancelled upon purchase. [Remainder of page intentionally left blank.] 16

21 ANNUAL DEBT SERVICE REQUIREMENTS The following table is a summary of the debt service schedule for the Series 2014A Bonds 1. Fiscal Year Ending Principal* Interest* Bond Debt Service* Capitalized Interest* Total Net Debt Service* 6/30/2015 4,299, ,299, ,299, , /30/2016 5,124, ,124, ,270, ,189, /30/2017 1,065,000 5,124, ,189, ,377, /30/2018 1,295,000 5,082, ,377, ,570, /30/2019 1,540,000 5,030, ,570, ,763, /30/2020 1,795,000 4,968, ,763, ,966, /30/2021 2,070,000 4,896, ,966, ,189, /30/2022 2,375,000 4,814, ,189, ,189, /30/2023 2,470,000 4,719, ,189, ,190, /30/2024 2,570,000 4,620, ,190, ,187, /30/2025 2,670,000 4,517, ,187, ,192, /30/2026 2,785,000 4,407, ,192, ,192, /30/2027 2,900,000 4,292, ,192, ,187, /30/2028 3,015,000 4,172, ,187, ,188, /30/2029 3,140,000 4,048, ,188, ,188, /30/2030 3,270,000 3,918, ,188, ,191, /30/2031 3,420,000 3,771, ,191, ,187, /30/2032 3,570,000 3,617, ,187, ,187, /30/2033 3,730,000 3,457, ,187, ,189, /30/2034 3,900,000 3,289, ,189, ,188, /30/2035 4,075,000 3,113, ,188, ,190, /30/2036 4,265,000 2,925, ,190, ,188, /30/2037 4,460,000 2,728, ,188, ,191, /30/2038 4,670,000 2,521, ,191, ,190, /30/2039 4,885,000 2,305, ,190, ,190, /30/2040 5,110,000 2,080, ,190, ,189, /30/2041 5,365,000 1,824, ,189, ,191, /30/2042 5,635,000 1,556, ,191, ,189, /30/2043 5,915,000 1,274, ,189, ,188, /30/2044 6,210, , ,188, ,188, /30/2045 6,520, , ,188, ,187, /30/2046 6,845, , ,187, , ,535, ,494, ,029, ,569, ,459, Assumes the Series 2014A Bonds bear interest at an approximate rate of 4.67%. SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2014A BONDS Leasehold Deed of Trust, Security Agreement, and Assignment of Agreements and Documents As security for the obligations of the Borrower to the Issuer under the Loan Agreement and the Series 2014A Note, the Borrower will execute and deliver to the Trustee, subject to the Permitted Encumbrances, (i) the Leasehold Deed of Trust pursuant to which the Borrower will grant to the Trustee a first deed of trust lien on its interest in the Series 2014A Project and the Property and assign and pledge to the Trustee the Borrower s interest in the General Revenues from the Series 2014A Project and any improvements thereto or expansions thereof, (ii) the Security Agreement pursuant to which the Borrower will grant to the Trustee a first priority security interest in the accounts, documents, chattel paper, instruments, and general intangibles held by the Borrower arising in any manner from the Borrower s ownership or operation of the Series 2014A Project and any improvements * Preliminary. Subject to Change. 17

22 thereto or expansions thereof, in the inventory, if any, located at the Series 2014A Project, and the equipment, machinery, furnishings, and other personal property included in the Series 2014A Project, and (iii) the Borrower Collateral Assignment pursuant to which the Borrower will conditionally assign to the Trustee its rights under the Development Agreement and the Management Agreement; and the Developer will execute and deliver to the Trustee, the Developer Collateral Assignment pursuant to which the Developer will conditionally assign to the Trustee its rights under the Design/Build Contract and all other contracts entered into by the Developer relating to the design or construction of the Series 2014A Project. The lien created by the Leasehold Deed of Trust is subject to the rights of the Ground Lessor under the Ground Lease as the fee simple owner of the Property. The Leasehold Deed of Trust does not constitute a lien on the Ground Lessor s fee simple interest in the Property. Because of certain risks associated with pledging and granting a security interest in collateral of this nature, potential investors should not rely upon such collateral as providing any significant security for the Series 2014A Bonds. See CERTAIN BONDHOLDERS RISKS Risks Associated with Ground Lease herein. Pledge and Assignment of Trust Estate Pursuant to the Indenture, and in order to secure the payment of the Debt Service Payments according to their tenor and effect and to secure the performance and observance by the Issuer of the covenants expressed in the Indenture and in the Series 2014A Bonds, the Issuer will pledge and assign to the Trustee its right, title, and interest in and to the following (the Trust Estate ) which will consist of: (i) all the right, title, and interest of the Issuer in and to (a) the Loan Agreement (except for Reserved Rights) and any amendment thereto, loan, financing, or similar agreement between the Issuer and the Borrower relating to Additional Bonds and (b) the Series 2014A Note and any Additional Notes, and all extensions, amendments, supplements, modifications and renewals of the terms thereof, if any, and all amounts encumbered thereby, including, but without limiting the generality of the foregoing, the present and continuing right to make claim for, collect, receive, and make receipt for payments and other sums of money payable, receivable, or to be held thereunder, to bring any actions and proceedings thereunder or for the enforcement thereof, and to do any and all other things that the Issuer is or may become entitled to do under the foregoing; (ii) all the right, title, and interest of the Issuer in and to all cash proceeds and receipts arising out of or in connection with the sale of the Bonds and all of the right, title and interest of the Issuer in and to the General Revenues, including money held by the Trustee in the funds created under the Indenture (other than the Rebate Fund) or by the Manager (when the University is the Manager), in any Restricted Accounting Fund, including the Revenue Fund, the Bond Fund, the Redemption Fund, the Issuance Cost Fund, the Construction Fund, the Debt Service Reserve Fund, the Repair and Replacement Fund, the Insurance Fund, the Condemnation Fund, the Operations Contingency Fund and the Surplus Fund created thereunder, or held by the Trustee as special trust funds derived from insurance proceeds, condemnation awards, payments on contractors performance or payment bonds or other surety bonds, or any other source; (iii) all the right, title, and interest of the Issuer in and to all moneys and securities and interest earnings thereon from time to time delivered to and held by the Trustee or by the University (when the University is the Manager) under the terms of the Indenture (except money on deposit in the Rebate Fund), and all other rights of every name and nature and any and all other property from time to time by delivery or by writing of any kind conveyed, mortgaged, pledged, assigned, or transferred as and for additional security under the Indenture by the Issuer or by anyone on its behalf or with its written consent to the Trustee; and (iv) all other property of every name and nature from time to time by delivery or by writing mortgaged, pledged, delivered, or hypothecated as and for additional security under the Indenture by the Issuer or by anyone on its behalf or with its written consent in favor of the Trustee. 18

23 Because of certain risks associated with pledging and assigning collateral of the nature described above, potential investors should not rely solely upon such collateral as providing security for the Series 2014A Bonds. As defined in the Indenture, General Revenues means (i) the sum of (a) the gross rents, fees and receipts and operating and non-operating revenues derived by the Borrower or the Manager on behalf of the Borrower from the ownership or operation of the Project including, without limitation, business or rental interruption insurance proceeds and proceeds of condemnation, sale or other disposition of the Project or any part thereof received by or on behalf of the Borrower; and (b) Unrestricted Contributions, all as determined in accordance with GAAP, but excluding, in any event, (ii) the sum of (a) earnings on amounts that are irrevocably deposited in escrow to pay the principal of or interest on indebtedness of the Borrower related to the Project, (b) deposits received from residents of the Project and held by the Borrower or the Manager on behalf of the Borrower until such time, if any, as the Borrower or the Manager is permitted to apply such deposits to the payment of rent or to the repair and maintenance of the Project in accordance with the terms of a residency agreement, at which time such deposits will constitute General Revenues. Establishment of Funds and Accounts The University has agreed to serve as the Manager under the Management Agreement relating to the Series 2014A Project. Pursuant to the Management Agreement, the University (in its capacity as Manager) will agree to cause all General Revenues collected and received from the Series 2014A Project to be deposited in a bank account to be held and maintained by the University (in its capacity as Manager). The University will further agree in the Management Agreement to establish a Restricted Accounting Fund to be known as the Revenue Fund and to record as deposits to the Revenue Fund all General Revenues deposited from time to time with the University (in its capacity as Manager). See THE MANAGER AND THE MANAGEMENT AGREEMENT herein. The University (in its capacity as Manager) also agrees in the Management Agreement to establish the following additional Restricted Accounting Funds: (a) (b) (c) (d) the Operating Account; the Repair and Replacement Fund; the Operations Contingency Fund; and the Surplus Fund. The transfer or crediting of funds to the Restricted Accounting Funds is further described below. Revenue Fund As described above, the University (in its capacity as Manager) has agreed to record as deposits to the Revenue Fund all General Revenues deposited from time to time with the University. Until the occurrence of a Transfer Event, or at such time the incident that gave rise to the Transfer Event has been cured, the University (in its capacity as Manager) is required to (i) make accounting entries reflecting transfers and allocations of the amounts credited to the Revenue Fund or (ii) otherwise transfer amounts to the Trustee, as appropriate, for the following purposes and in the following order; provided however that amounts required to be transferred under clauses (b), (e), (h) and (i) below are required to be transferred only upon receipt by the University (in its capacity as Manager) of a written statement from the Trustee of the amounts required to be paid: (a) there is required to be paid to the Trustee for deposit to the Bond Fund: (i) on or before September 20, 2014 and on or before each March 20 and September 20 thereafter, a sum equal to the amount payable on the immediately succeeding Interest Payment Date as interest on the Series 2014A Bonds, or such lesser amount that, together with amounts already on deposit in the 2014A CI Subaccount of the Capitalized Interest Account of the Bond Fund and available therefor, will be sufficient to pay interest on the Series 2014A Bonds to become due on the immediately succeeding Interest Payment Date; 19

24 (ii) on the dates set forth in any amendment or amendments to the Loan Agreement executed in connection with the issuance of Additional Bonds, the amount(s) set forth therein to be paid by the Borrower in respect of interest on such Additional Bonds; (iii) on or before September 20, 2017*, and on or before March 20 and September 20 of each year thereafter, a sum equal to (A) one-half of the principal due on the immediately succeeding April 1 that is a maturity date of the Series 2014A Bonds, or (B) one-half of the amount required to retire Series 2014A Bonds under the mandatory sinking fund redemption requirements of the Indenture on the immediately succeeding April 1, as the case may be; (iv) on the dates set forth in any amendment or amendments to the Loan Agreement executed in connection with the issuance of Additional Bonds, the amount(s) set forth therein to be paid by the Borrower in respect of the principal of such Additional Bonds (whether at maturity or under any mandatory sinking fund or other similar redemption requirements of any supplemental indenture or indentures executed in connection with the issuance of Additional Bonds); and (v) on the Business Day prior to any date on which any Additional Bonds are to be redeemed pursuant to any mandatory redemption provisions of any supplemental indenture or indentures executed in connection with the issuance of Additional Bonds (other than mandatory sinking fund or other similar redemption pursuant to such supplemental indenture or indentures), an amount equal to the Redemption Price of such Additional Bonds to be redeemed (taking into account amounts then on deposit in the Bond Fund and the Redemption Fund to be used for the payment of such Additional Bonds to be redeemed). (b) there is required to be paid to the Trustee: (i) on an annual basis, the annual fee of the Trustee for the Ordinary Services of the Trustee payable each year plus the Ordinary Expenses of the Trustee incurred under the Indenture and under the other Bond Documents, as and when the same become due, (ii) except as provided in (i) above, the reasonable fees and charges of any paying agents on the Bonds for acting as paying agents as provided in the Indenture, payable as and when the same become due, (iii) the reasonable fees and charges of the Trustee for the Extraordinary Services of the Trustee rendered by it and the Extraordinary Expenses of the Trustee incurred by it under the Indenture and under the other Bond Documents, as and when the same become due; provided, that the Borrower may, without creating an Event of Default under the Indenture, contest in good faith the reasonableness of any such Extraordinary Services of the Trustee and Extraordinary Expenses of the Trustee and the reasonableness of any such fees, charges, or expenses; (c) there is required to be paid to the Issuer (as certified in writing to the University, in its capacity as Manager, by the Issuer) on the twentieth day of each month (or the immediately succeeding Business Day if the twentieth day of a month is not a Business Day), an amount sufficient to reimburse the Issuer for all unpaid fees and expenses reasonably incurred by the Issuer under the Loan Agreement in connection with the Project, including, but not limited to, the reasonable fees and expenses of counsel for the Issuer and Bond Counsel; (d) there is required to be credited on the twentieth day of each month (or the immediately succeeding Business Day if the twentieth day of a month is not a Business Day) to the Operating Account an amount equal to the greater of (i) the amount budgeted in the Annual Budget for Expenses for the immediately succeeding month or (ii) 10% of the Expenses shown in the then current Annual Budget; provided that the amount transferred may not exceed the amount, if any, resulting by subtracting (A) the amount theretofore deposited into the Operating Account pursuant to this provision for the then current Annual Period from (B) * Preliminary. Subject to Change. 20

25 the amount budgeted in the Annual Budget for Expenses for the then current Annual Period through the last day of the immediately succeeding month; (e) if any funds are withdrawn from the Debt Service Reserve Fund, if there is a diminution in Value of the cash and investments held in the Debt Service Reserve Fund as of any Valuation Date, or if any net losses results from the investment of amounts held in the Debt Service Reserve Fund that reduces the Value of the cash and investments in the Debt Service Reserve Fund to less than the Debt Service Reserve Requirement as of any Valuation Date, there is required to be paid to the Trustee on a monthly basis for deposit to the Debt Service Reserve Fund, beginning on the twentieth day of the month following notice from the Trustee of such withdrawal, diminution in Value or losses, and on the twentieth day of each month thereafter, (i) one-fourth of the amount of such deficiency due to a diminution in Value, or such losses; or (ii) one-twelfth of the amount of such deficiency if such deficiency results from any withdrawal from the Debt Service Reserve Fund or from any other source; in each case until the amount on deposit in to the Debt Service Reserve Fund equals the Debt Service Reserve Fund Requirement; (f) if any funds are withdrawn from the Repair and Replacement Fund to pay Debt Service Payments, there is required to be credited to the Repair and Replacement Fund, beginning on the twentieth day of the month following any such withdrawal and continuing on the twentieth day of each month thereafter the greater of (i) the lesser of (A) one-twelfth of the amount of such withdrawal or (B) such amount that is necessary to reimburse the Repair and Replacement Fund for all such withdrawals, or (ii) such amount as is directed in writing by the University; (g) there is required to be credited to the Repair and Replacement Fund, commencing on twentieth day of the first month following the month in which the Series 2014A Project receives a certificate of occupancy and on the twentieth day of each month thereafter, in equal monthly installments, an amount necessary to equal the annual amounts set forth in a schedule attached to the Loan Agreement (or portion thereof, as applicable), and any and all additional amounts required to be deposited therein following a Periodic Project Assessment and any and all additional amounts required to be deposited therein by any amendment or amendments to the Loan Agreement executed in connection with the issuance of Additional Bonds; (h) there is required to be paid to the Trustee for deposit to the Rebate Fund on the dates that the Borrower provides any calculation of the Rebate Amount to the Trustee in accordance with the Indenture, the amounts determined by the Borrower to be equal to the excess, if any, of the Rebate Amount so calculated over the amount then in the Rebate Fund; (i) there is required to be transferred or credited to the appropriate fund or funds other than the Repair and Replacement Fund, the Operations Contingency Fund and the Surplus Fund, any and all additional amounts required to be deposited into such fund or funds by any amendment or amendments to the Loan Agreement executed in connection with the issuance of Additional Bonds on the date(s) specified therein; and (j) on the twentieth day of each month, there is required to be paid to the University an amount equal to all Subordinated Expenses, that have not previously been reimbursed to the University, as reimbursement to the University for the payment of such Subordinated Expenses, provided, however that no payments may be made under this clause (j) unless (i) all payments under clauses (a) through (i) above that are due have been paid, and (ii) the University, in its capacity as Manager, determines that, after payment of such Subordinated Expenses, there are sufficient funds in the Bond Fund, the Revenue Fund and the Operations Contingency Fund to pay the ensuing payments coming due under clause (a) above on the next succeeding March 20 or September 20, as applicable (amounts paid to the University in accordance with this provision will be property of the University and will no longer be subject to the lien of the Indenture); and (k) on the twentieth day of each month (or the immediately succeeding Business Day if the twentieth day of a month is not a Business Day) any amounts remaining therein on the last Business Day of each month is required to be transferred to the Operations Contingency Fund. 21

26 Upon the occurrence and continuation of one of the following events (each a Transfer Event ): (i) the University is no longer the sole Manager of the Series 2014A Project under the Management Agreement; (ii) the General Revenues are no longer deposited in the bank account of the University (in its capacity as Manager) in a manner substantially similar to the banking arrangement of the University on the Series 2014A Closing Date; (iii) a draw of the Series 2014A Insurance Policy (or any other insurance policy insuring the payment of principal of and interest on the Series 2014A Bonds); (iv) the occurrence and continuation of an Event of Default under the Indenture; (v) funds in the Debt Service Reserve Fund have been withdrawn and not replenished to the full amount of the Debt Service Reserve Requirement within 12 months from the date of the withdrawal of funds; or (vi) the Developer has failed to obtain certain required permits by November 1, 2014 as required by the Development Agreement, there is required to be created by the Issuer and ordered established with the Trustee trust funds and accounts to be designated the Revenue Fund, the Repair and Replacement Fund, the Operations Contingency Fund and the Surplus Fund, to which the University (in its capacity as Manager) is required to immediately transfer, pursuant to its obligations under the Management Agreement, all funds credited to the Restricted Accounting Funds then held by the University to such Funds and Accounts held by the Trustee (except that in the case of the Operating Account, to the extent the University is no longer the Manager of the Project, such amounts are required to be transferred to the Operating Account to be established by the successor Manager), and so long as such Transfer Event continues, the Borrower has agreed to deposit or cause to be deposited all General Revenues to the Revenue Fund not less frequently than each Friday (or if Friday is not a Business Day, the immediately preceding Business Day); provided, however, that if an Event of Default has occurred and is continuing, the Borrower is required to deliver all such General Revenues daily, in accordance with the Loan Agreement. At such time that the incident that gave rise to the Transfer Event has been cured, the obligation to deposit all General Revenues with the Trustee will cease and the funds on deposit in the Revenue Fund, the Repair and Replacement Fund, the Operations Contingency Fund and the Surplus Fund maintained by the Trustee are required to be returned to the University (in its capacity as Manager) for immediate deposit by the University (in its capacity as Manager) in a separate account of the University (in its capacity as Manager) and are required thereafter to be accounted for by the University (in its capacity as Manager) in accordance with paragraphs (a) through (k) above until such time, if any, of the occurrence and continuation of another Transfer Event. See Appendix B SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE AND LOAN AGREEMENT The Indenture Transfer of General Revenues after Transfer Event for a description of the flow of funds upon a Transfer Event cure. Bond Fund The Indenture establishes a trust fund of the Issuer with the Trustee to be designated the Bond Fund. The amounts described under the caption Revenue Fund above, all Basic Loan Payments received by the Trustee from the Borrower pursuant to the Loan Agreement, and certain other money received by the Trustee under the Loan Agreement are required to be deposited into the Bond Fund. Except as otherwise provided, money in the Bond Fund (with the exception of the Defeasance Account) is required to be used to pay Debt Service Payments on the Bonds. Upon an Event of Default, the Trustee may use money in the Bond Fund to pay the fees and expenses of the Trustee prior to making payments to the Bondholders. If there are insufficient funds in the Bond Fund and the Redemption Fund available to pay Debt Service Payments for a series of Bonds then due, the Trustee is required to transfer to the Bond Fund, or to send written notice to the Manager to transfer to the Trustee for deposit to the Bond Fund, an amount equal to the insufficiency from the following Funds in the following order of priority: the related Account of the Redemption Fund, the Surplus Fund, the Operations Contingency Fund, the Repair and Replacement Fund and the related Account of the Debt Service Reserve Fund. For additional information regarding the Bond Fund, see Appendix B SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE AND LOAN AGREEMENT The Indenture The Bond Fund. Redemption Fund The Indenture establishes a trust fund of the Issuer with the Trustee to be designated the Redemption Fund. Money in the Redemption Fund may be used only to pay the principal of Bonds or that portion of the 22

27 Redemption Price of Bonds corresponding to principal as specified in the Indenture. For additional information regarding the Redemption Fund, see Appendix B SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE AND LOAN AGREEMENT The Indenture The Redemption Fund. Construction Fund The Indenture establishes a trust fund of the Issuer with the Trustee to be designated the Construction Fund. The 2014A Proceeds Account is required to be established within the Construction Fund. Money in the 2014A Proceeds Account is required to be expended for Costs of the Series 2014A Project in accordance with the provisions of the Loan Agreement. All proceeds of the Series 2014A Bonds and investment earnings thereon remaining in the 2014A Proceeds Account of the Construction Fund on the Series 2014A Completion Date, less amounts retained or set aside to meet costs not then due and payable or that are being contested, are required to be used for other capital expenditures related to the Series 2014A Project that are approved by the University with the consent of the Borrower; provided, however, that a Favorable Opinion of Bond Counsel with respect to such expenditure has been obtained. If there are no such additional capital expenditures, such excess amounts are required to be transferred (i) to the 2014A Payment Subaccount of the Bond Fund and used for the payment of principal of the Series 2014A Bonds provided the Borrower delivers to the Trustee a Favorable Opinion of Bond Counsel; or (ii) if the Borrower fails to deliver such an opinion, to the Redemption Fund by the Trustee and used to redeem Series 2014A Bonds on the earliest possible date for which notice may be given in accordance with the Indenture. Unless the 2014A Insurer otherwise directs, upon the occurrence and continuance of an Event of Default or an event which with notice or lapse of time would constitute an Event of Default, amounts on deposit in the 2014A Proceeds Account of the Construction Fund are required to be applied to the Debt Service Payment or redemption price of the Series 2014A Bonds. For additional information regarding the Construction Fund, see Appendix B SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE AND LOAN AGREEMENT The Indenture The Construction Fund. Debt Service Reserve Fund Under the Indenture, a Debt Service Reserve Fund and a separate account designated the 2014 Account will be established with the Trustee and will be funded initially from the proceeds of the Series 2014A Bonds in an amount equal to the Debt Service Reserve Requirement for the Series 2014A Bonds on and as of the date of issuance and delivery thereof. Under the Indenture, the Trustee will be authorized to transfer to the Bond Fund amounts held in the 2014 Account of the Debt Service Reserve Fund to pay the Debt Service Payments on the Series 2014A Bonds and on any Additional Bonds if authorized pursuant to a supplemental indenture in the event there should be insufficient funds for said purposes in the Bond Fund, the Redemption Fund, the Surplus Fund, the Operations Contingency Fund and the Repair and Replacement Fund available therefor on the date such Debt Service Payments are due. Any withdrawals for this purpose from the Debt Service Reserve Fund will be required to be restored by payments of Reserve Loan Payments by the Borrower. See Appendix B SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE AND LOAN AGREEMENT The Indenture Debt Service Reserve Fund and SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE AND LOAN AGREEMENT The Loan Agreement Loan Payments and Other Amounts Payable Reserve Loan Payments herein. If Additional Bonds are issued, the Debt Service Reserve Fund will be required to be increased by an amount equal to the Debt Service Reserve Requirement for such Additional Bonds, if any. Repair and Replacement Fund The Repair and Replacement Fund will be established in a general banking account of the University as a Restricted Accounting Fund into which the University will deposit any money required to be paid under the Loan Agreement for credit or transfer to the Repair and Replacement Fund, provided, however, that upon the occurrence and continuation of a Transfer Event, such fund is required to be transferred to the Trustee and 23

28 held as a Fund under the Indenture. See Appendix B SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE AND LOAN AGREEMENT - The Indenture Transfer of General Revenues After Transfer Event, and - Repair and Replacement Fund and SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE AND LOAN AGREEMENT - The Loan Agreement - Loan Payments and Other Amounts Payable herein. The University (in its capacity as Manager) or the Trustee, as the case may be, is authorized under the Indenture to withdraw funds from the Repair and Replacement Fund to pay (i) the costs incurred in connection with the major maintenance, repair or replacement of Equipment or other components of the Project which would be considered capital in nature under GAAP or, to the extent that the Net Proceeds are insufficient for such purposes and after depleting any amounts in the Surplus Fund and the Operations Contingency Fund, to the costs of restoration or replacement of the Project (or any portion thereof) pursuant to the Loan Agreement, and (ii) the Debt Service Payments to the extent there are insufficient funds in the Bond Fund, the Redemption Fund, the Surplus Fund and the Operations Contingency Fund available therefor on the date such Debt Service Payments are due. No amounts may be disbursed for the purpose described in item (i) above without the written consent of the University, unless (i) such disbursement has been included in the then current Annual Budget, or (ii) such disbursement does not exceed $5,000 or, in the case of an emergency (which is required to be certified to the University), $10,000, or (iii) such disbursement, together with all other disbursements from the Repair and Replacement Fund during such Annual Period that were not included in the then current Annual Budget and to which the University has consented does not exceed $15,000. Operations Contingency Fund The Operations Contingency Fund will be established in a general banking account of the University as a Restricted Accounting Fund. Moneys remaining in the Revenue Fund after the disbursements described in paragraphs (a) through (j) under the description of the Revenue Fund, above are required to be transferred to the Operations Contingency Fund. Upon the occurrence and continuation of a Transfer Event, the Operations Contingency Fund is required to be transferred to the Trustee to be held as a trust fund under the Indenture. At such time as the incident that gave rise to the Transfer Event has been cured, the Operations Contingency Fund is required to be transferred back to the University. See Appendix B SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE AND LOAN AGREEMENT The Indenture Transfer of General Revenues after Transfer Event. Moneys in the Operations Contingency Fund may be used by the University (in its capacity as Manager) or the Trustee to pay Expenses of, or to make capital expenditures or repairs and replacements in respect of, the Project, which are not included in the Annual Budget, or to pay Subordinated Expenses (provided, the Manager, including the University if the University then serves as the Manager, determines, and certifies in writing to the Trustee if the Trustee is holding the Operations Contingency Fund, that, after payment of such Subordinated Expenses, there are sufficient funds in the Bond Fund, the Revenue Fund and the Operations Contingency Fund to pay the ensuing payments coming due under clause (a) under the description of the Revenue Fund, or as otherwise provided for upon the occurrence of a Transfer Event, as applicable, on the next succeeding March 20 or September 20); provided that, if the Trustee holds the Operations Contingency Fund, such funds are required to be disbursed upon receipt of a requisition for payment substantially in the form attached to the Indenture executed by the Authorized Borrower Representative and approved by the University. 24

29 Money in the Operations Contingency Fund may also be used to pay Debt Service Payments, and the Issuer authorizes and directs the University (in its capacity as Manager) or the Trustee, as the case may be, to withdraw funds from the Operations Contingency Fund to make such Debt Service Payments to the extent that there are insufficient funds in the Revenue Fund, the Bond Fund, the Redemption Fund and the Surplus Fund (in such order of priority) available therefor on such date. So long as no liabilities or obligations of the Borrower, whether budgeted or unbudgeted, are then due and unpaid as of June 30 of each Annual Period, all amounts remaining in the Operations Contingency Fund in excess of 25% of the aggregate Expenses reflected in the Annual Budget for the following Annual Period are required to be credited or transferred to the Surplus Fund on June 30 of such Annual Period. Amounts credited to or held in the Operations Contingency Fund will be available on a monthly basis to make the monthly credits or deposits required from the Revenue Fund, including for the payment of Subordinated Expenses (provided, the Manager, including the University if the University then serves as the Manager, determines, and certifies to the Trustee if the Trustee is holding the Operations Contingency Fund, that, after payment of such Subordinated Expenses, there are sufficient funds in the Bond Fund, the Revenue Fund and the Operations Contingency Fund to pay the ensuing payments coming due under clause (a) under the description of the Revenue Fund, or as otherwise provided for upon the occurrence of a Transfer Event, as applicable, on the next succeeding March 20 or September 20). Surplus Fund The Surplus Fund will be established in a general banking account of the University as a Restricted Accounting Fund. Upon the occurrence and continuation of a Transfer Event, the Surplus Fund is required to be transferred to the Trustee to be held as a trust fund and account under the Indenture. At such time as the incident that gave rise to the Transfer Event has been cured, the Surplus Fund is required to be transferred back to the University (in its capacity as Manager). See Appendix B SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE AND LOAN AGREEMENT The Indenture Transfer of General Revenues after Transfer Event. At any time prior to a Transfer Event, provided the University (in its capacity as Manager) has received (i) a certificate of an Authorized Borrower Representative confirming that no Event of Default has occurred and is then continuing as of the proposed release date; and (ii) the annual financial statements and Audit Report for the most recently ended Annual Period (with supporting calculations) that indicate a Fixed Charges Coverage Ratio of at least 1.20 for the prior Annual Period, then the University (in its capacity as Manager) is required to transfer to the Foundation any portion of the Borrower Acquisition Fee and Borrower Membership Fee that has not been paid to the Foundation and to transfer the balance thereafter in the Surplus Fund, after applying any amounts required below, to the Ground Lessor as payment of rent due under the Ground Lease. At any time after a Transfer Event and prior to the cure of such Transfer Event, provided the Trustee has received (i) a certificate of an Authorized Borrower Representative confirming that no Event of Default has occurred and is then continuing as of the proposed release date, and (ii) the annual financial statements and Audit Report for the most recently ended Annual Period with supporting calculations that indicate a Fixed Charges Coverage Ratio of at least 1.20 for the prior Annual Period, then the Trustee at the written direction of the Borrower, is required to transfer to the Foundation any portion of the Borrower Acquisition Fee and Borrower Membership Fee that has not been paid to the Foundation and is required to transfer the balance thereafter in the Surplus Fund, after applying any amounts required below, to the Ground Lessor as payment of rent due under the Ground Lease. Until such time as one of the release tests above is satisfied, amounts credited to or held in the Surplus Fund will be available on a monthly basis to make the monthly credits or deposits required from the Revenue Fund and to pay Debt Service Payments if there are insufficient funds in the Revenue Fund, the Bond Fund and the Redemption Fund (in such order of priority). 25

30 Title and Property Insurance A mortgagee s title insurance policy or a commitment therefor will be delivered in the amount of not less than the original principal amount of the Bonds to insure the Trustee s first priority deed of trust lien on the leasehold interest in the Series 2014A Project, subject only to Permitted Encumbrances and the standard exclusions from the coverage of such policy. Under such title insurance policy, the Trustee is not permitted to recover more than the fair market value of any property which is lost as a result of a title defect. The Board, in its capacity as Ground Lessor, has committed to repair and rebuild damaged or destroyed portions of the Series 2014A Project, and provide for lost revenues with respect thereto, all as provided in the Ground Lease. See THE GROUND LEASE Ground Lessor Commitment to Repair and Replace the Series 2014A Project herein. Rate Covenant The Borrower has covenanted to operate the Project as a revenue producing student housing facility on a non-discriminatory basis and beginning with the Annual Period ending June 30, 2016, to the extent permitted by law and by the applicable Ground Lease, to charge such rates, fees, and charges for the Project and to exercise such skill and diligence as will provide Revenue Available for Fixed Charges in each Annual Period, sufficient to produce a Fixed Charges Coverage Ratio of at least If it is determined, based upon the annual audited financial statements of the Borrower that for any Annual Period, such Fixed Charges Coverage Ratio was not maintained, the Borrower will be required, within 30 days of receipt of such financial statements and calculation of the Fixed Charges Coverage Ratio, to engage a Financial Consultant to submit a report of such firm containing recommendations as to changes in the operating policies of the Manager of the Project designed to achieve such Fixed Charges Coverage Ratio, to cause such Financial Consultant to prepare and submit such recommendations within 60 days of the date of its engagement, and to promptly implement, within 30 days of receipt of the report, such recommendations to the extent permitted by law and by the applicable Ground Lease. If the Fixed Charges Coverage Ratio does not fall below 1.00, no Event of Default under the Loan Agreement will occur as a result of the provisions of the Loan Agreement described in this paragraph if the recommendations of the Financial Consultant are followed notwithstanding that such Fixed Charges Coverage Ratio is not subsequently reattained, but the Borrower will continue to be obligated to employ such a Financial Consultant for such purpose until such Fixed Charges Coverage Ratio is reattained. The Borrower will also be required, from time to time as often as necessary and to the extent permitted by law and the applicable Ground Lease, to revise the rates, fees, and charges aforesaid in such manner as may be necessary or proper so that the Revenue Available for Fixed Charges will be sufficient to meet the requirements of the Loan Agreement, and further, in order to comply with provisions of the Loan Agreement, to take all action within its power to obtain approvals of any regulatory or supervisory authority to implement any rates, fees, and charges required by the Loan Agreement. 2014A Insurer Consent Anything in the Indenture to the contrary notwithstanding, and so long as the Series 2014A Insurance Policy is in effect under the Indenture and no 2014A Insurer default exists with respect to the Series 2014A Insurance Policy, any request, demand, authorization, direction, notice, consent, waiver, or other action provided in the Indenture to be given or taken by the Owners of Insured Series 2014A Bonds and any right of the Owners of the Insured Series 2014A Bonds to direct, consent to, or waive the exercise by the Trustee of any right or remedy under the Indenture may be given or taken by, and only by, a written instrument signed by the 2014A Insurer on behalf of such Owners. 2014A BOND INSURANCE The following information under this heading has been furnished by the 2014A Insurer for use in this Official Statement. 26

31 Bond Insurance Policy Concurrently with the issuance of the Series 2014A Bonds, AGM will issue the Bond Insurance Policy for the Insured Series 2014A Bonds. The Bond Insurance Policy guarantees the scheduled payment of principal of and interest on the Insured Series 2014A Bonds when due as set forth in the form of the Bond Insurance Policy included as Appendix E to this Official Statement. The Bond Insurance Policy is not covered by any insurance security or guaranty fund established under New York, California, Connecticut or Florida insurance law. Assured Guaranty Municipal Corp. AGM is a New York domiciled financial guaranty insurance company and an indirect subsidiary of Assured Guaranty Ltd. ( AGL ), a Bermuda-based holding company whose shares are publicly traded and are listed on the New York Stock Exchange under the symbol AGO. AGL, through its operating subsidiaries, provides credit enhancement products to the U.S. and global public finance, infrastructure and structured finance markets. Neither AGL nor any of its shareholders or affiliates other than AGM, is obligated to pay any debts of AGM or any claims under any insurance policy issued by AGM. AGM s financial strength is rated AA (stable outlook) by Standard and Poor s Ratings Services, a Standard & Poor s Financial Services LLC business ( S&P ) and A2 (stable outlook) by Moody s Investors Service, Inc. ( Moody s ). Each rating of AGM should be evaluated independently. An explanation of the significance of the above ratings may be obtained from the applicable rating agency. The above ratings are not recommendations to buy, sell or hold any security, and such ratings are subject to revision or withdrawal at any time by the rating agencies, including withdrawal initiated at the request of AGM in its sole discretion. In addition, the rating agencies may at any time change AGM s long-term rating outlooks or place such ratings on a watch list for possible downgrade in the near term. Any downward revision or withdrawal of any of the above ratings, the assignment of a negative outlook to such ratings or the placement of such ratings on a negative watch list may have an adverse effect on the market price of any security guaranteed by AGM. AGM only guarantees scheduled principal and scheduled interest payments payable by the issuer of bonds insured by AGM on the date(s) when such amounts were initially scheduled to become due and payable (subject to and in accordance with the terms of the relevant insurance policy), and does not guarantee the market price or liquidity of the securities it insures, nor does it guarantee that the ratings on such securities will not be revised or withdrawn. Current Financial Strength Ratings. On March 18, 2014, S&P published a Research Update report in which it upgraded AGM s financial strength rating to AA (stable outlook) from AA- (stable outlook). AGM can give no assurance as to any further ratings action that S&P may take. On February 10, 2014, Moody s issued a press release stating that it had affirmed AGM s insurance financial strength rating of A2 (stable outlook). AGM can give no assurance as to any further ratings action that Moody s may take. For more information regarding AGM s financial strength ratings and the risks relating thereto, see AGL s Annual Report on Form 10-K for the fiscal year ended December 31, Capitalization of AGM. At December 31, 2013, AGM s policyholders surplus and contingency reserves were approximately $3,529 million and its net unearned premium reserve was approximately $1,891 million. Such amounts represent the combined surplus, contingency reserves and net unearned premium reserve of AGM and its wholly owned subsidiary Assured Guaranty (Europe) Ltd., plus 60.7% of the contingency reserve and net unearned premium reserve of AGM s indirect subsidiary, Municipal Assurance Corp. Incorporation of Certain Documents by Reference. Portions of the following document filed by AGL with the Securities and Exchange Commission (the SEC ) that relate to AGM are incorporated by reference 27

32 into this Official Statement and shall be deemed to be a part hereof: the Annual Report on Form 10-K for the fiscal year ended December 31, 2013 (filed by AGL with the SEC on February 28, 2014). All consolidated financial statements of AGM and all other information relating to AGM included in, or as exhibits to, documents filed by AGL with the SEC pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, excluding Current Reports or portions thereof furnished under Item 2.02 or Item 7.01 of Form 8-K, after the filing of the last document referred to above and before the termination of the offering of the Series 2014A Bonds shall be deemed incorporated by reference into this Official Statement and to be a part hereof from the respective dates of filing such documents. Copies of materials incorporated by reference are available over the internet at the SEC s website at at AGL s website at or will be provided upon request to Assured Guaranty Municipal Corp.: 31 West 52 nd Street, New York, New York 10019, Attention: Communications Department (telephone (212) ). Except for the information referred to above, no information available on or through AGL s website shall be deemed to be part of or incorporated in this Official Statement. Any information regarding AGM included herein under the caption 2014A BOND INSURANCE Assured Guaranty Municipal Corp. or included in a document incorporated by reference herein (collectively, the AGM Information ) shall be modified or superseded to the extent that any subsequently included AGM Information (either directly or through incorporation by reference) modifies or supersedes such previously included AGM Information. Any AGM Information so modified or superseded shall not constitute a part of this Official Statement, except as so modified or superseded. Miscellaneous Matters. AGM or one of its affiliates may purchase a portion of the Insured Series 2014A Bonds or any uninsured bonds offered under this Official Statement and such purchases may constitute a significant proportion of the bonds offered. AGM or such affiliate may hold such Insured Series 2014A Bonds or uninsured bonds for investment or may sell or otherwise dispose of such Insured Series 2014A Bonds or uninsured bonds at any time or from time to time. AGM makes no representation regarding the Series 2014A Bonds or the advisability of investing in the Series 2014A Bonds. In addition, AGM has not independently verified, makes no representation regarding, and does not accept any responsibility for the accuracy or completeness of this Official Statement or any information or disclosure contained herein, or omitted herefrom, other than with respect to the accuracy of the information regarding AGM supplied by AGM and presented under the heading 2014A BOND INSURANCE. THE ISSUER The Issuer is a public nonprofit corporation created by the Town of New Hope, Texas (the Town ) and exists as a instrumentality of the Town pursuant to the Cultural Education Facilities Finance Corporation Act, Article 1528m, Vernon s Texas Civil Statutes, as amended (the Act ). The Act grants the Issuer, among others, the same powers, authority, and rights to issue revenue bonds for the purpose of aiding any accredited institutions of higher education and authorized charter schools in financing or refinancing educational facilities and housing facilities and facilities which are incidental, subordinate, or related thereto or appropriate in connection therewith that a nonprofit corporation created under Section 53.35(b), Texas Education Code, or any authority created under Section 53.11, Texas Education Code, has under Chapter 53, Texas Education Code, as amended. All of the Issuer s property and affairs are controlled by and all of its power is exercised through a board of directors (the Issuer Board ), which consists of five members, each of whom has been appointed by the Town Council of the Town. Issuer Board members serve two-year terms, and each Issuer Board member may serve an unlimited number of two-year terms. Issuer Board members serve until their successors have been appointed. All vacancies on the Issuer Board are filled by the Town Council. The officers of the Issuer consist of a president, a vice president, a secretary, and a treasurer, each selected by the Issuer Board from among its members, whose terms of office may not exceed two years and 28

33 whose duties are described in the Issuer s bylaws. All officers are subject to removal from office, with or without cause, at any time by a vote of a majority of the entire Issuer Board. Vacancies may be filled by the Issuer Board. Neither Issuer Board members nor officers receive compensation for serving as such, but they are entitled to reimbursement for expenses incurred in performing such service. The Issuer has no assets, property or employees. Other than legal counsel, the Issuer has not engaged any consultant or other professional. THE ISSUER HAS NO TAXING POWER. The Issuer is receiving a fee of approximately $30,000 in connection with the issuance of the Series 2014A Bonds, which amount, after expenses, is expected to be paid to the Town and used by the Town for any lawful purpose. Except for the issuance of the Series 2014A Bonds, the Issuer is not in any manner related to or affiliated with the Borrower. The Issuer has issued the Series 2014A Bonds solely to carry out the Issuer s statutory purposes. The Borrower has agreed to indemnify the Issuer for certain matters. The Issuer Board members are not personally liable in any way for any act or omission committed or suffered in the performance of the functions of the Issuer. Neither the Issuer nor the Town has assumed any responsibility for the matters contained herein except, in the case of the Issuer, solely as to matters relating to the Issuer. All findings and determinations by the Issuer and the Town, respectively, are and have been made by each for its own internal uses and purposes. Notwithstanding its approval of the Series 2014A Bonds for purposes of Section 147(f) of the Internal Revenue Code of 1986, as amended, the Town does not endorse in any manner, directly or indirectly, guarantee, or promise to pay the Series 2014A Bonds from any source of funds of the Town or guarantee, warrant or endorse the creditworthiness or credit standing of the Borrower, or in any manner guarantee, warrant, or endorse the investment quality or value of the Series 2014A Bonds. The Series 2014A Bonds are payable solely as described in this Official Statement and are not in any manner payable from any funds or properties otherwise belonging to the Issuer. By its issuance of the Series 2014A Bonds, the Issuer does not in any manner, directly or indirectly, guarantee, warrant or endorse the creditworthiness or credit standing of the Borrower or the investment quality or value of the Series 2014A Bonds. The Issuer makes no warranty or representation, whether express or implied, with respect to the Series 2014A Project or the use thereof. Further, the Issuer has not prepared any material for inclusion in this Official Statement, except that material under the headings THE ISSUER and LITIGATION - The Issuer. The distribution of the information contained under the captions THE ISSUER and LITIGATION The Issuer contained in this Official Statement has been duly approved and authorized by the Issuer. Such approval and authorization does not, however, constitute a representation or approval by the Issuer of the accuracy or sufficiency of any of the information contained herein except to the extent of the material under the headings referenced in this paragraph. General THE SERIES 2014A PROJECT As proposed, the Series 2014A Project consists of the development of 412 apartment-style units with approximately 1,274 beds on the University s west campus in College Station, Texas. In addition to the residential buildings described below, the Series 2014A Project is anticipated to include an on-site Manager s office and a community space that includes a lobby/reception area, several offices, a community kitchen, and multipurpose rooms. 29

34 Residential Buildings The Series 2014A Project is anticipated to consist of three five-story residential buildings. The foundation of all of the buildings will be carton form suspended structural slab on concrete piers. The framing for the apartments will be a combination of wood, steel and concrete block. The total square footage of the buildings is approximately 533,000 gross square feet. Currently, the development plans provide that the Series 2014A Project will be delivered in the Fall of As planned, the Series 2014A Project consists of the following apartment units: Unit Type Number of Units Number of Beds Number of Revenue Producing Beds Academic Year Monthly Rent/Bed 4BR/2BA (Single Occupancy) $769 4BR/4BA (Single Occupancy) $822 2BR/1BA (Single Occupancy) $875 1BR/1BA (Single Occupancy) $1,034 1BR/1BA (Resident Advisor) $822 2 BR/2BA (Director) $0 Total/Weighted Average 412 1,274 1,268 $816 Currently it is anticipated that each unit will be furnished with specialized student furniture and each student will have his or her own closet. Students will have cable television, and wired and wireless internet connections in their units. Each apartment unit will include a washer/dryer. The exterior will include several courtyards, bike racks and gathering areas. Phase II Project and Additional Projects Currently it is anticipated that the Borrower may undertake a Phase II project to be located in the proximity of the Series 2014A Project, consisting of approximately 477 residence hall units, including approximately 1,226 beds, which would be delivered in Fall 2016 (the Phase II Project ). If constructed, the Phase II Project is expected to be financed through the issuance of Additional Bonds, to be secured on parity with the Series 2014A Bonds. Additional improvements located in the proximity of the Series 2014A Project and the Phase II Project may also be financed through the issuance of Additional Bonds to be secured on parity with the Series 2014A Bonds. See THE SERIES 2014A BONDS Additional Bonds and THE GROUND LEASE Phase II Project herein. THE GROUND LEASE The following is a summary of certain provisions of the Ground Lease pursuant to which the real property underlying the Series 2014A Project will be leased to the Borrower by the Board (which is herein referred to in such capacity as the Ground Lessor. ) This summary is not a complete recital of the terms of the Ground Lease and reference is made to the Ground Lease in its entirety. During the initial offering period, potential purchasers of the Series 2014A Bonds can obtain a copy of the Ground Lease from the Underwriter at no cost and are encouraged to review the same before investing in the Series 2014A Bonds. Following the initial offering period, potential purchasers can examine such documents at the office of the Trustee. General Lease Terms Pursuant to the Ground Lease, the Ground Lessor has leased the Property to the Borrower for a term of thirty-two (32) years, subject to certain termination rights provided therein and unless extended by agreement of the Ground Lessor and the Borrower. The annual rental payable under the Ground Lease is all net available cash flow from the Series 2014A Project which will equal the amount transferred from time to time from the 30

35 Surplus Fund created under the Indenture after payment of the Borrower Acquisition Fee and Borrower Membership Fee. Limitations on Use The Ground Lease requires that the Series 2014A Project be used solely for the operation of a student housing facility to serve enrolled students, faculty and staff of the University and people attending programs presented by the University or another organization on the University s campus, whose presence is deemed desirable by the University to the effective provision of the University s programs and services. Ground Lessor s Commitment The Ground Lessor and the University agree in the Ground Lease that, whether or not the University is acting as the manager of the Series 2014A Project, to have the University: (i) include the Series 2014A Project in all information and marketing materials regarding student housing that it provides to students and prospective students, including providing information about the Series 2014A Project on the University s Department of Residence Life s (or its successor s) website, refer students to the Series 2014A Project, and include the Series 2014A Project in any housing assignment system it holds and otherwise promote the availability of the Series 2014A Project in the same manner as its own student housing facilities; (ii) to the extent possible, provide to students residing at the Series 2014A Project the same services and access it provides to Students in its own housing facilities from time to time, including, without limitation, access to the University s computer network and student transportation system; (iii) not construct or otherwise sponsor any additional housing facilities for University students on or off the campus of the University ( Additional Student Housing ) beyond the replacement of the same number of units of existing University housing facilities, unless: (i) the University has first consulted with the Borrower on the need for Additional Student Housing, (ii) the Ground Lessor (specifically the Board) has (x) reviewed and accepted a pro forma operating statement for the Additional Student Housing, (y) determined that there is a valid reason for the Additional Student Housing, and (z) made a determination based on reasonable evidence furnished to the Borrower that the Series 2014A Project is projected to maintain a minimum Fixed Charges Coverage Ratio of at least 1.20 for the then-current fiscal year (to the extent the Series 2014A Project has been operational) and to maintain such a minimum level of debt service coverage in each year thereafter when taking into account the Additional Student Housing, (iii) construction of the Additional Student Housing has been approved, if required, by any other governmental authority having jurisdiction over the construction, (iv) the Series 2014A Project has maintained a minimum Fixed Charges Coverage Ratio of at least 1.20 for the preceding fiscal year (to the extent the Series 2014A Project has been operational) and (iv) no Event of Default exists under the Loan Agreement; (iv) assign students to the Series 2014A Project in a manner consistent with the assignment of students to the University s other student housing facilities, including consideration of a student s on-campus housing preferences at the time of application, utilizing a student s date of application to give priority in a first come, first served assignment system, and assigning students to special programs such as freshmen housing, Corps of Cadets housing and Honors housing; (v) if the Borrower is not in compliance with the requirements of the Bond Documents, cooperate with the Borrower in selecting an independent consultant, the cost of which will be borne by the Borrower as part of the Series 2014A Project s Expenses, and implement or modify the consultant s recommendations regarding the operation and maintenance of the Series 2014A Project as appropriate, to achieve compliance an in a manner approved by the Borrower, such approval not to be unreasonably withheld; 31

36 (vi) maintain and diligently enforce with respect to the Series 2014A Project University s then current collection policies and procedures regarding withholding of grades and/or registration in the event of delinquencies in the payment of rent under Resident Leases (as defined in the Ground Lease); (vii) ensure that the Series 2014A Project and the Premises are subject, at all times during the term of the Ground Lease, to the jurisdiction of the University s campus security force; (viii) assist the Borrower with its continuing disclosure obligations by providing it with such information about the University and the Series 2014A Project that the Borrower may need to comply with such obligations, including but not limited to demographic and statistical information about its enrollment, on-campus housing and general financial stability and the occupancy rates for the Series 2014A Project; and (ix) in the event the Series 2014A Project is not being managed by the University, (i) implement procedures to assist students in applying for residence at the Series 2014A Project, (ii) assist where possible in the collection of rents, (iii) where appropriate, facilitate the use of financial aid provided to students to pay eligible housing expenses, (iv) permit the Borrower to advertise the Series 2014A Project on the University s campus and its website and to post reasonably sized advertising literature on bulletin boards in the University s facilities that are available for public announcements, (v) permit the Borrower to maintain space on the University s campus at a site determined by the University for a staffed leasing display, (vi) provide to the Borrower a mailing list of the University s students that are seeking housing to the extent such a list is maintained and the University is permitted by law to disclose such information regarding its students to the Borrower. University Commitment to Provide Certain Utilities Under the Ground Lease, the Ground Lessor and the University have agreed that the University is to make application for, obtain and pay for, and be solely responsible for electric, water (including water for domestic uses and for fire protection) and wastewater utilities ( University Utility Services ) required, used or consumed on the Series 2014A Project, and the University is entitled to reimbursement for payment of the University Utility Services incurred as a Subordinated Expense as and to the extent provided in the Indenture. The Borrower has agreed to make application for, obtain and pay for, and be solely responsible for, all utilities other than University Utility Services including but not limited to telephone, cable TV and garbage collection services. If requested by the Ground Lessor, the Borrower agrees to join in the grant of easements in connection with the Ground Lessor s development of the Campus (as defined in the Ground Lease) and to execute any and all documents, agreements, and instruments and to take all other actions in order to effectuate the same in the event the Borrower s joinder is required in connection with any easements affecting any portion of the Property, provided such easements: (i) may only be located within those areas of the Property that will not interfere with the Series 2014A Project; (ii) are approved by the Borrower in its reasonable judgment as to their location and the form of the easement agreement; (iii) may only be granted as non-exclusive easements; and (iv) will not adversely affect the tax-exempt status of any outstanding Series 2014A Bonds or the tax-exempt status of the Foundation. Borrower Commitment to Provide Taxes and Insurance for Series 2014A Project The Borrower has agreed, to the extent assessed, to bear and pay to the public officer charged with the collection thereof, before the same becomes delinquent, any and all taxes, assessments, license fees, excises, imposts, fees, and charges of every sort, nature and kind which during the term of the Ground Lease are or might be levied, assessed, charged, or imposed upon or against the Series 2014A Project or the interest or estate of the Borrower or the Ground Lessor therein. 32

37 Except to the extent of the Board s assumption of the obligation to (i) repair, reconstruct, restore and replace the Series 2014A Project, and (ii) provide for lost revenues, in the event the Series 2014A Project damaged or destroyed as provided in the Ground Lease and as described below, it is the intent of the parties that all risk of loss for the Series 2014A Project be shifted to insurance to the maximum extent practicable. The Borrower has agreed to obtain and maintain insurance coverage as specified in the Ground Lease for workers compensation insurance, property, business interruption, fidelity bonds or employee dishonesty, commercial general liability, automobile, professional errors and omissions, and additional umbrella coverage. Notwithstanding the foregoing, so long as the Ground Lessor continues to be obligated to (i) repair, reconstruct, restore and replace the Series 2014A Project, and (ii) provide for lost revenues, in the event the Series 2014A Project damaged or destroyed as provided in the Ground Lease, the Borrower will not be required to carry casualty and business interruption insurance, as provided in the Ground Lease. Ground Lessor Commitment to Repair and Replace the Series 2014A Project The Ground Lessor will repair, reconstruct, restore, or replace portions of the Series 2014A Project damaged or destroyed by fire or any other casualty, as provided in the Ground Lease, and will agree to pay an amount equal to the loss of revenues, the value of related soft costs or other income by the Borrower by reason of total or partial suspension of, or interruption in, the operation of the Series 2014A Project caused by damage or destruction of the Series 2014A Project in an amount sufficient to meet debt payments and other recurring payments from the date of such suspension or interruption and continuing until such time as the Series 2014A Project is repaired and thereafter until the revenues of the Series 2014A Project, without regard to insurance proceeds or payments by the Ground Lessor or the University, will be sufficient to maintain a Fixed Charges Coverage Ratio of not less than 1.20 for the most recently completed fiscal year, irrespective of the length of time required to meet such requirement. For as long as the Ground Lessor remains obligated to pay the cost of repairing and rebuilding the Series 2014A Project, and to offset loss of revenue to the extent necessary to pay debt service and other recurring costs during the period prior to completion of such repair and rebuilding, all as contemplated by the Ground Lease, the Borrower will not be required to obtain casualty and business interruption insurance. The Ground Lessor may elect to terminate its obligation to repair and rebuild, in which event the Borrower will be required to maintain casualty and business interruption insurance as described above. At any time while the Ground Lessor remains so obligated, the Ground Lessor may request that the Borrower obtain any insurance coverage against casualty loss or interruption of rental income that it may specify, with such deductible amounts and other terms as the Ground Lessor specifies, in which case (A) the Borrower will endeavor to obtain such coverage or coverages as are requested, in cooperation with the Ground Lessor, (B) all premiums for such insurance will be paid by the Ground Lessor or the University, subject to reimbursement as a Subordinated Expense (as defined in the Indenture), and (C) all proceeds of such insurance will be paid to the Ground Lessor and will not constitute Net Proceeds under the Indenture. For any period during which the Ground Lessor is obligated to repair the Series 2014A Project it is entitled to reimbursement for (x) payment of premiums (or a prorated share thereof for any partial period covered by a premium) for insurance carried by it to insure against the costs of such repair and (y) an allocated portion of any charge for self-insurance under a program of self-insurance maintained by the Ground Lessor, in each case as a Subordinated Expense as and to the extent provided in the Indenture. Any allocation of charges for self-insurance is required to be determined in the same manner as the allocation of charges for other facilities of the same nature as the Series 2014A Project. The Ground Lessor has acknowledged that nothing in the preceding sentence is intended to alter its obligation to repair, reconstruct, restore or replace the Series 2014A Project, at its cost and expense, as provided in the Ground Lease and the proceeds of any insurance procured by the Borrower under the Ground Lease are intended to reimburse the Ground Lessor for any or all of its costs and expenses. Financial information for the Board can be found on the Electronic Municipal Market Access ( EMMA ) system of the Municipal Securities Rulemaking Board website at See also CERTAIN BONDHOLDERS RISKS Insurance and Legal Proceedings herein. 33

38 University Work The University will acquire, construct and install and thereafter maintain throughout the term of the Ground Lease (i) a storm water detention pond sufficient for the Series 2014A Project and any other property served by it and drainage pipes, ditches, and other facilities sufficient to carry storm water drainage from the Property to such detention pond, all as more particularly described in the Ground Lease, (ii) parking facilities sufficient for the Series 2014A Project located as shown in the Ground Lease, and (iii) such other utilities, roads and other infrastructure as is part of the University Work, as provided in the Development Agreement (collectively, the University Infrastructure ). Such University Infrastructure is required to be provided for the nonexclusive benefit of the Property. The construction schedule for the University Infrastructure is required to be coordinated with the Design/Builder so as to allow for adequate access, drainage and utilities for purposes of construction and operation of the Series 2014A Project. See THE DEVELOPMENT AGREEMENT and CERTAIN BONDHOLDERS RISKS Risks of Construction herein. Maintenance of the University Infrastructure by the University is required to be in accordance with the University s standards and practice for maintenance of similar facilities throughout its campus. The University will acquire, construct and install and thereafter maintain throughout the term of the Ground Lease parking for the Series 2014A Project and, if developed, the Phase II Project. Parking will initially consist of surface parking located as shown in the Ground Lease, and upon completion thereof will consist of a parking deck located as shown in the Ground Lease. Parking will at all times include the number of spaces and otherwise be constructed and maintained in accordance with the University s standards and practice for provision of parking for similar facilities throughout its campus. Failure to Provide Student Housing Facility on Schedule If the Developer fails to deliver the number of units of the Student Housing Facility required by the Development Agreement to be substantially complete by the date required thereunder (or such later date as the Ground Lessor shall agree), then the Borrower will require the Developer as provided in the Development Agreement to arrange for alternative housing reasonably acceptable to the University for the residents who have contracted to reside in the Student Housing Facility until the applicable unit for such resident is substantially complete. The Manager will be required (A) to require such residents to make all payments owed under their Resident Leases and (B) to remit the payments received from such residents to the Trustee for deposit to the Revenue Fund under the Indenture. The cost of such alternative housing shall be borne by the Developer as provided in the Development Agreement; provided, however, the Developer shall be entitled to reimbursement for the actual cost incurred in connection with providing such alternative housing to the extent allowed under the Development Agreement and after payment of all liquidated damages owed by the Developer thereunder, if any. Events of Default and Remedies The following are defined to be Events of Default under the Ground Lease: (i) The Borrower fails to pay the Rent at the times specified therein. (ii) The Borrower fails to perform or cause to be performed any other term, covenant, condition, or provision in the Ground Lease, other than as referred to in (i) above, and to correct such failure within thirty (30) days after written notice specifying such is given to the Borrower and the Trustee by the Ground Lessor. In the case of any such failure that cannot with due diligence be corrected within such thirty (30) day period but can be wholly corrected within a period of time not materially detrimental to the rights of the Ground Lessor, it is not an Event of Default if corrective action is instituted by the Borrower within the applicable period and diligently pursued until the failure is corrected. (iii) The Borrower is adjudicated as bankrupt. 34

39 (iv) A permanent receiver is appointed for the Borrower s interest in the Premises and such receiver is not be removed within ninety (90) days after notice from the Ground Lessor to the Borrower to obtain such removal. (v) The Borrower voluntarily takes advantage of any debtor relief proceedings under any present or future law whereby the Rent due under the Ground Lease or any part thereof is reduced or payment thereof deferred or becomes subject to any such involuntary proceedings and said involuntary proceedings is not dismissed within ninety (90) days after notice from the Ground Lessor to the Borrower to obtain such dismissal. (vi) The Borrower makes a general assignment for benefit of creditors. (vii) The Premises or the Borrower s effects or interests therein are levied upon or attached under process against the Borrower, and the same is not satisfied or dissolved within ninety (90) days after notice from the Ground Lessor to the Borrower and the Trustee, to obtain satisfaction or dissolution thereof. Upon the occurrence of any of the foregoing events of default, the Ground Lessor will, subject to the provisions of the Ground Lease described in the two immediately succeeding paragraphs, have the right to (i) terminate the Ground Lease immediately upon written notice thereof to the Borrower and the Trustee, and thereafter, without legal process, enter upon and take possession and control of the Premises to the complete exclusion of the Borrower; or (ii) without terminating the Ground Lease, re-let the Series 2014A Project and the Property and collect from the Borrower the reasonable costs and expenses of re-letting, repairing, and altering the Property. Notwithstanding the foregoing termination rights of the Ground Lessor, the Trustee is required to be entitled to extend the date of termination in order to allow it to acquire the Borrower s interest in the Ground Lease by foreclosure or otherwise. If the Ground Lease is required to be terminated due to a default by the Borrower the Trustee will have the option, but not the obligation, to enter into a lease of the Premises with the Ground Lessor at the same rent and upon the same terms and conditions contained in the Ground Lease. The Ground Lease will terminate at the option of the Ground Lessor, upon the payment in full of the Series 2014A Bonds, by Ground Lessor s exercise of a purchase option at a purchase price equal to the principal balance then outstanding of all sums secured by any Leasehold Mortgage (as defined in the Ground Lease) then in effect, plus any premium payable on such indebtedness, plus all interest accrued or to accrue on such indebtedness through the date of payment of such indebtedness plus any other charges due and payable under the Bond Documents. Leasehold Deeds of Trust The Ground Lease permits Leasehold Deeds of Trust approved by the Ground Lessor (including those associated with the Series 2014A Bonds) and grants the holders of such mortgages the right to cure defaults by the Borrower. The Ground Lease further provides that an approved mortgagee may, upon termination of the Ground Lease by the Ground Lessor by reason of the occurrence of an Event of Default thereunder, require the Ground Lessor to enter into a new ground lease, on the same terms, with such mortgagee. Rights of 2014A Insurer So long as no Series 2014A Insurer Default (as defined in the Indenture) exists the 2014A Insurer is deemed a third party beneficiary of the Ground Lease. The Ground Lease may not be amended without the prior written consent of the 2014A Insurer, except that no such consent is required for any amendment of the Ground Lease (i) in connection with the issuance of Additional Bonds pursuant to the terms of the Indenture, (ii) so as to identify more precisely the Property (as defined in the Ground Lease) or to add additional land or interests in land, or (iii) to provide for Additional Improvements; provided that in any event amendments or modifications to certain provisions of the Ground Lease are subject to the prior written consent of the 2014A 35

40 Insurer. Phase II Project The Ground Lessor has granted to the Borrower an option to lease the land on which the Phase II Project will be located upon compliance with the terms of the Indenture and the remaining Bond Documents for the issuance of Additional Bonds to construct, furnish and equip the Phase II Project as Additional Improvements. The option must be exercised, if at all, no later than November 1, 2014 unless otherwise agreed by the Ground Lessor. The lease of the land on which the Phase II Project will be located will be accomplished through an amendment to the Ground Lease. THE DEVELOPER The developer of the Series 2014A Project is BBCS Development, LLC, a limited liability company organized under the laws of the State of Delaware (the Developer ). The Developer will be responsible for acting as developer in connection with the development, design, construction, equipping and furnishing of the Series 2014A Project so that the Series 2014A Project is delivered on time and on budget in accordance with the terms of the Development Agreement (as defined below). The Developer is a wholly-owned subsidiary of Balfour Beatty Campus Solutions, LLC ( BBCS ). BBCS is a wholly-owned subsidiary of Balfour Beatty Investments, Inc. ( BBI ), which is headquartered in Newtown Square, PA and is an indirect subsidiary of Balfour Beatty plc, a UK-based company traded on the London Stock Exchange with world-wide 2013 reported annual revenues of approximately $15.9 billion, over one third of which is generated in the United States. BBI has made over $136 million of equity commitments in the U.S. Private Public Partnership (PPP) market and raised over $3.9 billion in project debt. BBI has developed and operates over $6 billion in family housing development for the U.S. military at 54 locations, in 26 states and Washington, DC; three of these locations house higher education students, faculty and staff. BBCS provides a range of on-campus real estate services to colleges and universities including project development, campus planning, construction management, property management, asset management and sustainable solutions. BBCS leadership has more than 70 collective years of experience in the development of student housing projects nationwide. THE DEVELOPMENT AGREEMENT The Borrower and the Developer will enter into a development agreement for the Series 2014A Project (the Development Agreement ) pursuant to which the Developer will contract with the Borrower to complete the construction of the Series 2014A Project, in all material respects as required by the approved plans and specifications and in accordance with the agreed-upon project schedule, in a good and workmanlike manner, free and clear of all mechanics, materialmen s and similar liens, all in substantial accordance with the terms of the Development Agreement. The Development Agreement will obligate the Developer to cause the Series 2014A Project to be designed, constructed, furnished and equipped for a total cost not to exceed $91,639,759* and by a date certain (in each case, subject to the terms and conditions of the Development Agreement). For its services as developer, the Developer will receive a development fee as provided in the Development Agreement. Pursuant and subject to the terms of the Development Agreement, if the Series 2014A Project is not substantially completed by August 14, 2015 (which date may be extended pursuant to the Development Agreement as described below), including the installation of furniture, fixtures and equipment and all life safety systems in substantial accordance with the aforesaid plans and specifications such that the Series 2014A Project is capable of being occupied for its intended purposes on such date, then the Developer is obligated to provide for those persons who executed student housing lease agreements and were to occupy bedrooms in the Series 2014A Project but were unable to do so solely because the Series 2014A Project, or portion thereof, is * Preliminary. Subject to Change. 36

41 not substantially complete: (a) alternative housing of a quality similar to, but not required to exceed that of, the Series 2014A Project, such alternative housing to be provided from the scheduled date of substantial completion (unless such date is extended pursuant to the Development Agreement as described below) through and continuing for up to three days after the date the Series 2014A Project is substantially complete; (b) at the student s election (i) transportation of such persons housed in such alternative housing residing more than one mile from campus between the campus of the University and such alternative housing or (ii) a daily transportation allowance of $25.00 paid to the respective student who selects an alternate form of transportation to and from campus; and (c) upon achieving substantial completion of the Series 2014A Project, arrangements for moving such persons from the alternative housing to the student s new unit. The Development Agreement provides that the scheduled date of substantial completion is required to be extended beyond August 14, 2015 to the extent of any delays to the critical path caused by a force majeure (as defined in the Development Agreement); a breach of the Development Agreement by the Borrower or the Board, or the University s failure to complete the University Work as set forth in the Development Agreement; or other events that are beyond the reasonable control and without material fault of the Developer or the Design/Builder (as defined below). The System (as the permitting authority of the Series 2014A Project) and the Developer are required to work cooperatively and in good faith with each other to have all permits that are required for the execution of the Series 2014A Project issued as soon as reasonably possible as set forth in the Development Agreement and certified for temporary and/or permanent occupancy as soon as reasonably possible; provided, however, if the Developer determines that delays by the Borrower or the System may cause the date of substantial completion to be delayed, then Developer may request a change to such date pursuant to the Development Agreement. The Development Agreement will provide that notwithstanding anything to the contrary set forth therein, (i) that, as of the date of the Development Agreement, the System has not issued all of the permits required for the execution of the Series 2014A Project, and (ii) the Borrower and the System agree that the Developer may at any time stop work by giving ten (10) days prior written notice thereof to the System and the Borrower (or such shorter period of notice as described in the Development Agreement) in the event that the System (through no fault of the Developer) fails to issue any one or more permits required for the execution of any portion of the Series 2014A Project following delivery to the System of submittals required by the Design Guidelines (as defined in the Development Agreement) within the time periods set forth in the Design Guidelines. Upon the Developer s provision of such written notice, the Development Agreement will terminate on the tenth day following delivery of the notice (but in any event, will terminate no later than on November 1, 2014 if such date falls within the aforesaid ten-day notice period) and no provision of the Development Agreement will survive other than the obligation of the Developer to pay to the Trustee the amounts described in the Development Agreement, provided that during the ten-day period (or during such shorter period of time if November 1, 2014 falls within such ten-day period), the Developer and the System will agree to negotiate in good faith to resolve any dispute regarding the issuance of the permit or permits. If the Developer elects to stop work and terminates the Development Agreement as described above, the Developer is required to, at its cost and expense, pay to the Trustee, for the account of the Borrower, an amount equal to the LD Payment (as defined above). For the avoidance of doubt, if, on November 1, 2014, all of the permits required for the execution of the Series 2014A Project have not been obtained by the Developer, the Development Agreement will automatically terminate on such date and no provision of the Development Agreement will survive other than the obligation of the Developer to pay to the Trustee, for the account of the Borrower, an amount equal to the LD Payment. Such payment shall be made within 10 days of the date the Developer receives notification of the amount of the LD Payment from the Trustee. See THE SERIES 2014A BONDS Redemption Mandatory Redemption Upon Failure to Obtain Permits herein. THE MANAGER AND THE MANAGEMENT AGREEMENT Management services for the Series 2014A Project will initially be provided by the University. The University will enter into a Management Agreement dated as of May, 2014 with the Borrower (the Management Agreement ) pursuant to which the University will manage the Series 2014A Project. The 2014A Insurer is deemed a third party beneficiary of the Management Agreement. 37

42 The Management Agreement will be in effect for a period commensurate with the Ground Lease, except as provided in the Management Agreement. Notwithstanding the foregoing, the Management Agreement is subject to termination by the University by giving the Borrower 120 days notice in writing, by the mutual consent of the University and Borrower as of the end of any calendar month, and by the Borrower, after providing written notice to the University and the Trustee, upon the occurrence of an Event of Default as described in the Management Agreement. The University agrees in the Management Agreement to use commercially reasonable, good faith efforts consistent with the University s policies, procedures, rules and regulations as in effect from time to time (the Manager Policies ), to collect the payments payable by residents pursuant to the resident contracts and any other income from the Series 2014A Project that is considered General Revenues under the Indenture as it becomes due. Management of the Series 2014A Project includes, but is not limited to, practices that are specific requirements for student housing owned or operated by the University as set forth in the Manager Policies. Without limiting the generality of the foregoing, the University s responsibilities under the Management Agreement include: (a) providing and supervising marketing activities of the Series 2014A Project, (b) providing and supervising directly assigned staff in the entering into and administering of resident contracts, including the timely collection of all reservation deposits and other charges considered to be General Revenues, (c) using commercially reasonable efforts to secure full compliance by each resident with the terms of his or her resident contract, (d) causing the Series 2014A Project to be maintained in good repair and in compliance with the Loan Agreement and the Ground Lease, (e) carrying out necessary capital improvements following completion of the Series 2014A Project, the cost of such improvements to be paid from the Repair and Replacement Fund, (f) making timely arrangements for utilities and other services, (g) maintaining accurate books and records with respect to the Series 2014A Project and (h) developing in good faith a lineitem operation and capital budget for the Series 2014A Project. The University agrees in the Management Agreement to establish and maintain a restricted account within the Revenue Fund entitled the Operating Account for all costs associated with the operating, managing, monitoring and repairing of the Series 2014A Project, all of which is required to be deemed to be operating expenses of the Series 2014A Project. The University will timely pay all such operating expenses out of the Operating Account unless previously paid by the Trustee. Sufficient funds for payment of all such operating expenses are required to be transferred by the twentieth day of each month (or the immediately succeeding Business Day if the twentieth day of the month is not a Business Day) in accordance with the Indenture. Other than for University Utility Services, in no event will the University be obligated to advance its own funds for the payment of operating expenses or otherwise for the maintenance, repair, restoration or improvement of the Series 2014A Project, but the University is only obligated to expend funds from the Operating Account for the payment of operating expenses and for such maintenance, repair, restoration or improvement of the Series 2014A Project in accordance with the provisions of the Management Agreement. See THE GROUND LEASE Ground Lessor Commitment to Repair and Replace the Series 2014A Project herein for a description of the Board s obligation to repair and replace the Series 2014A Project under the Ground Lease. THE DESIGN/BUILDER AND THE DESIGN/BUILD CONTRACT The Development Agreement provides that the Developer will enter into a design/build construction contract (the Design/Build Contract ) with Balfour Beatty Construction, LLC, an affiliate of the Developer (the Design/Builder ) pursuant to which the Design/Builder will agree to design and construct the Series 2014A Project for a guaranteed maximum price subject to adjustment as provided in the Design/Build Contract that when added to all other costs of developing, designing, constructing, equipping and furnishing the Series 2014A Project will not exceed the amount of the total development budget agreed to in the Development Agreement. The Development Agreement also obligates the Developer to cause the Design/Builder to perform in a manner consistent with the terms of the Development Agreement including causing the Design/Builder to take such actions as may be necessary to ensure completion of the Series 2014A Project by the scheduled date of substantial completion, as may be extended pursuant to the terms of the Development Agreement. 38

43 The Development Agreement requires the Developer to require the Design/Builder to deliver to the Trustee separate performance and labor and material payment bonds (the Payment and Performance Bonds ) with respect to the Design/Build Contract relating to the Series 2014A Project, and in the full amount of the Design/Build Contract (which amount excludes the cost of furniture, fixtures and equipment), made by the Design/Builder as the principal. Such Payment and Performance Bonds must be issued by a surety company or companies that is or are licensed to do business in the State, rated at least A by S&P or Excellent (A/A-) by A.M. Best Company, Inc., and otherwise satisfactory and acceptable to the Underwriter. The Payment and Performance Bonds will name both the Developer and the Borrower as obligee and the Board, the University, and the Trustee as multiple obligees. The Development Agreement obligates the Developer to cause its affiliate, Balfour Beatty Investments, Inc., to provide a limited guaranty to the Borrower that guarantees the Developer s acquisition and installation of the furniture, fixtures and equipment with respect to the Series 2014A Project. The Design/Build Contract provides for the payment of liquidated damages by the Design/Builder to the Developer if the Series 2014A Project is not substantially completed by the scheduled date of substantial completion provided in the Design/Build Contract subject to certain conditions contained therein. The Design/Build Contract provides that Design/Builder will contract with BOKA Powell, LLC as the architect for the necessary architectural and engineering work with respect to the design of the Series 2014A Project. General THE BORROWER The Borrower is a single member limited liability company duly organized and existing under the laws of the State of Alabama. The Borrower was formed for the purpose of acquiring and financing the Series 2014A Project for the exclusive benefit of the University and is not expected to have any assets other than the Series 2014A Project and any additional project financed with bonds issued on a parity with the Series 2014A Bonds. The Foundation is the sole member of the Borrower. The Foundation The Foundation is a nonprofit corporation formed in 1996 under the laws of the State of Alabama. The Foundation is also an organization that is exempt from federal income tax pursuant to 501(c)(3) of the Internal Revenue Code of 1986, as amended. It was organized and is operated exclusively for charitable and educational purposes including the purpose of assisting colleges and universities in providing housing for their enrolled students and otherwise assisting them in furtherance of their educational missions. The membership of the Foundation is comprised of those colleges and universities so assisted by the Foundation. To date, the Foundation has assisted over thirty (30) different colleges and universities with providing housing. In assisting many of those colleges and universities, the Foundation has established other single member limited liability companies for the limited purpose of acquiring and financing student housing projects for such schools, none of which have any assets other than the particular project for which they were established nor any obligations beyond the acquisition and financing of such particular project. Neither the Foundation nor any limited liability company established by the Foundation other than the Borrower will have any obligation with respect to the Series 2014A Bonds or under any of the Bond Documents. The Foundation is governed by a Board of Directors elected by its members. The following individuals constitute the Board of Directors of the Foundation: 39

44 Name Business Affiliation Term Expires Leeman H. Covey John B. Hicks Jack Edwards John Brooks Slaughter Thomas M. Daly Linda Flaherty-Goldsmith President of the Foundation, Former Vice President of Finance, Spring Hill College, Mobile, Alabama Senior Consultant, Academic Search, Inc., Former Executive Assistant to the Chancellor and Secretary of the Board of Trustees of the University of Alabama System Member of Hand Arendall LLC, Former President Pro Tem of the Board of Trustees of the University of Alabama System President Emeritus, Occidental College, Former President and Chief Executive Officer, National Action Council for Minorities in Engineering, Inc. Former Senior Vice President and Managing Director, Legg Mason Student Housing Public Finance Group Former Vice Chancellor for Finance of the University of Alabama System, Former Vice President and Chief Operating Officer, University of Connecticut, NONRECOURSE OBLIGATION OF THE BORROWER S MEMBER OR OFFICERS No recourse under or upon any obligation, covenant, or agreement contained in the Loan Agreement, in any of the Bond Documents, or in any other documents delivered in connection with the issuance of the Series 2014A Bonds, or for any claim based thereon, or under any judgment obtained against the Borrower, or by the enforcement of any assessment or penalty or otherwise or by any legal or equitable proceeding by virtue of any constitution, rule of law or equity, or statute or otherwise or under any other circumstances, under or independent hereof, will be had against any incorporator, director, member, or officer, as such, past, present, or future of the Borrower or the Foundation, or any incorporator, director, member, or officer of any successor entity, as such, either directly or through the Borrower or any successor entity, or otherwise, for the payment for or to the Borrower or any receiver thereof, of any sum that may be due and unpaid by the Borrower under the Loan Agreement, any of the Bond Documents, or any other documents delivered in connection with the issuance of the Bonds. History and Overview of University THE UNIVERSITY Opened in 1876, as Texas first public institution of higher learning, the University is a researchintensive flagship university with more than 50,000 students. In 1963 the Texas state legislature officially renamed the school Texas A&M University. The University s College Station campus is located on more than 5,200 acres and is located about 90 miles northwest of Houston, Texas within a two to three hour drive from Austin, Texas and Dallas, Texas. The University is ranked as the sixth largest university in the country, with more than 392,000 alumni worldwide. The University has more than $780 million in research expenditures generated by faculty-researchers and has an endowment valued at more than $5 billion. The University is accredited by the Southern Association of Colleges and Schools Commission on Colleges and also holds several other program specific accreditations. 40

45 In addition to College Station, the University has campuses located in Galveston, and as of 2003 in Qatar, which enrolls more than 350 engineering students from more than 20 countries. Additionally, in 2009 the University opened the Soltis Center for Research and Education in San Isidro, Costa Rica. The Texas A&M University System is one of the largest systems of higher education in the nation, with a statewide network of eleven universities and seven state agencies. The Texas A&M University System educates more than 120,000 students and reaches another 22 million people through service each year. Academics and Enrollment The University is one of the few universities in the nation to hold land, sea, and space grant status. The University offers more than 120 undergraduate degree programs and more than 240 master s and Ph.D. programs. It is ranked among the top 25 public universities in the nation and top 10 public engineering schools by U.S. News & World Report. The University holds membership in the Association of American Universities, one of only 62 institutions with this designation. The University is comprised of the following colleges/units: College of Agriculture and Life Sciences, College of Architecture, The Bush School of Government and Public Service, Mays Business School, College of Education and Human Development, Dwight Look College of Engineering, College of Geosciences, College of Liberal Arts, College of Science, the College of Veterinary Medicine & Biomedical Sciences, the School of Law and the Health Sciences Center. The University had a Fall 2013 enrollment of 52,449 students, of which 42,029 are undergraduate students. Of the 10,420 total graduate and first professional student population, 4,697 are doctoral students. The chart below shows five years of historical enrollment trends. Total University Headcount Enrollment by Level in Fall Semesters Undergraduate Non-Degree Freshmen 9,064 9,437 9,293 9,004 10,154 Sophomores 8,535 8,074 8,508 8,621 8,815 Juniors 9,003 8,851 8,852 9,041 9,564 Seniors 12,115 12,665 13,098 13,326 13,370 Undergraduate Post-baccalaureate Subtotal 38,809 39,148 39,867 40,100 42,029 Graduate Master's 5,919 5,834 5,530 4,891 5,246 Doctoral 3,464 3,631 3,943 4,709 4,647 Professional Subtotal 9,893 9,981 9,994 10,127 10,420 Total 48,702 49,129 49,861 50,227 52,449 Source: Texas A&M University. Based on fall 2013 admissions numbers there were 30,065 applicants of which 20,745 were admitted (69.0%) and approximateley 9,710 of those accepted enrolled in the University (46.8%). Below is a summary of the University s undergraduate admissions data for the past five years. 41

46 Student Life Historical Application, Admissions and Matriculation Fall 2009 Fall 2010 Fall 2011 Fall 2012 Fall 2013 New Applicants 22,757 23,407 25,949 27,798 30,065 Admitted 15,158 16,130 16,489 18,663 20,745 % Admitted 66.6% 68.9% 63.5% 67.1% 69.0% Enrolled 8,071 8,176 8,254 8,139 9,710 % Enrolled 53.2% 50.7% 50.1% 43.6% 46.8% Source: Texas A&M University. The University s Student Life includes more than 850 student organizations, intramural and club sports. Additionally, the University is a member of the NCAA Division I-A and competes in the Southeastern Conference in 20 varsity sports. Tuition and Fees The University s tuition for the previous five academic years per full-time student can be found in the chart below. The University s tuition for the fall 2013 academic year for undergraduate students (tuition and fees only) is approximately $8,506 per year for Texas residents and $25,126 per year for non-residents. Graduate student tuition is approximately $10,006 per year for residents and $20,626 per year for nonresidents, assuming 15 credit hours per semester. Annual Tuition and Fees Undergraduate In-State Resident (Per Year) Non-Resident (Per Year) Academic year Tuition Mandatory Fees Total Tuition Mandatory Fees Total $5,152 $3,024 $8,176 $19,585 $3,024 $22, ,297 3,124 8,421 20,687 3,124 23, ,296 3,122 8,418 20,687 3,122 23, ,297 3,209 8,506 21,826 3,209 25, ,297 3,209 8,506 21,917 3,209 25,126 Graduate In-State Resident (Per Year) Non-Resident (Per Year) Academic year Tuition Mandatory Fees Total Tuition Mandatory Fees Total $6,652 $3,024 $9,676 $14,962 $3,024 $17, ,797 3,090 9,887 16,097 3,090 19, ,797 3,122 9,919 16,187 3,122 19, ,797 3,209 10,006 17,327 3,209 20, ,797 3,209 10,006 17,417 3,209 20,626 Source: Texas A&M University. 42

47 Overview of Current University Student Housing On Campus Housing The University has the design capacity to house approximately 7,220 traditional undergradutate students on campus in twenty-five residence hall facilities offering a combination of dormitory and suite style living quarters. However, the University actually houses over 7,500 students each year due to the demand for on-campus housing. Students who reside in on-campus housing typically pay room and board costs per semester. The room cost per semester for the academic year ranges from $1,534/semester for traditional double occupancy halls up to $4,750/semester for single occupancy rooms in the brand new Hullabaloo Hall. As shown in the table below, the room rents for the academic year are projected to range from $1,580/semester to $4,855/semester. Residence Halls Rent/Semester Facility Capacity Fall 2013 Occupancy Double Single Apartment Hullabaloo % $3,605 $4, Modular Halls 2, % 2, $4,601 Common Halls 2, % 2, Balcony Halls % 2,010 2,860 3,123 Corridor Halls % 2,010 2,860 3,123 Ramp Halls % Non-Renovated 1,580 2, Renovated 1,611 2, Source: Texas A&M University. 1 Excludes housing for cadets, graduate students, married students, students with dependent children, international students, and students who are U.S. military veterans (including, but not limited to The Gardens Project). In addition to housing traditional underclassmen, the University has approximately 2,600 cadets on the Quad as members of the largest uniformed cadets in the country. The cadets are housed in 12 dorms, two of which have been renovated and one of which is currently undergoing renovation and is due to reopen in Fall The remaining halls are scheduled to be renovated beginning in While these Corps Halls are under renovation, certain of the Residence Halls described above will be used to house some of the cadets. All of the Corps Halls offer double occupancy rooms at per semester rent of $1,951 for the academic year and a projected per semester rent of $2,010 for the academic year. The Department of Residence Life also rents 418 units (788 beds) at the University Apartments to graduate students, undergraduate students (with at least 30 credit hours), married students, students with dependent children, international students, and students who are U.S. military veterans. Residents have the option to pay by the month or by the semester. UNIVERSITY NOT LIABLE FOR SERIES 2014A BONDS THE UNIVERSITY SHALL HAVE NO LIABILITY, EXPRESS OR IMPLIED, FOR THE PAYMENT OF PRINCIPAL OF, PREMIUM, IF ANY, OR INTEREST ON THE SERIES 2014A BONDS, AND THE UNIVERSITY SHALL NOT BE RESPONSIBLE OR LIABLE, EXPRESSLY OR IMPLICITLY, FOR ANY OTHER OBLIGATIONS OF ANY PARTY, UNDER ANY OF THE BOND DOCUMENTS, OR UNDER ANY OTHER DOCUMENTS DELIVERED IN CONNECTION WITH THE ISSUANCE OF THE SERIES 2014A BONDS OR FOR THE SERIES 2014A PROJECT. 43

48 CASH FLOW FORECAST A Cash Flow Forecast relating to the Series 2014A Project and the Borrower s ability to generate revenues from the operations of the Series 2014A Project sufficient to pay principal and interest on the Series 2014A Bonds for each of the fiscal years ending June 30 for the years has been prepared by the Manager. The Trustee, the Issuer and the Underwriter make no representations as to any aspect of the Cash Flow Forecast or the ability of the Borrower to pay amounts under the Loan Agreement sufficient to satisfy the principal, premium, if any, and interest due on the Series 2014A Bonds. The Cash Flow Forecast assumes that the Series 2014A Bonds will be issued in the aggregate principal amount of $111,535,000*, bear interest at an approximate rate of 4.67%* and are structured to produce approximately level debt service after an initial period of partially deferred principal through fiscal year ending June 30, Rental Revenues estimated in the Cash Flow Forecast are based on rents for each bed presented herein under the heading THE SERIES 2014A PROJECT. The Cash Flow Forecast assumes delivery of the Series 2014A Project in August 2015 with occupancy rates for available beds at the Series 2014A Project of 95% during the academic year and 15% during the summer. The occupancy rates are based on residents primarily entering into rental agreements covering a 10-month academic year, with a small amount of 12-month leases, as well as summer camp and conference rentals, providing the summer occupancies. Other revenues include additional ancillary income from the Series 2014A Project operation, as well as earnings on the Debt Service Reserve Fund at an assumed annual rate of 0.50%. In addition to regular estimated costs of operating the Series 2014A Project, the Cash Flow Forecast includes an annual deposit to the Repair and Replacement Fund equal to $185 per bed per year, as well as deposits to the Operations Contingency Fund sufficient to maintain a balance equal to 25% of annual Expenses. Income and expense estimates (including the annual replacement reserve deposit) are escalated at an assumed rate of 3% per annum beginning the year after such beds are available for occupancy. IF ACTUAL INTEREST RATES, PRINCIPAL PAYMENTS AND FUNDING REQUIREMENTS DIFFER FROM THOSE ASSUMED IN THE FORECAST, THE FORECAST COULD BE ADVERSELY AFFECTED, SOME ASSUMPTIONS WHICH SERVED AS A BASIS FOR THE FINANCIAL FORECAST INEVITABLY WILL NOT MATERIALIZE AND UNANTICIPATED EVENTS AND CIRCUMSTANCES MAY OCCUR; THEREFORE, THERE WILL USUALLY BE DIFFERENCES BETWEEN FORECASTED AND ACTUAL RESULTS AND THOSE DIFFERENCES MAY BE MATERIAL. [Remainder of page intentionally left blank.] * Preliminary. Subject to Change. 44

49 The following table is a summary of the Cash Flow Forecast based upon the assumptions described above. Fiscal Year Ending June 30, Gross Rental Revenue $10,400,700 $10,712,721 $11,034,103 $11,365,126 $11,706,079 LESS: Vacancies 520, , , , ,304 Gross Summer Rental Revenue 2,080,140 2,142,544 2,206,821 2,273,025 2,341,216 LESS: Summer Vacancies 1,768,119 1,821,163 1,875,797 1,932,071 1,990,034 Net Rental Revenues 10,192,686 10,498,467 10,813,421 11,137,823 11,471,958 Other Income 63,700 65,611 67,579 69,607 71,695 Debt Service Reserve Fund Earnings 1 5,994 35,962 35,962 35,962 35,962 Total Revenues $10,262,380 $10,600,040 $10,916,962 $11,243,392 $11,579,615 Payroll $423,007 $435,698 $448,768 $462,231 $476,098 Maintenance 875, , , , ,345 Custodial 266, , , , ,146 Landscaping 150, , , , ,826 Property Insurance 75,175 77,430 79,753 82,146 84,610 Resnet 16,800 17,304 17,823 18,358 18,909 Telecom/Cable/Card Access 89,686 92,376 95,148 98, ,942 Offices, Gaming & Computer Lab 3,000 3,090 3,183 3,278 3,377 Staff Development, Training & Travel 3,500 3,605 3,713 3,825 3,939 Security Officers 272, , , , ,138 Bond Related Fees 2 25,000 25,750 26,523 27,318 28,138 Foundation Fee 352, , , , ,437 Total Senior Expenses $2,552,874 $2,371,960 $2,443,119 $2,516,412 $2,591,905 Net Operating Income $7,709,506 $8,228,080 $8,473,844 $8,726,980 $8,987,711 Annual Debt Service 3 854,118 6,189,706 6,377,106 6,570,306 6,763,706 Debt Service Coverage Breakeven Occupancy 12.09% 75.97% 76.00% 76.02% 76.00% Subordinate: Utilities 1,295,755 1,334,628 1,374,667 1,415,907 1,458,384 Replacement Reserve Fund 235, , , , ,271 Operating Reserve Fund Deposits 899,657 26,990 27,799 28,633 29,492 Net Cash Flow $4,424,286 $433,995 $444,228 $454,589 $470,857 1 Assumes an annual return on investments in the Debt Service Reserve Fund of 0.50%. 2 Include the Rating Agency and Trustee fees. 3 Net of payments made from the Capitalized Interest Account. 45

50 MARKET STUDY A Market Study (the Market Study ) relating to the Series 2014A Project and an analysis of the housing market in College Station, Texas near the campus of the University has been prepared by Anderson Strickler, LLC (the Market Study Consultant ). The Market Study is dated March 3, The Market Study should be read in its entirety. The Market Study includes information on the off-campus rental market and housing development trends in and around the area where the Series 2014A Project will be located. The Market Study identifies, among other things, demand for additional housing at the University, as further described therein. With permission of the Market Study Consultant, the Market Study has been included in Appendix A. The achievement of any forecast is dependent upon future events, the occurrence of which cannot be assured. See CERTAIN BONDHOLDERS RISKS Actual Actual Results May Differ from Market Study and Cash Flow Forecast herein. The Trustee and the Issuer make no representation as to any aspect of the Market Study or the ability of the Borrower to pay amounts under the Loan Agreement sufficient to satisfy the principal, premium, if any, and interest due on the Series 2014A Bonds. General CERTAIN BONDHOLDERS RISKS EACH INVESTOR SHOULD CONSIDER THE RISKS INVOLVED TO DETERMINE THE SUITABILITY OF INVESTING IN THE SERIES 2014A BONDS. Each prospective investor should carefully examine this Official Statement and his or her own financial condition (including the diversification of his or her investment portfolio) in order to make a judgment as to whether the Series 2014A Bonds are an appropriate investment. The Borrower has identified and summarized below certain Bondholders Risks that could adversely affect the operation of the Series 2014A Project and/or the Series 2014A Bonds which should be considered by prospective investors. The following discussion is not intended to be exhaustive, but includes certain major factors which should be considered along with other factors set forth elsewhere in this Official Statement, including the Appendices hereto. If the Borrower is unable to generate sufficient Revenues from the operation of the Series 2014A Project to pay its operating expenses and principal of and interest on the Bonds, an Event of Default may occur under the Bond Documents. Upon an Event of Default, the Bonds may be paid before maturity or applicable redemption dates and a forfeiture of purchase premiums, if any, may result. The Borrower s ability to generate revenues and its overall financial condition may be adversely affected by a wide variety of future events and conditions including (i) a decline in the enrollment of the University, (ii) increased competition from other schools, (iii) loss of accreditation of the University s programs, (iv) failure of the University to meet applicable federal guidelines or some other event which results in students of the University being ineligible for federal financial aid, and (v) cost overruns in connection with the Series 2014A Project or other capital improvements. Limited Obligations of the Issuer The Series 2014A Bonds constitute special, limited obligations of the Issuer and have three potential sources of payment. The sources of payment are as follows: (a) Payments Received by the Trustee From the Borrower Pursuant to the Terms of the Indenture and the Loan Agreement. The Issuer has no obligation to pay the Series 2014A Bonds except from the Trust Estate, including Loan Payments derived from the Loan Agreement. The Series 2014A Bonds and the obligation to pay principal, premium, if any, and interest thereon, are special, limited obligations of the Issuer, secured as provided in the Indenture and payable solely out of the payments made pursuant to the Loan Agreement and the Security and as otherwise provided in the Indenture and the Loan Agreement. Neither the faith and credit nor the taxing power of the Board, the University, the State or any political subdivision thereof is pledged to the payment of the Series 2014A 46

51 Bonds. The State is not liable on the Series 2014A Bonds and the Series 2014A Bonds are not a debt of the State. The Issuer has no taxing power. No owner of the Series 2014A Bonds has the right to compel any exercise of the taxing power, if any, of the Issuer, the State or any political subdivision thereof to pay the principal of, premium, if any, or interest on the Series 2014A Bonds. Neither the members of the Issuer nor any person executing the Series 2014A Bonds is liable personally on the Series 2014A Bonds by reason of the issuance thereof. Under the Loan Agreement, the Borrower will be required to make Loan Payments (the interest in which the Trustee has received by assignment from the Issuer) to the Trustee in amounts sufficient to enable the Trustee to pay the principal of, premium, if any, and interest on the Series 2014A Bonds. The Loan Payments are anticipated, however, to be derived solely from the operation of the Series 2014A Project, and the obligation to make Loan Payments is not a general obligation of the Borrower. Furthermore, the Borrower s ability to meet its obligations under the Loan Agreement will depend upon achieving and maintaining certain occupancy levels at the Series 2014A Project throughout the term of the Series 2014A Bonds. No assurance can be made that the Borrower will generate sufficient revenues from the Series 2014A Project to pay maturing principal of, premium, if any, and interest on the Series 2014A Bonds after payment of operating expenses of the Series 2014A Project. (b) Revenues Received From Operation of the Series 2014A Project by a Receiver Upon a Default Under the Indenture. It has been the experience of lenders in recent years that attempts to have a receiver appointed to take charge of properties with respect to which loans have been made are frequently met with defensive measures such as the initiation of protracted litigation and the initiation of bankruptcy proceedings. Such defensive measures can prevent the appointment of a receiver or greatly increase the expense and time involved in having a receiver appointed. See CERTAIN BONDHOLDERS RISKS - Enforceability of Remedies herein. Accordingly, prospects for uninterrupted payment of principal and interest on the Series 2014A Bonds in accordance with their terms are largely dependent upon Loan Payments from the Borrower described in the preceding paragraph, which is wholly dependent upon the success of the Borrower in the operation of the Series 2014A Project. (c) Proceeds Realized From the Sale or Lease of the Issuer s and the Borrower s Interest in the Series 2014A Project to a Third Party by the Trustee at or Following Foreclosure by the Trustee of the Leasehold Deed of Trust and Proceeds Realized From the Liquidation of Other Security for the Series 2014A Bonds. Debtors frequently employ defensive measures, such as protracted litigation and bankruptcy proceedings, in response to lenders efforts to foreclose on real property or otherwise to realize upon collateral to satisfy indebtedness which is in default. Such defensive measures can prevent, or greatly increase the expense and time involved in achieving, such foreclosure or other realization. In addition, the Trustee could experience difficulty in selling or leasing the real and personal property portion of the Series 2014A Project upon foreclosure due to the special purpose nature of a Series 2014A Project, and the proceeds of such sale may not be sufficient to pay fully the owners of the Series 2014A Bonds. See CERTAIN BONDHOLDERS RISKS Liquidation of Security May Not Be Sufficient in the Event of a Default herein. Accordingly, prospects for uninterrupted payment of principal and interest on the Series 2014A Bonds in accordance with their terms are largely dependent upon the Loan Payments described in paragraph (a) above, which is wholly dependent upon the success of the Series 2014A Project. Even if the Series 2014A Project is operating in an efficient manner, other factors could affect the Borrower s ability to make Loan Payments under the Loan Agreement. Limited Resources of the Borrower The Borrower has no substantial revenues or assets other than the Series 2014A Project and the Series 2014A Bonds are secured only by the operations and assets of the Series 2014A Project. Therefore, timely payment of principal of, premium, if any, and interest on the Series 2014A Bonds will be dependent upon the Borrower s ability to generate revenues from the Series 2014A Project sufficient to pay its operating expenses and Loan Payments under the Loan Agreement. If after payment of operating expenses, net revenues are insufficient to pay the debt service on the Series 2014A Bonds, the Borrower may not have money or assets 47

52 other than the Series 2014A Project from which to make the payments required under the Loan Agreement, and is not obligated to use any such money or assets to make such payments. See NONRECOURSE OBLIGATION OF THE BORROWER S MEMBER OR OFFICERS herein. No Recourse Against the University The University will not be liable for the payment of the principal of, premium, if any, or interest on the Series 2014A Bonds, nor will the University be responsible or liable for any other obligations of the Borrower or the obligations of any other party in connection with the Series 2014A Bonds. Liquidation of Security May Not Be Sufficient in the Event of a Default The Series 2014A Project is located on the campus of the University, and may not be suitable for uses other than as a student housing facility. Furthermore, the Ground Lease significantly limits the uses to which the Series 2014A Project may be put. The number of entities that could be expected to purchase or lease the Borrower s interest in the Series 2014A Project is therefore limited, and thus the ability of the Trustee to realize funds from the sale or lease of such interest upon an event of default may be limited. Such value may be also limited by actual or alleged rights of residents. Any foreclosure proceeding may be subject to substantial delays. The ability of the Trustee to receive funds sufficient to pay the Series 2014A Bonds from any sale or foreclosure of the Issuer s interest in the Premises may be limited by a number of factors, including the limited operational use of the Series 2014A Project as a student housing facility. Risks Associated With Ground Lease The Borrower does not own fee title to the real property on which the Series 2014A Project is situated, and instead leases such property from the Ground Lessor pursuant to the Ground Lease. A default under the Ground Lease or failure of the Ground Lessor s title to any such real property could result in a termination thereof, effectively depriving the Trustee of the real property security for the Series 2014A Bonds. The Trustee is granted the right to cure defaults under the Ground Lease and the right to compel the University to enter into a new Ground Lease (of substantially the same terms as the original) upon any termination thereof. No assurance can be given, however, that the Trustee would be willing or able to effect a cure of any such default or enter into any such replacement Ground Lease. In addition, the obligation to comply with the terms of the Ground Lease and to relinquish any claim to the Series 2014A Project on termination of the Ground Lease renders the Series 2014A Project less valuable to prospective purchasers upon foreclosure. Geographic Concentration The occupancy rates in the Series 2014A Project may be adversely affected by regional and local economic conditions, competitive conditions, applicable local laws and regulations, and general real estate market conditions, including the supply and proximity of apartment communities in such area. Insurance and Legal Proceedings The Borrower will carry property and general liability insurance in amounts deemed adequate by management and consistent with industry practices and in compliance with the requirements of the Ground Lease and the Loan Agreement. However, for as long as the Ground Lessor remains obligated, in the event of damage or destruction by fire or other casualty to the Series 2014A Project, to pay the cost of repairing and rebuilding the Series 2014A Project and providing for loss of revenue during such time, the Borrower will not be required to obtain casualty and business interruption insurance. See THE GROUND LEASE Ground Lessor Commitment to Repair and Replace the Series 2014A Project herein. There can be no assurance that any current or future claims will be covered by or will not exceed applicable insurance coverage. A claim against the Borrower not covered by, or in excess of, the Borrower s insurance or not paid for by the Ground Lessor as provided in the Ground Lease could have a material adverse effect upon the Borrower. 48

53 Existing Operations and Possible Increased Competition The student housing industry is highly competitive. Such competition may inhibit the extent to which the Borrower will be able to raise charges and maintain or increase occupancy. Competing companies may offer newer or different projects or services and may thereby attract residents who are present or potential residents of the Series 2014A Project. See the Market Study attached hereto as Appendix A. The Borrower or the University may themselves acquire or develop additional student housing facilities which are competitive with the Series 2014A Project. The University currently operates student housing facilities which will compete with the Series 2014A Project. Governmental Regulation The housing industry is significantly regulated by the federal and local government. Regulations and conditions affecting the acquisition, development and ownership of residential real estate, including local zoning and land use issues, environmental regulations, the Americans with Disabilities Act, the Fair Housing Amendments Act of 1988 and general conditions in the multifamily residential real estate market, could increase the operating expenses of the Series 2014A Project or could otherwise have a material adverse effect on the financial condition of the Borrower or the results of its operations. Required Occupancy Levels and Rents In order for the Borrower to generate sufficient revenues to enable it to make the Debt Service Payments in the amounts and at the times required under the Loan Agreement, the Series 2014A Project must meet certain assumed occupancy levels and achieve certain assumed rents during each fiscal year. There can be no assurance, however, that the Series 2014A Project will be able to meet and maintain such required occupancy and rent levels during any fiscal year. Enrollment The Borrower s ability to maintain the required occupancy levels depends, to a large extent, on the University s ability to maintain student enrollment. Enrollment can be affected by a number of factors including, without limitation, (i) increased competition from other schools, (ii) changes in the demand for higher education in general or for programs offered by the University in particular, (iii) loss of accreditation of the University s programs, (iv) failure of the University to meet applicable federal guidelines or some other event which results in students of the University being ineligible for federal financial aid, and (v) state budget cuts. The Borrower s ability to generate revenues and its overall financial condition may be adversely affected by a wide variety of future events and conditions including a decline in the enrollment of the University. The Ground Lease requires that the Series 2014A Project be used solely for the operation of a housing facility to serve enrolled students, faculty and staff of the University and people attending programs presented by the University or another organization on the University s campus, whose presence is deemed desirable by the University to the effective provision of the University s programs and services. There can be no assurance that there will be sufficient demand or enrollment at the University for the Borrower to lease all of the beds in the Series 2014A Project. The University will not be liable for the payment of the principal of, premium, if any, or interest on the Series 2014A Bonds, nor will the University be responsible or liable for any other obligations of the Borrower or the obligations of any other party in connection with the Series 2014A Bonds. Risks of Construction The cost of construction and the date of completion of the Series 2014A Project may be affected by factors beyond the control of the Borrower, including strikes, material and labor shortages, adverse weather conditions, subcontractor defaults, delays, and unknown contingencies. Additionally, the date of completion 49

54 may be extended if the University does not complete the University Work according to the schedule agreed to with the Developer. See THE GROUND LEASE University Work and THE DEVELOPMENT AGREEMENT herein. Because of the exculpatory provisions contained in the Bond Documents, the Trustee will have no claim against the Borrower, beyond its interest in the Series 2014A Project and the Premises, in the event the Series 2014A Project is not completed in accordance with the plans and specifications, or otherwise not completed. The Development Agreement obligates the Developer to enter into the Design/Build Contract with the Design/Builder pursuant to which the Design/Builder will agree to design and construct the Series 2014A Project for a guaranteed maximum price subject to adjustment as provided in the Design/Build Contract that when added to all other costs of developing, designing, constructing, equipping and furnishing the Series 2014A Project will not exceed the amount of the total development budget agreed to in the Development Agreement. The Development Agreement also obligates the Developer to cause the Design/Builder to perform in a manner consistent with the terms of the Development Agreement including causing the Design/Builder to take such actions as may be necessary to ensure completion of the Series 2014A Project by the scheduled date of substantial completion, as may be extended pursuant to the terms of the Development Agreement. The cost of completing the Series 2014A Project may be increased, however, if there are change orders or other matters allowed under the Development Agreement. The Development Agreement requires the Developer to cause the Design/Builder to furnish performance and payment bonds; however, there can be no assurance that the obligations of the surety under such bonds can be enforced without costly and time consuming litigation. Permits The permits for the Series 2014A Project are expected to be delivered in three phases, not all of which will be obtained prior to the issuance of the Series 2014A Bonds. The System is responsible for issuing the permits; however, no assurance can be made that all permits will be delivered as scheduled. A failure to obtain permits or to stop work because of a failure to obtain permits under the Development Agreement will require a payment to be made by the Developer in the amount necessary, when added to amounts on deposit in the Funds (except the Rebate Fund) established pursuant to the Indenture, to redeem the outstanding Series 2014A Bonds. See THE SERIES 2014A BONDS Redemption Mandatory Redemption Upon Failure to Obtain Permits herein. Cleanup Costs and Liens Under Environmental Statutes The Borrower is not aware of any enforcement actions currently in process with respect to any releases of pollutants or contaminants at the site of the Series 2014A Project. However, there can be no assurance that an enforcement action or actions will not be instituted under such statutes at a future date. In the event such enforcement actions were initiated, the Borrower could be liable for the costs of removing or otherwise treating pollutants or contaminants located at the Series 2014A Project. In addition, under applicable environmental statutes, in the event an enforcement action were initiated, a lien superior to the Trustee s lien on behalf of the Bondholders could attach to the Series 2014A Project, which would adversely affect the Trustee s ability to realize value upon foreclosure of the Leasehold Deed of Trust. Furthermore, in determining whether to exercise any foreclosure rights with respect to the Series 2014A Project under the Indenture, the Trustee and the Bondholders would need to take into account the potential liability of any tenant of the Series 2014A Project, including a tenant by foreclosure, for clean-up costs with respect to such pollutants and contaminants. Enforceability of Remedies To secure the Borrower s obligations to the Issuer under the Loan Agreement and the Series 2014A Note, the Borrower has, subject to Permitted Encumbrances, (i) granted to the Trustee a first deed of trust lien on the Borrower s interest in the Premises and has assigned and pledged to the Trustee the Borrower s interest in the General Revenues from the Series 2014A Project and any improvements thereto or expansions thereof pursuant to the Leasehold Deed of Trust, (ii) granted to the Trustee a first priority security interest in the 50

55 accounts, documents, chattel paper, instruments and general intangibles held by the Borrower arising in any manner from the Borrower s ownership or operation of the Series 2014A Project and any improvements thereto or expansions thereof, in the inventory, if any, located thereat or thereon and in the Equipment pursuant to the Security Agreement, and (iii) conditionally assigned to the Trustee, inter alia, its rights under the Development Agreement and the Management Agreement, and the Developer has conditionally assigned to the Trustee, its rights under the Design/Build Contract and all contracts entered into by the Developer relating to the design and construction of the Series 2014A Project. Pursuant to the Indenture, the Issuer will assign, pledge and grant a security interest in all of its right, title and interest in the Loan Agreement (except for Reserved Rights, as hereinafter defined), the Series 2014A Note and certain funds and accounts held under the Indenture to the Trustee which, on behalf of the owners of the Series 2014A Bonds, will exercise all of the Issuer s rights with respect thereto (except for Reserved Rights). Unless there is a Transfer Event, the Revenue Fund, the Repair and Replacement Fund, the Operations Contingency Fund and the Surplus Funds are all Funds that are held by the University under the Indenture. The practical realization of value upon any default will depend upon the exercise of various remedies specified by the Bond Documents. These and other remedies may, in many respects, require judicial actions, which are often subject to discretion and delay. Under existing law (including, particularly, federal bankruptcy law), the remedies specified by the Bond Documents may not be readily available or may be limited. A court may decide not to order the specific performance of the covenants contained in the Bond Documents. The various legal opinions to be delivered concurrently with the delivery of the Series 2014A Bonds will be qualified as to the enforceability of the various legal instruments by limitations imposed by state and federal laws, rulings, and decisions affecting remedies, including judicial discretion in the application of the principles of equity, and by bankruptcy, reorganization, or other laws affecting the enforcement of creditors rights generally. Effect of Determination of Taxability The Borrower and the Issuer each will covenant not to take any action that would cause the Series 2014A Bonds to be arbitrage bonds or that would otherwise adversely affect the federal income tax status of interest on the Series 2014A Bonds. The Borrower has also made representations with respect to certain matters within its knowledge which have been relied on by Bond Counsel and which Bond Counsel has not independently verified. Failure by the parties to the Loan Agreement, Tax Regulatory Agreement and Indenture to comply with their respective covenants thereunder could result in interest on the Series 2014A Bonds becoming includible in gross income for federal tax purposes. It is possible that a period of time may elapse between the occurrence of the event which causes interest to become taxable and the determination that such an event has occurred. In such a case, interest previously paid on the Series 2014A Bonds could become retroactively taxable from the date of their issuance. Additionally, certain owners of Series 2014A Bonds are subject to possible adverse tax consequences. See TAX MATTERS herein. Actual Results May Differ From Market Study and Cash Flow Forecast The Market Study and its forecast of future demands included in Appendix A hereto, and the Cash Flow Forecast and its forecast of future revenues and expenses with respect to the Series 2014A Project is based upon assumptions concerning future events, circumstances, and transactions. In addition, the Cash Flow Forecast contained herein only covers the approximate five year period ending June 30, 2020, and consequently does not cover the entire period during which the Series 2014A Bonds may be outstanding. The achievement of any financial forecast is dependent upon future events, the occurrence of which cannot be assured. Realization of the results forecasted will depend on the implementation by the Borrower of policies and procedures consistent with such assumptions. Future results will also be affected by events and circumstances beyond the control of the Borrower. For the reasons described above, it is likely that the actual results of the Series 2014A Project will be different from the results forecast in the Market Study and the Cash Flow Forecast and those differences may be material and adverse. 51

56 No representation or assurances can be made that revenues will be realized by the Borrower from the operation of the Series 2014A Project in amounts sufficient to pay maturing principal and interest on the Series 2014A Bonds. Future economic and other conditions, including demand for and services offered by the Series 2014A Project and the ability of the residents of the Series 2014A Project to meet their financial obligations, increased costs, litigation, competition, lower than anticipated revenues, higher than anticipated operating expenses, changes in governmental regulation, loss of federal tax-exempt status, loss of state or local property tax exemption, changes in demographic trends, changes in the student housing industry and general economic conditions may adversely affect revenues and, consequently, payment of principal and interest. Factors such as increasing maintenance fees which could affect occupancy, differences in interest rates from those expected, competition from other institutions to host summer conferences, and construction costs are all items to which the forecast financial statements are highly sensitive. The ability of the Borrower to pay debt service on the Series 2014A Bonds depends upon its ability to market the Series 2014A Project. The economic feasibility of the Series 2014A Project depends upon the ability of the Borrower to attract sufficient residents and to maintain substantial occupancy at projected rent levels of such Series 2014A Project throughout the term of the Series 2014A Bonds. There can be no assurance that the levels of occupancy assumed in the Cash Flow Forecast will be obtained or maintained. Uncertainty of Investment Income The investment earnings of, and accumulations in, certain funds and accounts established by the Indenture have been estimated and are based on assumed earnings rates. While these assumptions are believed to be reasonable in view of the rates of return presently available, there is no assurance that similar interest rates will be available on such investments in the future, nor is there any assurance that the potential accumulations assumed will be realized. Consequences of Changes in the Foundation s Tax Status The Foundation has obtained a determination letter from the Internal Revenue Service stating that it will be treated as an exempt organization as described in Section 501(c)(3) of the Code and can reasonably be expected not to be classified as a private foundation. In order to maintain its exempt status and not to be considered a private foundation, the Foundation is subject to a number of requirements affecting its operation. The possible modification or repeal of certain existing federal income tax laws, the change of Internal Revenue Service policies or positions, the change of the Borrower s or the Foundation s method of operations, purposes or character or other factors could result in loss by the Foundation of its tax-exempt status. The Borrower will covenant to cause the Foundation to remain eligible for such tax-exempt status and to avoid operating the Series 2014A Project as an unrelated trade or business (as determined by applying Section 513(a) of the Code). Failure of the Series 2014A Project to remain so qualified or of the Borrower so to operate the Series 2014A Project could affect the funds available to the Borrower for payments under the Loan Agreement by subjecting the Borrower to federal income taxation and could result in the loss of the excludability of interest on the Series 2014A Bonds from gross income for purposes of federal income taxation. See CERTAIN BONDHOLDERS RISKS Effect of Determination of Taxability above. State and Local Taxes The Cash Flow Forecast is based on an assumption that the Series 2014A Project will be exempt from ad valorem property taxes based on exemptions currently provided in the Texas Property Tax Code. The determination of whether such exemptions apply to the Series 2014A Project is made by the local central appraisal district, subject to review by a state district court. If the local central appraisal district determines that the property tax exemptions do not apply to the Series 2014A Project or if the property tax exemptions are repealed by the Texas Legislature, the Borrower may be required to raise the rent charged to tenants, which could negatively affect occupancy levels and thereby reducing revenues from the Series 2014A Project. 52

57 Taxation of Series 2014A Bonds An opinion of Bond Counsel has been obtained as described under TAX MATTERS herein. Such an opinion is not binding on the Internal Revenue Service. Application for a ruling from the Internal Revenue Service regarding the status of the interest on the Series 2014A Bonds has not been made. The opinion of Bond Counsel contains certain exceptions and is based on certain assumptions described herein under the heading TAX MATTERS. Failure by the parties to the Loan Agreement, Tax Regulatory Agreement and Indenture to comply with their respective covenants thereunder could result in interest on the Series 2014A Bonds becoming includible in gross income for federal tax purposes. Bond Insurance In the event of default of the payment of principal or interest with respect to the Series 2014A Bonds when all or some becomes due, any Owner of the Insured Series 2014A Bonds will have a claim under the Bond Insurance Policy for such payments. However, in the event of any acceleration of the due date of such principal by reason of mandatory or optional redemption or acceleration resulting from default or otherwise, other than any advancement of maturity pursuant to a mandatory sinking fund payment, the payments are to be made in such amounts and at such times as such payments would have been due had there not been any such acceleration. The Bond Insurance Policy does not insure against redemption premium, if any. The payment of principal and interest in connection with mandatory or optional prepayment of the Insured Series 2014A Bonds by the Issuer which is recovered by the Issuer from the Bond Owner as a voidable preference under applicable bankruptcy law is covered by the Bond Insurance Policy, however, such payments will be made by the 2014A Insurer at such time and in such amounts as would have been due absent such prepayment by the Issuer unless the 2014A Insurer chooses to pay such amounts at an earlier date. Under most circumstances, default of payment of principal and interest does not obligate acceleration of the obligations of the 2014A Insurer without appropriate consent. The 2014A Insurer may direct and must consent to any remedies and the 2014A Insurer s consent may be required in connection with amendments to any applicable bond documents. In the event the 2014A Insurer is unable to make payment of principal and interest as such payments become due under the Bond Insurance Policy, the Insured Series 2014A Bonds are payable solely from the moneys received pursuant to the applicable bond documents. In the event the 2014A Insurer becomes obligated to make payments with respect to the Insured Series 2014A Bonds, no assurance is given that such event will not adversely affect the market price of the Insured Series 2014A Bonds or the marketability (liquidity) for the Insured Series 2014A Bonds. The insured ratings on the Insured Series 2014A Bonds are dependent in part on the financial strength of the 2014A Insurer and its claim paying ability. The 2014A Insurer s financial strength and claims paying ability are predicated upon a number of factors which could change over time. No assurance is given that the long-term ratings of the 2014A Insurer and of the insured ratings on the Insured Series 2014A Bonds will not be subject to downgrade and such event could adversely affect the market price of the Series 2014A Bonds or the marketability (liquidity) for the Insured Series 2014A Bonds. See description of RATINGS herein. The obligations of the 2014A Insurer are contractual obligations and in an event of default by the 2014A Insurer, the remedies available may be limited by applicable bankruptcy law or state law related to insolvency of insurance companies. Neither the Issuer, the Borrower or the Underwriter have made independent investigation into the claims paying ability of the 2014A Insurer and no assurance or representation regarding the financial strength or projected financial strength of the 2014A Insurer is given. Thus, when making an investment decision, potential investors should carefully consider the ability of the Issuer to pay principal and interest on the Insured Series 2014A Bonds and the claims paying ability of the 2014A Insurer, particularly over the life of the investment. See 2014A BOND INSURANCE herein for further information provided by the 2014A Insurer 53

58 and the Bond Insurance Policy, which includes further instructions for obtaining current financial information concerning the 2014A Insurer. The Issuer LITIGATION There is not now pending (as to which the Issuer has received service of process) or, to the actual knowledge of the Issuer threatened, any litigation against the Issuer restraining or enjoining the issuance or delivery of the Series 2014A Bonds or questioning or affecting the validity of the Series 2014A Bonds or the proceedings or authority under which the Series 2014A Bonds are to be issued. Neither the creation, organization nor existence of the Issuer nor the title of any of the present members or other officers of the Issuer to their respective offices is being contested. There is no litigation against the Issuer pending (as to which the Issuer has received service of process) or, to the actual knowledge of the Issuer, threatened, which in any manner questions the right of the Issuer to enter into the Indenture, the Loan Agreement or the Bond Purchase Agreement or to secure the Series 2014A Bonds in the manner provided in the Indenture, the Resolution and the Act. The Borrower There is no action, suit or proceeding, at law or in equity before any court, public board or body pending or, to the knowledge of the Borrower, threatened (or any meritorious basis for such an action, suit, proceeding, inquiry or investigation) at the date of this Official Statement to restrain or enjoin the issuance, sale, execution or delivery of the Series 2014A Bonds or any proceedings of the Borrower taken with respect thereto, or wherein an unfavorable decision, ruling or finding (i) would adversely affect the transactions contemplated by this Official Statement or the validity or enforceability of the Series 2014A Bonds, the Indenture, the Loan Agreement or any other agreement or instrument which is used or contemplated for use in the consummation of the transactions contemplated by this Official Statement or (ii) would materially adversely affect the financial condition or operations of the Series 2014A Project. There is no litigation now pending or threatened against the Borrower, of which the Borrower has knowledge, which in any manner questions the right of the Borrower to enter into or perform its obligations under the Loan Agreement, the Ground Lease, the Leasehold Deed of Trust, the Security Agreement or the Assignment of Agreements and Documents. Opinion TAX MATTERS On the date of initial delivery of the Series 2014A Bonds, McCall, Parkhurst & Horton L.L.P., Dallas, Texas, Bond Counsel to the Issuer, will render its opinion that, in accordance with statutes, regulations, published rulings and court decisions existing on the date thereof ( Existing Law ), (1) interest on the Series 2014A Bonds for federal income tax purposes will be excludable from the gross income of the holders thereof and (2) the Series 2014A Bonds will not be treated as specified private activity bonds the interest on which would be included as an alternative minimum tax preference item under section 57(a)(5) of the Internal Revenue Code of 1986 (the Code ). Except as stated above, Bond Counsel to the Issuer will express no opinion as to any other federal, state or local tax consequences of the purchase, ownership or disposition of the Series 2014A Bonds. See APPENDIX C-- FORM OF OPINION OF BOND COUNSEL. In rendering its opinion, Bond Counsel to the Issuer will rely upon (a) the opinion of Hand Arendall, LLC relating to the designation of the Borrower as a disregarded entity for federal income tax purposes by virtue of its sole member being an organization described in section 501(c)(3) of the Code, (b) information furnished by the parties to the Loan Agreement and the Tax Regulatory Agreement, and particularly written representations of officers and agents of such parties with respect to certain material facts that are solely within their knowledge relating to the use of proceeds of the bonds, and (c) the Issuer s federal tax certificate. Failure of the Issuer, the Borrower or the Foundation to comply with these representations or 54

59 covenants could cause the interest on the Series 2014A Bonds to become includable in gross income retroactively to the date of issuance of the Series 2014A Bonds. The Code and the regulations promulgated thereunder contain a number of requirements that must be satisfied subsequent to the issuance of the Series 2014A Bonds in order for interest on the Series 2014A Bonds to be, and to remain, excludable from gross income for federal income tax purposes. Failure to comply with such requirements may cause interest on the Series 2014A Bonds to be included in gross income retroactively to the date of issuance of the Series 2014A Bonds. The opinion of Bond Counsel to the Issuer is conditioned on compliance by the Issuer and the Borrower with such requirements, and Bond Counsel to the Issuer has not been retained to monitor compliance with these requirements subsequent to the issuance of the Series 2014A Bonds. Bond Counsel's opinion represents its legal judgment based upon its review of Existing Law and the reliance on the aforementioned information, representations and covenants. Bond Counsel's opinion is not a guarantee of a result. Existing Law is subject to change by the Congress and to subsequent judicial and administrative interpretation by the courts and the Department of the Treasury. There can be no assurance that Existing Law or the interpretation thereof will not be changed in a manner which would adversely affect the tax treatment of the purchase, ownership or disposition of the Series 2014A Bonds. A ruling was not sought from the Internal Revenue Service by the either the Borrower or the Issuer with respect to the Series 2014A Bonds or the property financed or refinanced with proceeds of the Series 2014A Bonds. No assurances can be given as to whether or not the Internal Revenue Service will commence an audit of the Series 2014A Bonds, or as to whether the Internal Revenue Service would agree with the opinion of Bond Counsel. If an audit is commenced, under current procedures the Internal Revenue Service is likely to treat the Issuer as the taxpayer and the Bondholders may have no right to participate in such procedure. No additional interest will be paid upon any determination of taxability. Federal Income Tax Accounting Treatment of Original Issue Discount The initial public offering price to be paid for one or more maturities of the Series 2014A Bonds may be less than the principal amount thereof or one or more periods for the payment of interest on the bonds may not be equal to the accrual period or be in excess of one year (the Original Issue Discount Bonds ). In such event, the difference between (i) the stated redemption price at maturity of each Original Issue Discount Bond, and (ii) the initial offering price to the public of such Original Issue Discount Bond would constitute original issue discount. The stated redemption price at maturity means the sum of all payments to be made on the bonds less the amount of all periodic interest payments. Periodic interest payments are payments which are made during equal accrual periods (or during any unequal period if it is the initial or final period) and which are made during accrual periods which do not exceed one year. Under Existing Law, any U.S. owner who has purchased such Original Issue Discount Bond in the initial public offering is entitled to exclude from gross income (as defined in section 61 of the Code) an amount of income with respect to such Original Issue Discount Bond equal to that portion of the amount of such original issue discount allocable to the accrual period. For a discussion of certain collateral federal tax consequences, see discussion set forth below. In the event of the redemption, sale or other taxable disposition of such Original Issue Discount Bond prior to stated maturity, however, the amount realized by such owner in excess of the basis of such Original Issue Discount Bond in the hands of such owner (adjusted upward by the portion of the original issue discount allocable to the period for which such Original Issue Discount Bond was held by such initial owner) is includable in gross income. Under Existing Law, the original issue discount on each Original Issue Discount Bond is accrued daily to the stated maturity thereof (in amounts calculated as described below for each six-month period ending on the date before the semiannual anniversary dates of the date of the Series 2014A Bonds and ratably within each such six-month period) and the accrued amount is added to an initial owner's basis for such Original Issue 55

60 Discount Bond for purposes of determining the amount of gain or loss recognized by such owner upon the redemption, sale or other disposition thereof. The amount to be added to basis for each accrual period is equal to (a) the sum of the issue price and the amount of original issue discount accrued in prior periods multiplied by the yield to stated maturity (determined on the basis of compounding at the close of each accrual period and properly adjusted for the length of the accrual period) less (b) the amounts payable as current interest during such accrual period on such Original Issue Discount Bond. The federal income tax consequences of the purchase, ownership, redemption, sale or other disposition of Original Issue Discount Bonds which are not purchased in the initial offering at the initial offering price may be determined according to rules which differ from those described above. All owners of Original Issue Discount Bonds should consult their own tax advisors with respect to the determination for federal, state and local income tax purposes of the treatment of interest accrued upon redemption, sale or other disposition of such Original Issue Discount Bonds and with respect to the federal, state, local and foreign tax consequences of the purchase, ownership, redemption, sale or other disposition of such Original Issue Discount Bonds. Collateral Federal Income Tax Consequences The following discussion is a summary of certain collateral federal income tax consequences resulting from the purchase, ownership or disposition of the Series 2014A Bonds. This discussion is based on Existing Law, which is subject to change or modification, retroactively. The following discussion is applicable to investors, other than those who are subject to special provisions of the Code, such as financial institutions, property and casualty insurance companies, life insurance companies, individual recipients of Social Security or Railroad Retirement benefits, individuals allowed an earned income credit, certain S corporations with accumulated earnings and profits and excess passive investment income, foreign corporations subject to the branch profits tax taxpayers qualifying for the health insurance premium assistance credit, and taxpayers who may be deemed to have incurred or continued indebtedness to purchase tax-exempt obligations. INVESTORS, INCLUDING THOSE WHO ARE SUBJECT TO SPECIAL PROVISIONS OF THE CODE, SHOULD CONSULT THEIR OWN TAX ADVISORS AS TO THE TAX TREATMENT WHICH MAY BE ANTICIPATED TO RESULT FROM THE PURCHASE, OWNERSHIP AND DISPOSITION OF TAX-EXEMPT OBLIGATIONS BEFORE DETERMINING WHETHER TO PURCHASE THE SERIES 2014A BONDS. Interest on the Series 2014A Bonds will be includable as an adjustment for adjusted current earnings to calculate the alternative minimum tax imposed on corporations by section 55 of the Code. Under section 6012 of the Code, holders of tax-exempt obligations, such as the Series 2014A Bonds, may be required to disclose interest received or accrued during each taxable year on their returns of federal income taxation. Section 1276 of the Code provides for ordinary income tax treatment of gain recognized upon the disposition of a tax-exempt obligation, such as the Series 2014A Bonds, if such obligation was acquired at a market discount and if the fixed maturity of such obligation is equal to, or exceeds, one year from the date of issue. Such treatment applies to market discount bonds to the extent such gain does not exceed the accrued market discount of such bonds; although for this purpose, a de minimis amount of market discount is ignored. A market discount bond is one which is acquired by the holder at a purchase price which is less than the stated redemption price at maturity or, in the case of a bond issued at an original issue discount, the revised issue price (i.e., the issue price plus accrued original issue discount). The accrued market discount is the amount which bears the same ratio to the market discount as the number of days during which the holder holds the obligation bears to the number of days between the acquisition date and the final maturity date. 56

61 State, Local and Foreign Taxes Investors should consult their own tax advisors concerning the tax implications of the purchase, ownership or disposition of the Series 2014A Bonds under applicable state or local laws. Foreign investors should also consult their own tax advisors regarding the tax consequences unique to investors who are not United States persons. UNDERWRITING RBC Capital Markets, LLC (the Underwriter ), has entered into a Bond Purchase Agreement with the Issuer and the Borrower, to purchase the Series 2014A Bonds at a purchase price of $, representing the principal amount of the Series 2014A Bonds less an Underwriter s discount of $, plus original issue premium in the amount of $, less original issue discount in the amount of $. The total compensation to the Underwriter in connection with the Series 2014A Bonds is expected to be in the form of the discount. The Series 2014A Bonds will be subject to various conditions contained in the Bond Purchase Agreement, including the receipt of an underlying rating on the Series 2014A Bonds of at least Baa3 from Moody s Investor Services, Inc. ( Moody s ) and BBB- from Standard & Poor s Ratings Services ( S&P ), the receipt of the Bond Insurance Policy and the receipt of a rating on the Insured Series 2014A Bonds of at least A2 from Moody s and AA from S&P. The Underwriter is purchasing the Series 2014A Bonds and intends to offer the Series 2014A Bonds to the original purchasers thereof at the offering prices set forth on the inside cover page of this Official Statement, which offering price may subsequently be changed without any requirement of prior notice. The Underwriter has reserved the right to permit other securities dealers who are members of the Financial Industry Regulatory Authority to assist in selling the Series 2014A Bonds. The Underwriter may offer and sell Series 2014A Bonds to certain dealers at prices lower than the public offering price or otherwise allow concessions to such dealers who may re-allow concessions to other dealers. Any discounts and/or commissions that may be received by such dealers in connection with the sale of the Series 2014A Bonds will be deducted from the Underwriter s discount. The Borrower has agreed to indemnify the Underwriter against certain civil liabilities, including certain liabilities under federal securities laws. Under existing statutes, regulations, and court decisions, the enforceability of such an agreement to indemnify is uncertain. RATINGS Moody s and S&P are expected to assign the Insured Series 2014A Bonds ratings of A2 and AA, respectively, with the understanding that upon the delivery of the Insured Series 2014A Bonds, the Bond Insurance Policy will be issued by AGM. In addition, Moody s and S&P have assigned underlying ratings of Baa3 and BBB-, respectively, to the Series 2014A Bonds without regard to the issuance of the Bond Insurance Policy. An explanation of the significance of such ratings may be obtained from Moody s and S&P, respectively. Moody s and S&P were furnished with the information contained in a preliminary form of this Official Statement and other information. Generally, ratings agencies base their rating on such materials and information, as well as their own investigation, studies and assumptions. The ratings reflect only the respective view of Moody s and S&P, respectively, and none of the Borrower, the Issuer, the University or the Underwriter makes any representation as to the appropriateness of the ratings. The above ratings are not recommendations to buy, sell or hold the Series 2014A Bonds, and such ratings may be subject to revision or withdrawal at any time by Moody s and S&P. Any downward revision or withdrawal of any of the above ratings may have an adverse effect on the market price of the Series 2014A Bonds. LEGAL MATTERS Certain legal matters incident to the authorization, issuance and sale of the Series 2014A Bonds are subject to the approving legal opinion of McCall, Parkhurst & Horton L.L.P., as Bond Counsel ( Bond Counsel ), who has been retained by, and acts as, Bond Counsel to the Issuer. Bond Counsel has not been 57

62 retained or consulted on disclosure matters and has not undertaken to review or verify the accuracy, completeness or sufficiency of this Official Statement or other offering material relating to the Series 2014A Bonds and assumes no responsibility for the statements or information contained in or incorporated by reference in this Official Statement, except that in its capacity as Bond Counsel, McCall, Parkhurst & Horton L.L.P. has, at the request of the Issuer, reviewed the information under the headings THE SERIES 2014A BONDS (except for under the subheading Book-Entry-Only System for Series 2014A Bonds ), SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2014A BONDS (other than under the subcaptions Leasehold Deed of Trust, Security Agreement and Assignment of Agreements and Documents, and Title and Property Insurance ), TAX MATTERS, and APPENDIX B - SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE AND LOAN AGREEMENT and has supplied a form of its proposed opinion in APPENDIX C hereto. This review was undertaken solely at the request and for the benefit of the Issuer and did not include any obligation to establish or confirm factual matters set forth herein. Certain legal matters will also be passed on for the Issuer by Rapier, Wilson & Wendland, P.C., Allen, Texas, for the Borrower by its counsel, Hand Arendall LLC, Mobile, Alabama and Shackelford, Melton & McKinley, LLP, Dallas, Texas, and for the Underwriter by its counsel, Ballard Spahr LLP, Baltimore, Maryland. RELATIONSHIP OF PARTIES In the ordinary course of business, the Underwriter, its parent the Royal Bank of Canada, and certain of their affiliates may from time to time provide other investment banking services, commercial banking services or financial products to the University, the Issuer, the Borrower and the Foundation. The Borrower is represented by Hand Arendall LLC, Mobile, Alabama and Jack Edwards, a member of the Board of Directors of the Foundation, is a retired member of that law firm and Will Givhan, an officer of the Foundation, is a member of that law firm. CONTINUING DISCLOSURE The Issuer has determined that no financial or operating data concerning the Issuer is material to any decision to purchase, hold or sell the Series 2014A Bonds, and the Issuer will not provide any such information. The Borrower has undertaken all responsibilities for any continuing disclosure to Bondholders as described below, and the Issuer has no liability to Bondholders or any other person with respect to such disclosures. The Borrower will undertake in a Continuing Disclosure Agreement dated as of May 1, 2014 (the Continuing Disclosure Agreement ) by and between the Borrower, the Issuer and the Trustee, as Trustee and dissemination agent, to comply with the provisions of Rule 15c2-12 as amended from time to time (the Rule ), promulgated by the Securities and Exchange Commission (the SEC ), by providing certain annual financial information and operating data and event notices required by the Rule. Such information is to be filed with the Electronic Municipal Market Access ( EMMA ) system of the Municipal Securities Rulemaking Board. Such undertaking requires the Borrower to provide only limited information at specified times. Upon a failure of the Borrower to provide the required continuing disclosure, any bondholder may bring an action seeking specific performance of the Borrower s obligations to provide continuing disclosure. No assurance can be given as to the outcome of any such proceeding. Failure by the Borrower to comply with the continuing disclosure obligations in the Continuing Disclosure Agreement will not be an Event of Default under the Leasehold Deed of Trust, the Loan Agreement, the Indenture or under any other Bond Document, and the sole and exclusive remedy for such failure is for an action to be brought by or on behalf of the holders of the Series 2014A Bonds to compel specific performance of the Borrower s continuing disclosure obligations, as described above. The Borrower has not previously entered into a continuous disclosure undertaking pursuant to the Rule. 58

63 The proposed form of Continuing Disclosure Agreement is attached hereto as Appendix D. MISCELLANEOUS Any statements herein involving matters of opinion, whether or not expressly so stated, are intended as such and not as representations of fact. The foregoing references to and summaries or descriptions of provisions of the Series 2014A Bonds, the Loan Agreement, the Indenture, the Ground Lease, the other Bond Documents, and all references to other materials not stated to be quoted in full are only brief outlines of some of the provisions thereof and do not purport to summarize or describe all of the provisions thereof. The information set forth in this Official Statement and in the Appendices hereto should not be construed as representing all of the conditions affecting the Issuer, the Borrower, the University, the Underwriter or the Series 2014A Bonds. At closing of the issuance and sale of the Series 2014A Bonds, the Issuer and the Borrower will each deliver to the Underwriter a certificate that no litigation is pending or threatened against it which would have a material effect on the issuance of the Series 2014A Bonds or performance under the Bond Documents. In addition, the Borrower will represent to the Underwriter and the Issuer in the Bond Purchase Agreement that the information contained in this Official Statement relating to itself does not contain any misrepresentation of a material fact and does not omit to state any material fact necessary to make the statements herein contained, in light of the circumstances under which they were made, not misleading. The Borrower has furnished the information contained in this Official Statement relating to itself. The Issuer has furnished only the information contained in this Official Statement relating to itself under the headings THE ISSUER and LITIGATION The Issuer. The Underwriter has furnished the information contained in this Official Statement under the heading UNDERWRITING and has furnished the information with respect to the public offering prices of the Series 2014A Bonds contained on the cover page of this Official Statement. Any statements made in this Official Statement involving estimates or matters of opinion, whether or not so expressly stated, are set forth as such and not as representations of fact, and no representation is made that any of the estimates or matters of opinion will be realized. Neither this Official Statement nor any statement which may have been made orally or in writing is to be construed as a contract with the owners of the Series 2014A Bonds. The distribution of this Official Statement has been duly authorized by the Issuer and the Borrower. The Issuer has not assisted in the preparation of this Official Statement, except for the statements pertaining to the Issuer under the captions THE ISSUER and LITIGATION The Issuer herein and, except as aforesaid, the Issuer is not responsible for any statements made in this Official Statement. Except for the execution and delivery of documents required to effect the issuance of the Series 2014A Bonds, the Issuer has not otherwise assisted in the public offer, sale or distribution of the Series 2014A Bonds. Accordingly, except as aforesaid, the Issuer assumes no responsibility for the disclosures set forth in this Official Statement. 59

64 Borrower s Signature Page to Official Statement CHF-COLLEGIATE HOUSING COLLEGE STATION I, L.L.C. By: Collegiate Housing Foundation, its sole member, doing business in the State of Texas as CHF- Collegiate Housing Foundation By: Leeman H. Covey President

65 APPENDIX A MARKET STUDY The Market Study includes forecasts as to the demographic, socioeconomic and housing development trends in and around the area where the Series 2014A Project will be located. The achievement of any financial forecasts is dependent on future events, the occurrence of which cannot be assured. Therefore, the actual results achieved may vary from the forecasts. Such variation could be material. See CERTAIN BONDHOLDERS RISKS Actual Results May Differ from Market Study and Cash Flow Forecast.

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67 Student Housing Market Study for Balfour Beatty Campus Solutions Montgomery Village Avenue, Suite 515 Gaithersburg, MD March 3, 2014

68 TABLE OF CONTENTS TEXAS A&M UNIVERSITY STUDENT HOUSING MARKET STUDY Executive Summary... 1 Methodology... 4 Texas A&M Housing... 6 Overview... 6 Student Satisfaction... 6 Freshman Living... 7 Off-Campus Market... 9 National Economic Outlook... 9 College Station/Bryan Market... 9 Market Sample Off-Campus Survey Data Pipeline Living Preferences Policies and Amenities Unit Preferences Interest Demand Analysis Summary of Findings Demand Methodology and Results Unit Preference ATTACHMENT 1: Focus Group Notes ATTACHMENT 2: Off-Campus Market Data ATTACHMENT 3: Student Survey Tabulation ATTACHMENT 4: Student Survey Demographics Page i ANDERSON STRICKLER LLC

69 EXECUTIVE SUMMARY TEXAS A&M UNIVERSITY STUDENT HOUSING MARKET STUDY EXECUTIVE SUMMARY Balfour Beatty Campus Solutions retained Anderson Strickler, LLC (ASL) to test demand for a planned development of 4,000 beds on the West Campus of Texas A&M University (TAMU) with a first phase of 2,000 beds. The study included focus groups with 36 current students, an off-campus market analysis of 37 properties, a survey of current students that received over 1,000 responses, and a housing demand analysis. ASL concluded that if TAMU students currently living off campus had their desired housing, up to approximately 4,500 additional students would live on campus. With the opening of 648 beds in fall 2013 in Hullabaloo Hall, the first new residence hall since 1989, TAMU has the capacity to house 9,672 students, including 2,397 beds dedicated to the Corps of Cadets. Fall occupancy was just over 100%. Generally, students are satisfied with their current living situation. The most satisfied off-campus students are those that live in housing owned by their parents or other relatives. The most satisfied on-campus students are those living in Hullabaloo Hall, followed by those in The Gardens. Over 1,500 beds of off-campus student housing opened in fall 2013, with more scheduled to open in the next few years. Both existing and new properties continue to have high occupancy, due in part to increasing enrollment at TAMU. College Station continues to attract student housing developers, though there are some signs that the market is cooling off in terms of rents and Class A occupancies. When ASL polled individually-leased apartments in July 2013, 17 of the 23 complexes reported offering specials. Concessions ranged from waived security deposits to rent discounts or gift cards. In terms of students that rent housing off-campus, one-half rent an apartment (25% in an individuallyleased unit and 25% in a market apartment rented by the unit); 44% rent a house, townhouse, or duplex (where the entire unit is rented by one student or a group); 3% rent a room in a private home, 2% live in a private residence hall, and 1% have some other living arrangement. Only 7% live alone while 22% live with one other person, 28% with two others, 34% with three others, and 9% with more than three others. When deciding where to live for the academic year, the main factor for both those who live on and off campus is affordable rent. For those who live on campus, the second most important decisionmaking factor is the location relative to campus, followed by adequate living space. For those who live off campus, affordable rent is followed by having a private bedroom and adequate living space. High-speed wireless Internet, in-unit temperature control, and a washer/dryer in the unit were the most influential unit features or policies, while a required meal plan would have a negative effect on most students interest in living in campus housing. Important community amenities include on-site laundry facilities, convenient parking, printing stations, and quiet study areas. Survey respondents were shown eight floor plans and asked to rank each as preferred, acceptable, or would not live there. The rents assume that all units are furnished and that rent includes utilities, Internet, and basic cable television. Rents do not include meal plan charges. Four traditional unit plans assume an academic-year lease and four apartment unit plans assume a twelve-month lease. The highest percentage of respondents preferred the two-single-bedroom semi-suite with an academic-year lease followed by a four-single-bedroom apartment with a twelve-month lease. Page 1 ANDERSON STRICKLER LLC

70 EXECUTIVE SUMMARY TEXAS A&M UNIVERSITY STUDENT HOUSING MARKET STUDY If the student housing options in the survey had been available to respondents for fall 2013 when they were choosing their housing for the academic year, 20% of all respondents indicated they would have definitely lived in their preferred unit and 38% indicated they might have lived there (more than a 50/50 chance). Those who were not interested in the proposed housing selected reasons they were not interested. Overall, respondents cited the housing as being too expensive as the main reason, followed by not wanting to move (off-campus respondents) and West Campus being too far from classes (oncampus respondents). 31% 13% 11% 25% 20% 17% 44% 38% 35% 13% 33% 20% Off Campus On Campus All Respondents Would not have lived there Probably would not have lived there Might have lived there Definitely would have lived there Figure 1: Interest in Housing on Campus, Fall 2013 The potential demand for housing from full-time definitely interested undergraduate students would be between 1,345 and 2,422 beds with a midpoint of 1,884. Demand from might be interested undergraduate students is in a range of 2,332 to 2,870 with a midpoint of 2,601. The ranges are based on the statistical confidence level of ±3.81% in student responses based on the number of responses received and the target market count. 1 Table 1 is a breakdown of demand at the mid-point of the range showing potential demand of 4,484 beds. 2 FALL 2013 Full Time Off Campus Non Corps Enrollment Definitely Interested Might Be Interested Potential Incremental Demand Capture 50% Capture 25% Class Rate Closure Rate Closure Freshman (U1) 3,400 6% % Sophomore (U2) 6,319 18% % 559 1,142 Junior (U3) 8,072 16% % 780 1,426 Senior (U4) 10,456 10% % 783 1,331 28,247 1,884 2,601 4,484 Table 1: Potential Incremental Demand Table 2 shows demand by unit preference for interested respondents. It centers on the preferred unit type and does not take into account the acceptable units. If housing were developed strictly on student preferences, the unit mix would look like that described below. 1 Assumes an overall +/- 3.81% Confidence Interval at a 95% Confidence Level, meaning we are 95% confident that demand is more than the low end of the range and below the high end of the range. 2 2 Though the total sample of 683 from off-campus respondents exceeded the statistical target of 379 responses, there were only 16 responses from off-campus freshmen. Page 2 ANDERSON STRICKLER LLC

71 EXECUTIVE SUMMARY TEXAS A&M UNIVERSITY STUDENT HOUSING MARKET STUDY Off Campus Unit Type Interested Student Preference Potential Incremental Demand 2 Dbl BR Semi Suite 8% Dbl BR Semi Suite 6% Sgl BR Semi Suite 14% Sgl BR Semi Suite 21% BR/2 BA Apt 9% BR/4 BA Apt 23% 1,037 2 BR Apt 10% 431 Studio Apt 10% 444 Total 100% 4,484 Table 2: Unit Preference If only double-bedroom semi-suite units were provided, however, many interested students would find one or both acceptable. Although 1,222 beds (27%) of demand would be lost, there would still be demand for 3,262 beds in a mix of two- and one-double-bedroom semi-suites, as Table 3 shows. Unit Type Potential Incremental Demand (Preferred Unit) Potential Additional Demand (Acceptable Unit) Additional (Both Units Acceptable) Grand Total Total 2 Dbl BR Semi Suite ,509 1 Dbl BR Semi Suite ,160 1,753 1,509 3,262 Table 3: Total Demand for Double-Bedroom Semi-Suites Only Page 3 ANDERSON STRICKLER LLC

72 METHODOLOGY TEXAS A&M UNIVERSITY STUDENT HOUSING MARKET STUDY METHODOLOGY Focus Groups An ASL representative conducted focus groups on campus on October 3, The groups were comprised of six different cohorts: students living in halls with community bathrooms, students living in halls with suite-style bathrooms, students living in Hullabaloo Hall, athletes, students living in the Gardens apartments, and students renting housing off campus. Using a moderator s guide ASL developed, the moderator asked questions about students current housing situation, advantages and disadvantages to living on or off campus, preferred unit types and amenities for campus housing, housing options for new housing, and budget limitations. Each session lasted for one hour. Participants were given a cash honorarium in appreciation for their time spent in the session. The results add depth to the understanding of student preferences and also helped ASL design survey questions. Focus group notes are in Attachment 1. Off-Campus Market Analysis Using input from previous TAMU studies, student focus groups, and the student survey, ASL researched the local rental market. ASL interviewed property managers by telephone at 37 apartment complexes to determine what unit types, rents, occupancy, and amenities are offered. The 37 properties consisted of three groupings: three private residence halls, 23 properties catering to students and rented by the bed, and 11 market properties rented by the bed. ASL also collected information on the Internet, contacted College Station and Bryan city planners, reviewed existing market reports, and collected data from other sources. Property listings and related data are in Attachment 2. Student Survey ASL designed a student survey with input from Balfour Beatty and campus administrators. The purpose of the survey was to collect students demographic information, information on students current housing situation, and information on desired unit types at estimated rents. The Web survey was posted between November 26 and December 10, TAMU sent invitations to complete the survey to randomly selected students in the target market in two mailings. The first was to 2,200 students with approximately an even mix of on- and off-campus residents. The second mailing of 7,000 was sent solely to off-campus residents. With 360 responses from on-campus students, the response rate was 33%; with 683 responses from off-campus students, the response rate was 8%. 3 As an incentive to respond to the survey, cash prizes were offered to four randomly selected respondents (totaling $500). Tabulations of survey responses are in Attachment 3, while demographic information has been incorporated into Attachment 4. Demand Analysis The first step in the analysis is to determine the population of the target market. The target market is the group that will provide the incremental demand for housing. For this study, the group is full-time, undergraduate, non-corps students who live off campus. According to data provided by the Office of Data Research Services, there are 28,247 full-time, off-campus undergraduates in this category. 3 Though the total sample of 683 from off-campus respondents exceeded the statistical target of 379 responses, there were only 16 responses from off-campus freshmen. Page 4 ANDERSON STRICKLER LLC

73 METHODOLOGY TEXAS A&M UNIVERSITY STUDENT HOUSING MARKET STUDY ASL s standard methodology for calculating demand uses the responses from the target market to Question 34 on the survey asking where respondents would have lived had student housing been available to them when making a decision of where to live for the academic year. The first step in calculating demand is to determine a capture rate using the following equation: Capture Rate = Count of Target Market Definitely Interested in Housing by Class Number of Full time Target Market Respondents by Class The capture rate reflects the percentage of respondents at each level of interest (e.g., definitely interested). A closure rate is necessary to reflect that not all students who express interest will sign a lease. ASL typically assumes a 50% closure rate for those who indicated that they definitely would have lived in the housing and a 25% closure rate for those who indicated that they might have lived in the housing (or 50% of those with 50/50 interest). The target market count is multiplied by the capture rate; then the closure rate is applied to yield the demand. Page 5 ANDERSON STRICKLER LLC

74 TEXAS A&M HOUSING TEXAS A&M UNIVERSITY STUDENT HOUSING MARKET STUDY TEXAS A&M HOUSING Overview Current capacity for on-campus housing is 9,672 students, including 2,397 beds for Corps of Cadets housing. Fall 2013 occupancy was just over 100%. The newest residence hall, Hullabaloo Hall, opened in fall 2013 and is the first new residence hall on campus since Hullabaloo Hall contains 648 beds in a variety of suite styles. TAMU received 3,700 applications for the new housing 2,000 from freshmen and 1,700 from returners. The final mix was 70% freshmen and 30% upperclassmen. Student Satisfaction Whether they choose to live on campus or off campus, most students are satisfied with their current housing situation. As shown in Figure 2, when very satisfied and satisfied are added together, 85% of on-campus students are satisfied and 91% of off-campus students are satisfied. 8% 13% 56% 58% 35% 27% Very dissatisfied Dissatisfied Satisfied Very satisfied Off Campus Figure 2: Satisfaction with Housing On Campus Cross-tabulating satisfaction level with respondents current living situation allows the examination of respondents satisfaction level with specific residence halls and off-campus living situations. Figure 3 shows that off-campus students are generally satisfied with their current living situation, particularly those that live in housing owned by their parents or other relatives. The most satisfied on-campus students, as shown in Figure 4, are those living in Hullabaloo Hall (26 respondents), followed by those in The Gardens (7 respondents). When dissatisfied and very dissatisfied are combined, the lowest level of satisfaction from halls with at least 10 respondents comes from those living in Krueger and Moses Halls and closely followed by those living in Neeley, McFadden, and Aston Halls. Very satisfied Satisfied Dissatisfied Very dissatisfied Own home, never consider (n=11) Own home, consider (n=4) Par/rel, never consider (n=5) Par/rel, consider (n=6) Local Hsg Owned by Par/Rel (n=32) Rental housing (n=622) 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Figure 3: Off-Campus Students Satisfaction with Housing Page 6 ANDERSON STRICKLER LLC

75 TEXAS A&M HOUSING TEXAS A&M UNIVERSITY STUDENT HOUSING MARKET STUDY Very satisfied Satisfied Dissatisfied Very dissatisfied Appelt (n=9) Aston (n=23) Clements (n=14) Corps Housing (n=2) Davis Gary (n=5) Dunn (n=24) Eppright (n=15) Fowler FHK (n=9) The Gardens (n=7) Haas (n=22) Hart (n=7) Hobby (n=6) Hughes FHK (n=3) Hullabaloo Hall (n=26) Keathley FHK (n=10) Krueger (n=10) Lechner (n=13) Legett (n=2) McFadden (n=18) Moses (n=15) Mosher (n=29) Neeley (n=13) Rudder (n=10) Schuhmacher (n=7) Underwood (n=20) Walton (n=11) Wells (n=16) 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Figure 4: On-Campus Students' Satisfaction by Residence Hall Freshman Living Because one of the driving forces behind the expansion of housing on West Campus is to house more freshmen, survey respondents were asked about their status as a freshman (regardless of their current classification). Most students did not fit in any of the special categories listed on the survey, as shown in Figure 5. Page 7 ANDERSON STRICKLER LLC

76 TEXAS A&M HOUSING TEXAS A&M UNIVERSITY STUDENT HOUSING MARKET STUDY None of the categories apply/would have applied Due to compelling circumstances, am not/was not able to live on campus Would have reached age 21 prior to the 1st day of classes 1 5 Am/was married or in a partnership and/or had dep children 1 1 Have/had current active military/u.s. veteran status Am/was residing in with parent/legal guardian w/in 50 miles of campus Am/was a part time student On Campus Off Campus Number of Respondents Figure 5: Freshman Year Status Students in one or more of the listed categories were asked if they would have elected to live on campus freshman year if housing had been available. Overall, 80% would have lived on campus; 68% in any available housing and 12% in new housing. See Figure 6 for a breakdown of respondents currently living on and off campus. 27% 16% 21% 10% 12% 63% 81% 68% No Yes, only in new housing Yes, in any available housing Off Campus On Campus Overall Figure 6: Where Students Would Have Lived if Campus Housing Were Available Page 8 ANDERSON STRICKLER LLC

77 OFF-CAMPUS MARKET TEXAS A&M UNIVERSITY STUDENT HOUSING MARKET STUDY OFF-CAMPUS MARKET National Economic Outlook Nationally, there are positive signs of economic recovery with improvement in housing sales, consumer spending, and employment growth. The Gross Domestic Product (GDP) grew to 2.4% in the first quarter of 2013, up from 1.9% in the first quarter of However, while relatively affordable single-family homes are available, many households can still not qualify to buy, impacting the rental market. Nationally, building permits for properties with five or more units increased 54.5% as of April Demand for apartments remains strong; the national occupancy rate is 95%. Effective rents began to increase in 2010 but disposable income growth has not kept pace. There has been a surge in Class B and Class C rental property occupancy while occupancy at higher end, Class A properties, has stabilized because of increased competition from new product coming on the market. 4 The recovery from the 2008 recession has been slow but the state of Texas economic outlook is bright due to the creation and addition of good-quality jobs, a thriving housing market and growth in oil, natural gas, and renewable energy business sectors. 5 At 6.5%, unemployment in Texas is lower than the national unemployment rate of 7% and economic growth is expected to continue through 2014, with GDP predicted to be 2.6% for the year. 6 College Station/Bryan Market College Station, located in Brazos County, shares part of its northern boundary with the city of Bryan. Together, these make up the College Station-Bryan Metropolitan Statistical Area (MSA). According to the U.S. census, College Station s population has been steadily increasing and as of October 2013, the population is 99,840. Unemployment in the MSA in 2012 was 7.7% slightly higher (0.6%) than As of October, 2013, the unemployment rate was 5%. 7 Over 1,500 beds of student housing opened in fall 2013 with more scheduled to open in the next few years. Both existing and new properties continue to have high occupancy, due in part to increasing enrollment at TAMU. College Station continues to attract student housing developers, though there are some signs that the market is cooling off in terms of rents and Class A occupancies. TAMU experienced a surge in enrollment for the academic year with 56,255 students; the main campus is at 53,672. TAMU is now one of the five largest universities in the country. One reason for the increase is because TAMU acquired the School of Law in Fort Worth, TX. However, the university has 4 The Outlook, Marcus & Milllichap Research Services. 5 Cox, Wendell. The Texas Growth Machine. City Journal Winter Kiplinger s Economic Outlooks, December College Station/Bryan MSA Employment and Unemployment Data, Real Estate Center at Texas A&M University. Page 9 ANDERSON STRICKLER LLC

78 OFF-CAMPUS MARKET TEXAS A&M UNIVERSITY STUDENT HOUSING MARKET STUDY also seen an increase in minority enrollment, graduate students, and international students. President Loftin attributes the increase to the university s affordability and high-quality education. 8 Figure 7 shows total headcount enrollment growth at the College Station campus since ,449 48,039 48,702 49,129 49,861 50, Figure 7: TAMU Fall Enrollment, College Station Campus Only Apartment occupancy remains strong. Between 2012 and 2013, the occupancy rate differential between Class A properties and Class B and C properties has decreased in the College Station-Bryan submarket, as shown in Figure 8. 9 Class A property occupancy decreased in 2008 after peaking in 2007, with a steady increase until Since then, occupancy has stabilized at 97%. Class B and C property occupancy dipped in 2012 but appears to be increasing. Overall occupancy, as of the end of the third quarter in 2013, is near 93% for Class B and Class C multi-family dwellings % 95.0% Occupancy Rate 90.0% 85.0% 80.0% 75.0% 70.0% Class A Class B Class C Q Figure 8: Historical Occupancy Rate 10 8 TAMU Times. A&M Enrollment Reaches Record 58,809, Tops in Texas and Among Top 5 Nationally. September 26, (While the article quotes 58,809 as total enrollment, TAMU s Data and research Services reports enrollment for all campuses to be 56,255.) 9 Class A properties are new and/or high-quality multi-family dwellings in good locations commanding high rents, Class B are generally years old but in good condition with lower rents than Class A properties, Class C properties are older and generally in lowto-moderate income neighborhoods, Class D properties (not shown) are over 40 years old and in poor condition. 10 Real Estate Center at Texas A&M University, 2013 O Connor & Associates. Page 10 ANDERSON STRICKLER LLC

79 OFF-CAMPUS MARKET TEXAS A&M UNIVERSITY STUDENT HOUSING MARKET STUDY Figure 9 shows rent-per-square-foot for each property classification between 2005 and the third quarter of While Class A properties have increased rents by $0.14 per square foot since 2005, rent has not increased between 2012 and 2013 and remains $1.12 per square foot. Class C properties also remained the same between 2012 and 2013 at $0.81 per square foot. Class B saw a slight increase over the past year, from $0.90 to $0.92. $1.20 $1.10 Rent per Square Foot $1.00 $0.90 $0.80 $0.70 $0.60 $0.50 $0.40 Class A Class B Class C Q Figure 9: Historical Rent per Square Foot 11 The college housing market continues to grow. Two properties have opened and two have added units since ASL s 2012 study. The Cottages of College Station located at 1400 Harvey Mitchell Parkway South is a Capstone project. Phase II, with 621 beds, brings capacity to 1,354. Fall 2013 occupancy is 100%. Lakeridge Townhomes, located at 1198 Jones Butler Road, offers for-sale and for-rent units; approximately 70% are rentals. Phase III, with 45 units, opened in 2013 bringing the total number of units to 140. Lakeridge Townhomes reports 100% occupancy for fall The Stack. Located on the site of the former University Square shopping center, The Stack is located at the intersection of South College Avenue and University Drive. With 416 beds of student housing, The Stack experienced 79% occupancy in fall The four-story apartment building includes ground floor retail. Two additional phases are planned. The Rise at Northgate. Located at 717 University Drive, The Rise at Northgate, a 17-story apartment building with ground floor retail, reached 96% occupancy in fall The project offers 471 student beds in one-, two-, three-, and four-bedroom apartments. 11 Real Estate Center at Texas A&M University, 2013 O Connor & Associates. Page 11 ANDERSON STRICKLER LLC

80 OFF-CAMPUS MARKET TEXAS A&M UNIVERSITY STUDENT HOUSING MARKET STUDY Market Sample Rental Rates Private Residence Halls Callaway House, Tradition at Northgate, and Cambridge at College Station are three student-oriented properties offering units without full kitchens. The units have an under-counter refrigerator and microwave or a limited kitchenette. The halls offer full service dining similar to that found on campus with a variety of meal plans. Per-person rates include mandatory meal plans ranging from seven meals per week to unlimited meals per week. Payment plans are also offered: one-lump advance payment, semester payments, and monthly payments. Installment plans carry a premium. Rents for the academic year (9- or 10-month lease) for and , with a lump-sum payment, representing a 1% to 5% increase, are as follows: AY Studio (single) Studio (double) 1BR (single) 1BR (double) 2BR (single) 2BR (double) 3B (single) Callaway House : $14,502 $16,364 $9,308 $13,228 $8,662 $13,228 $14,110 4BR (single) MPW $12, Townhouse: $11,705 $10,735 Townhouse: $11, : $14,796 $16658 $9,504 $13,718 $8,916 $13,718 $14,306 $13, Townhouse: (not available) The Cambridge at College Station : $14,000 $8,400 $13,000 $9,200 $11, : $14,500 $8,755 $13,600 $9,300 $11, The Tradition at Northgate : $13,865 $14,708 $9,842 $11, : $14,281 $15,297 Table 4: Rents for Private Residence Halls $9,989 $11,994 Callaway House offers furnished studios, one-bedroom, two-bedroom, three-bedroom, and four-bedroom units in flats and townhouses with single and double-occupancy bedrooms. Rents for represent a 2% to 5% increase over the previous year, depending on unit type. The highest increase is for a four-bedroom suite. Rates include cable, Internet, and all utilities. Each student is required to pay a $200 security deposit. Callaway House reported 98% occupancy for fall Cambridge at College Station rents increased 1% for a four-bedroom suite to 4% for a twobedroom suite. The property offers fully-furnished studio, two-bedroom, and four-bedroom units with single and double-occupancy bedrooms. Rates include cable with HBO, high-speed Internet, and all utilities. There is no security deposit required. Cambridge at College Station reported 97% occupancy for fall Tradition at Northgate rents increased 1% to 4% with the highest increase for a large onebedroom unit. Tradition offers one- and two-single-bedroom, furnished units. Rent includes cable with HBO, broadband Internet access, all utilities, and weekly housecleaning. Each student is required to pay a $100 security deposit. 12 Page 12 ANDERSON STRICKLER LLC

81 OFF-CAMPUS MARKET TEXAS A&M UNIVERSITY STUDENT HOUSING MARKET STUDY Individual Lease Properties Of the 23 individual-lease properties in the sample, three offer efficiencies or studios, 15 offer onebedroom units, 20 offer two-bedroom units, 13 offer three-bedroom units, and 20 offer four-bedroom units. Figure 10 shows rent ranges by unit type per bed with the medians ranging from $564 for a fourbedroom unit to $902 for a one-bedroom unit. Rates are based on a 12-month lease but 13 properties will accept a shorter-term contract that may require additional monthly rent. Between fall 2012 and fall 2013, median rents increased 4% for studios and 2% for one-bedroom apartments. There was no change for two-bedroom and four-bedroom apartments. Median rents for three-bedrooms decreased 2%. Properties that opened in fall 2013, Rise at Northgate and The Stack, report rates that are higher than the median rent. Low Median High $735 $777 $850 $750 $902 $485 $608 $1,103 $428 $570 $1,000 $404 $564 $975 $1,500 Eff./Studio (n=3) 1BR (n=15) 2BR (n=20) 3BR (n=13) 4BR (n=20) Figure 10: Per Bed Rents, Individual Lease Properties Market Complexes Of the eleven market complexes in the sample, four properties offer efficiencies or studios, nine offer one-bedroom units, all offer two-bedroom units, and five offer three-bedroom units. Only one property, Warehouse at Northgate, has four-bedroom units. Figure 11 shows rent ranges by unit type per unit with the medians ranging from $795 for a studio to $1,290 for a three-bedroom unit. Between fall 2012 and fall 2013, median rents increase 4% for studios and one-bedroom apartments and 2% for two-bedroom apartments. There was no change in the median rent for a three-bedroom apartment. Leases for market apartments are typically 12-month, but short-term leases are offered at most properties; some add a premium to the rent. Low Median High $580 $785 $885 $569 $794 $1,180 $609 $1,017 $1,325 $989 $1,290 $1,800 Eff./Studio (n=4) 1BR (n=9) 2BR (n=11) 3BR (n=5) Figure 11: Per Unit Rents, Market Properties Rate Changes and Specials For individually-leased apartment communities, The Rise at Northgate charges the highest rent, particularly for its one- and two-bedroom penthouse units. An 800 square-foot apartment is $1,500 per- Page 13 ANDERSON STRICKLER LLC

82 OFF-CAMPUS MARKET TEXAS A&M UNIVERSITY STUDENT HOUSING MARKET STUDY person, per-month, and a 1,000 square-foot two-bedroom is $1,103 per-person, per-month. Wave s Z Islander has the highest rent for a studio (not offered at The Rise), but did not raise its rate of $850 per month between 2012 and Rent reductions between 2012 and 2013 were seen at several properties, most significantly at Reveille Ranch (-12% on one-bedroom units), Parkway Place (-9 to -10% on twobedroom units), Lofts at Wolf Pen Creek (-14% on two-double-bedroom and -13% on three-singlebedroom units), and District on Luther (-12% on three-bedroom units). Drastic reduction were not seen at conventional market apartments with the exception of threebedroom units at The Presidio, which changed 13% between 2012 and Overall, median change in rent for market complexes was 4% for studio and one-bedroom units and 2% for two-bedroom units. Three-bedroom units showed no change. When ASL polled individually-leased apartments in July 2013, 17 of the 23 complexes reported offering specials prior to the fall 2013 leasing period. Two were not offering specials because they were fully preleased for fall. Concessions ranged from waived security deposits to rent discounts or gift cards as shown in Table 5. Complex Security Dep/Fees Gift Card Rent Reduction 2818 Place None $500 Callaway Villas $50 SD 4BR only Campus View None Campus Village at College Sta. No signing fee Option or $50 $100/mo College Edge at Bryan None The Cottages of College Sta. No SD The District on Luther None Add'l amt if lessee "likes" & comments on FB: 2BR $100+$35; 3BR $700+$100, 4BR $300+$75 The Enclave None if signed w/in 48 hrs of tour Gateway at College Station $200/1BR, sm2br, 3BR $350/lg2BR, 4BR Jefferson at the Zone None $500 off 1mo 4BR only The Lofts at Wolf Pen Creek None Parkway Place None $500 (AMEX) Reveille Ranch None for12 mo lease Selected units Rise at Northgate None if signed w/in 48 hrs of initial contact The Stack at Legacy Point No appl fee, $75 SD Selected 2BR unit The Trails at Wolf Pen Creek Wave's Z Islander None for 12 mo lease $100 (VISA),2BR/2.5BA unit only Table 5: Specials Offered in July 2013 for Fall Occupancy: Individually-Leased Properties Conventional market apartments were also offering specials in July Hunter s Point offered $300 off of the first month s rent and waived the security deposit, Huntington waived the application fee and reduced the security deposit to $50, Meadows Point offered one-half off of first month s rent and $30 off every month for two-bedroom units, Signature Park offered one-half off the first month s rent on selected units, and Stadium View offered a $100 discount for look and lease prospective tenants. Page 14 ANDERSON STRICKLER LLC

83 OFF-CAMPUS MARKET TEXAS A&M UNIVERSITY STUDENT HOUSING MARKET STUDY Occupancy Rates For the individually-leased complexes, median occupancy rates increased from 94% to 98% between fall 2012 and fall 2013, returning to 2011 levels. Notable increases in occupancy include 2818 Place (84% to 89%), College Edge at Bryan (89% to 99%), Cottages at College Station (90% to 100%), Lofts at Wolf Pen Creek (62% to 99%), Parkway Place (82% to 91%), and Wave Z Islander (78% to 99%). Notable decreases in occupancy occurred at The District on Luther (98% to 91%) and The Enclave (99% to 94%). A 95% occupancy rate is considered the rule of thumb for a market that is in balance between landlords and tenants so a median of 98% occupancy indicates a tight rental market. For market complexes, median occupancy rates decreased from 97% to 95% between fall 2012 and fall Median occupancy at private residence halls remained the same at 95%. Amenities Private Residence Halls The private residence halls continue to offer the same full range of amenities including some of the offerings typically only found on a college campus, such a dining hall, study rooms, and a residence life program. Community amenities include a swimming pool, computer lab, game room, fitness center, BBQ area, and a common area laundry. Other amenities include weekly maid service, movie theaters, and tanning facilities. Security deposits range from no deposit to $200 per person. Roommate matching services are provided. Parking is available, typically at an extra charge. Pets are not permitted. Individual Lease and Market Properties The individual lease complexes offer much more in the way of community amenities than the market properties. All individual lease complexes offer swimming pools, fitness centers, and roommate matching services. All but one have game rooms and barbeque areas. Most have volleyball, computer labs, study rooms, and outdoor recreation areas. In terms of unit amenities, the individual lease properties are more likely to have furnishings included and offer appliances such as a washer, dryer and dishwasher. Most market apartments in the ASL sample have a swimming pool, barbeque area, and a washer-dryer connection in the unit. Only one, The Presidio, offers roommate matching services. Market complexes are less likely to include Internet, cable, or electricity in the rent as individual lease properties do. The two types of properties are more similar when it comes to lease terms with both offering lease flexibility. 12 Two market apartments made improvements over the past year. Huntington Apartments now include Internet and cable in the rent. Warehouse at Northgate is renovating and adding a clubhouse, fitness area, concierge station, business center, and outdoor green space to include horseshoe pits. Security deposits for individual lease properties range from no deposit (six properties) to $50-$500 with a median of $150. For market properties, deposits range from $99 to one month s rent. 12 A complete list of amenities, services, and policies for all surveyed apartment complexes is in Attachment 2. Page 15 ANDERSON STRICKLER LLC

84 OFF-CAMPUS MARKET TEXAS A&M UNIVERSITY STUDENT HOUSING MARKET STUDY Off-Campus Survey Data What Students Pay Survey respondents renting housing off campus were asked to estimate their monthly housing costs. Figure 12 shows the median per-person monthly cost of housing for single students where n is the number of survey respondents. Per-person rents range from $510 for a three-bedroom unit ($425 rent and $85 other costs) to $705 for a one-bedroom unit ($610 rent and $95 other costs). $705 Other Costs $574 $95 $95 $567 $68 $510 $525 $85 $60 $570 $70 Rent $479 $610 $499 $425 $465 $500 Eff./Studio (n=7) 1BR (n=31) 2BR (n=110) 3BR (n=165) 4BR (n=202) > 4BR (n=21) Figure 12: Single Students Total Median Monthly Housing Cost per Person, by Unit Type 13 When married students and students with children were asked to list their housing expenses on the survey, the information was collected per unit. For this cohort total median monthly cost of housing ranges from $810 per month for a one-bedroom unit ($660 rent and $150 other expenses) to $1,142 per month for a three-bedroom unit ($1,000 rent and $142 other expenses). 14 Figure 13 shows the median monthly cost of housing by unit type where n is the number of respondents. $810 $150 $866 $161 $1,142 $142 Other Costs Rent $660 $705 $1,000 1BR (n=7) 2BR (n=6) 3BR (n=1) Figure 13: Families Total Median Monthly Housing Costs per Unit, by Unit Type 15 Where Students Live Out of all survey respondents, 65% live off campus; of those that live off campus, 91% rent their own housing. Of those that live off campus but do not rent housing, 73% would consider living in campus housing. A summary is shown in Figure Other costs include utilities (electricity, gas, water, sewer, trash removal), telephone, Internet, and cable TV. 14 Only one married/family survey respondent reported living in a three-bedroom unit. 15 Other costs include utilities (electricity, gas, water, sewer, trash removal), telephone, Internet, and cable TV. Page 16 ANDERSON STRICKLER LLC

85 OFF-CAMPUS MARKET TEXAS A&M UNIVERSITY STUDENT HOUSING MARKET STUDY Off Campus 65% On Campus 35% Non Renters 9% Renters 91% Would not consider 27% Would consider 73% All Respondents (n=1,043) Off Campus (n=683) Non renters (n=59) Figure 14: Living Situation of Survey Respondents A closer look at the profile of those who rent their housing reveals the following: TYPE OF HOUSING One half rent an apartment (25% in an individually-leased unit and 25% market apartment rented by the unit); 44% rent a house, townhouse, or duplex (where the entire unit is rented by one student or a group); 3% rent a room in a private home, 2% live in a private residence hall, and 1% have other living arrangement. Survey respondents named apartment complexes where applicable. The most mentioned properties were Reveille Ranch (17 students), The District on Luther (16 students), Crossing Place (16 students), and The Zone (15 students). Seven percent of renters live in one-bedroom units, 21% live in two-bedroom units, 29% in three-bedroom units, 37% in four-bedroom units, and 5% in housing with more than four bedrooms. Only 1% live in an efficiency or studio apartment. SHARING Only 7% live alone while 22% live with one other person, 28% with two others, 34% with three others, and 9% with more than three others. Out of 624 respondents who rent housing, 551 live with roommates or apartment-mates; others live with siblings (42), a spouse or partner (23), and/or dependent children (1). Most renters have a private bedroom (88%), 9% share a bedroom with a roommate and 3% share a bedroom with a spouse, partner, and/or child. Those who share a bedroom with a roommate do so to save on rent (40 respondents), want to live with friends (28 respondents), could not find housing with a private bedroom (3 respondents), or some other reason (6 respondents). Over one-third do not share a bathroom with other residents (37%); over half share at most with one other (59%), while only 4% share with more than two people. POLICIES AND AMENITIES Over half rent an unfurnished unit (57%), 11% rent a partially furnished unit, and 32% rent a fully-furnished apartment. Most, 77%, signed a twelve-month lease; 15% signed an academic-year lease, 3% signed a sixmonth lease, 2% signed a month-to-month lease, 1% signed a semester lease, and 2% signed another type of lease. Page 17 ANDERSON STRICKLER LLC

86 OFF-CAMPUS MARKET TEXAS A&M UNIVERSITY STUDENT HOUSING MARKET STUDY Over 300 survey respondents live in properties where trash, Internet, cable, and water/sewer fees are included in the rent. Figure 15 illustrates all utilities and services included in survey respondents rent. Trash Internet Cable Water/sewer Gas 197 Shuttle services 133 Electricity 113 Local telephone 55 No utilities are included in the rent Figure 15: Utilities and Services Included in Rent 137 Number of Respondents The following figure illustrates the concentration of renter survey respondents by ZIP Code while attending classes at TAMU. The vast majority of renter respondents live in College Station, TX ZIP Code (445 respondents). The figure below shows ZIP Codes where three or more respondents live College Station, TX College Station, TX Bryan, TX Bryan, TX College Station, TX Bryan, TX Bryan, TX College Station, TX Number of Respondents Decision-Making Factors When deciding where to live for the academic year, the main factor for those who live on and off campus is affordable rent. For those who live on campus, the second most important decision-making factor is the location relative to campus, followed by adequate living space. For those who live off campus, affordable rent is followed by having a private bedroom and adequate living space. The top ten ranked responses for both on- and off-campus respondents are shown in Figure 16. Page 18 ANDERSON STRICKLER LLC

87 OFF-CAMPUS MARKET TEXAS A&M UNIVERSITY STUDENT HOUSING MARKET STUDY Off Campus (n=683) On Campus (n=360) Affordable rent Location relative to campus Adequate living space Internet connection Have own bedroom Have own bath Ability to enter into an academic year lease Furnished unit Environment social Ability to live in a LLC Affordable rent Have own bedroom Adequate living space Kitchen in the unit Have own bath Location relative to campus Bus service provided by university Physical condition of the housing Pets allowed Laundry machines in the unit Figure 16: Factors Used to Make a Decision of Where to Live ,000 1,500 2,000 2,500 Weighted Scale (Most Important=5, 2nd=4, 3rd=3, 4th=2, 5th=1) Of the 683 survey respondents who live off campus, 355 moved off after living on campus one year, 130 moved off after two years, 16 moved off after three years, and 14 moved off campus later. 16 The survey provided a list of reasons for moving off campus and asked respondents to select all that apply. The response most frequently selected was the ability to have a kitchen, followed by the desire for more privacy and wanting a private bedroom, as Figure 17 shows survey respondents never lived on campus. 17 Students were asked to select all reasons that apply. Page 19 ANDERSON STRICKLER LLC

88 OFF-CAMPUS MARKET TEXAS A&M UNIVERSITY STUDENT HOUSING MARKET STUDY Ability to have a kitchen Desire for more privacy Wanted a private bedroom Desire for more independence Lack of living space in the unit Wanted a private bathroom No need to move out over breaks Small size of bedrooms Dislike of meal plan terms and conditions Friends were moving off Restrictions on permitted appliances in the room Parking located too far from hall Campus housing is too expensive Dislike of food service quality Wanted more or better located storage space Inadequate number of common kitchens Rules, regulations, and policies Dislike of food service hours Inadequate laundry facilities Lack of temperature control Age and condition of housing facilities Dislike of community bathrooms High noise level in residence halls Not enough outlets Prefer an unfurnished unit Space was not avail in my pref on campus hsg Wanted to live w/ my sp/part/sig other and/or child Some other reason Number of Off Campus Respondents Figure 17: Reasons for Moving Off Campus Pipeline Building Permits Multifamily building permits issued in College Station and Bryan over the last 10 years increased dramatically between 2005 and The demand for permits then dropped before increasing again beginning in Figure 18 shows multi-family building permits issued for College Station and Bryan over the past ten years Some of the permit data has changed since ASL s earlier reports for the university as the US Census Bureau adjusted its figures. Page 20 ANDERSON STRICKLER LLC

89 OFF-CAMPUS MARKET TEXAS A&M UNIVERSITY STUDENT HOUSING MARKET STUDY Bryan College Station (as of Nov) 5+ Units in Multi Family Building Permits for Bryan and College Station Source: US Census Bureau, SOCDS Building Permit Database Figure 18: Multifamily Building Permits in College Station and Bryan Upcoming Student-Oriented Projects The Plaza The Plaza Hotel, located across from TAMU s campus, was demolished in May The Northpoint Crossing project, known as The Plaza, has experienced multiple delays but is now under construction. The project will open in two phases. Phase I will include 307 apartments (920 beds) and two parking garages and is scheduled to open by summer Phase II, with an additional 300 apartments, is scheduled to open in fall The final project will include restaurants and retail. The developer is Woodbridge Capital Partners. U Centre Bordered by College Avenue, Cross Street, Inlow Boulevard, and Dogwood Street, the U Centre will open in August TAMU has leased the land to American Campus Communities. The final project will include 784 student beds. The property will offer four-bedroom, four-and-a-half bathroom townhomestyle units at $589 per month and four-bedroom, four-bathroom flats at $564 and $574 per month. Bedrooms are individually leased and units are fully furnished. A $150 security deposit is required as well as a $35 application fee. Amenities include a clubhouse with fitness center, business center, theater, game room, tanning beds and an outdoor swimming pool. The property is on the TAMU bus route. Campus Pointe Campus Pointe will be located next to Northpoint Crossing on University Drive. This project is also being developed on university-owned land that is being leased for 50 years to a private developer. This project will replace TAMU s married student housing development and will break ground in spring Plans call for retail, entertainment, commercial space, and a room hotel, although plans have not been finalized. The housing component may include 300 high-end multi-family units, 36 of which will be used as game-day condos. First Street Property First Street Property is located at the northwest corner of First Street and Church Avenue and is owned by the City. After issuing an RFI for the development of multi-family housing, the City has opted to sell the land to a private developer and will close on the property by January 17, The developer is Asset Page 21 ANDERSON STRICKLER LLC

90 OFF-CAMPUS MARKET TEXAS A&M UNIVERSITY STUDENT HOUSING MARKET STUDY Plus Companies and the final development will be student focused. No plans have been submitted to the City for review so the number of units cannot be confirmed. Parts of the development will be up to four stories and there will be structured parking on site. The block is 3.36 acres. Additional Projects In addition to the major projects specifically targeting students, there are a number of multifamily projects that are new, under construction, or planned as listed in Table 6. The target market for some of the properties is not specified. However, given the distances from campus, it is unlikely that many of the projects are primarily serving the student market as most projects serving students are within two miles of campus. Miles Name # of Units Type Location from TAMU Status Target Market 4.0 North 7 Rental 2650 Beck St 7.9 Completed Corporate The Legacy at Traditions 240 Rental 8085 Atlas Pear Dr 4.3 Completed Upscale (Traditions Subdivision) Jefferson St. Townhomes 12 For sale College Main & Jefferson 2.4 Under construction Upscale/Game Day Sts Regency Gardens Apts. 200 Rental West Villa Maria Road 6.2 Under construction Unknown across from Kimmy Drive Highland Villas Apts. 180 Rental Wildflower Dr b/t Briarcrest 6.5 Under construction Family/elderly Dr & Wm. J Bryan Pkwy Hidden Bridge Condos 39 For sale Casita Court 4.8 Under construction Market (Traditions Subdivision) Traditions Game Day 32 For sale Heisman Circle 4.4 Under construction Upscale/Game Day Cottages (Traditions Subdivision) Watson Lane Townhomes 13 NA South College Ave & 3.0 Planned NA Watson Ln Old College Multifamily 50 Rental Old College Rd b/t S 2.8 Planned NA College & Mobile Aves Apartments on Nash St. 240 Rental Nash Street b/t E. Villa Maria Road & Wm J Bryan Pwy 5.9 Planned NA Table 6: Additional Projects Page 22 ANDERSON STRICKLER LLC

91 LIVING PREFERENCES TEXAS A&M UNIVERSITY STUDENT HOUSING MARKET STUDY LIVING PREFERENCES Policies and Amenities To learn more about students preferences regarding unit amenities, housing policies, and community features, two survey questions asked how influential listed features would be on their interest in living in campus housing. The influence of all tested unit amenities and housing policies are in ranked order in Figure 19. High-speed wireless Internet, in-unit temperature control, and a washer/dryer in the unit were the most influential features while a required meal plan would have a negative effect on most students interest in living in campus housing. 19 Not live without it (1) Positive influence (2) No effect (3) Negative influence (4) Not live with it (5) High speed wireless Internet (x =1.47) Temperature control in each unit (x =1.69) Washer/dryer in unit (x =1.74) Full kitchen in unit (x =1.77) Storage space (x =1.89) Utilities included in rent (x =1.97) Soundproof walls (x =1.99) Furnished unit (x =2.11) Basic cable TV (x =2.11) Bookshelves (x =2.25) High ceilings (x =2.42) 9 month/ay lease requirement (x =2.53) Availability of a meal plan (x =2.72) LLC interests (com svc, sust, outdoor) (x =2.83) LLC academic (Engineering, Honors) (x =2.87) 12 month lease requirement (x =3.28) Required meal plan (x =4.22) 0% 20% 40% 60% 80% 100% Figure 19: Importance of Unit Amenities Responses to the community amenities question are in Figure 20. On-site laundry facilities ranked highest, followed by convenient parking, printing stations, and quiet study areas. 19 Respondents selected one level of influence for each amenity. Page 23 ANDERSON STRICKLER LLC

92 LIVING PREFERENCES TEXAS A&M UNIVERSITY STUDENT HOUSING MARKET STUDY Not live without it (1) Positive influence (2) No effect (3) Negative influence (4) Not live with it (5) On site laundry facilities (x =1.64) Convenient parking (x =1.79) Printing station (x =1.99) Quiet study areas (x =2.03) Convenience store in/near housing (x =2.12) Computer lab (x =2.16) Fitness center/weight room (x =2.16) Dining hall in/near housing (x =2.17) Group study/meeting space (x =2.22) Coffee shop or café in/near housing (x =2.23) Outdoor green space/bbq area (x =2.25) Outdoor rec space (volleyball, basketball) (x =2.27) Recycling areas (x =2.34) Ice machines (x =2.35) Acad tutoring and/or other support svcs (x =2.37) Game room (ping pong, pool, etc.) (x =2.38) Social/TV lounge (x =2.39) Main lobby with front desk (x =2.46) Music room (x =2.59) Live in staff (x =2.67) Community kitchen (x =2.68) 0% 20% 40% 60% 80% 100% Figure 20: Importance of Community Amenities Unit Preferences Survey respondents were shown eight floor plans and asked to rank each as preferred, acceptable, or would not live there. The rates and floor plans tested are shown in Table 7. The rents assume that all units are furnished and that rent includes utilities, Internet, and basic cable television. Rents do not include meal plan charges. Four traditional unit plans assume an academic-year lease and four apartment unit plans assume a twelve-month lease. (Floor plans show concepts only and are not to scale.) Page 24 ANDERSON STRICKLER LLC

93 LIVING PREFERENCES TEXAS A&M UNIVERSITY STUDENT HOUSING MARKET STUDY ACADEMIC-YEAR LEASE TWO DOUBLE BEDROOM SEMI SUITE Rent per person: $3,375 per semester ONE DOUBLE BEDROOM SEMI SUITE. Rent per person: $3,600 per semester FOUR SINGLE BEDROOM SEMI SUITE Rent per person: $3,700 per semester 12-MONTH LEASE TWO SINGLE BEDROOM SEMI SUITE Rent per person: $3,825 per semester FOUR BEDROOM /TWO BATHROOM APARTMENT Rent per person: $700 per month FOUR BEDROOM /FOUR BATHROOM APARTMENT Rent per person: $750 per month TWO BEDROOM APARTMENT Rent per person: $775 per month Table 7: Floor Plans and Tested Rents STUDIO APARTMENT Rent per person: $925 per month Page 25 ANDERSON STRICKLER LLC

94 LIVING PREFERENCES TEXAS A&M UNIVERSITY STUDENT HOUSING MARKET STUDY The highest percentage of respondents preferred the two-single-bedroom semi-suite with an academicyear lease, followed by a four-single-bedroom apartment with a twelve-month lease. See Figure 21 shows for a breakdown of preferred, acceptable, and unacceptable unit types. Preferred Acceptable Would not live there Academic Year Lease 12 Month Lease STUDIO APT 2 BR APT 4 BR/4 BA APT 4 BR/2 BA APT 2 SGL BR SEMI SUITE 4 SGL BR SEMI SUITE 1 DBL BR SEMI SUITE 2 DBL BR SEMI SUITE 6% 7% 14% 6% 15% 12% 4% 8% 32% 48% 48% 54% 54% 55% 53% 47% 62% 45% 38% 40% 31% 33% 43% 45% Figure 21: Unit Preference Since the demand analysis targets students not currently living on campus, unit preference is sorted by on- and off-campus survey respondents in Figure 22. While the preferred unit percentages do not differ greatly between on- and off-campus students, when preferred and acceptable are combined (the blue and the red bars), single-bedroom semi-suite units are more desirable than other unit types. Preferred Acceptable Would not live there STUDIO APT 5% 38% 56% 2 BR APT 8% 59% 34% 4 BR/4 BA APT 14% 54% 32% Off Campus On Campus 4 BR/2 BA APT 2 SGL BR SEMI SUITE 4 SGL BR SEMI SUITE 1 DBL BR SEMI SUITE 2 DBL BR SEMI SUITE STUDIO APT 2 BR APT 4 BR/4 BA APT 4 BR/2 BA APT 2 SGL BR SEMI SUITE 4 SGL BR SEMI SUITE 6% 17% 13% 6% 12% 7% 7% 14% 6% 14% 11% 59% 58% 56% 63% 53% 29% 42% 44% 51% 52% 55% 35% 26% 31% 31% 35% 64% 51% 42% 43% 34% 34% 1 DBL BR SEMI SUITE 3% 48% 49% 2 DBL BR SEMI SUITE 6% 44% 50% Figure 22: Unit Preference by On- and Off-Campus Survey Respondents Page 26 ANDERSON STRICKLER LLC

95 LIVING PREFERENCES TEXAS A&M UNIVERSITY STUDENT HOUSING MARKET STUDY Interest If the student housing options in the survey had been available to respondents for fall 2013 when they were choosing their housing for the academic year, 20% of all respondents indicated they would have definitely lived in their preferred unit and 38% indicated they might have lived there (more than a 50/50 chance). 31% 13% 11% 25% 20% 35% 17% 44% 38% 13% 33% 20% Off Campus On Campus All Respondents Would not have lived there Probably would not have lived there Might have lived there Definitely would have lived there Figure 23: Interest in Housing on Campus, Fall 2013 Those who were not interested in the proposed housing selected reasons they were not interested. Overall, respondents cited the housing as being too expensive as the main reason, followed by not wanting to move (off-campus respondents) and West Campus being too far from classes (on-campus respondents). Figure 24 shows responses for all reasons listed in the survey. 20 The housing is too expensive I do not want to move West campus is too far from where my classes are I am concerned about the level of rules and regulations I have a pet Parents/relatives own the housing I live in during AY I already own a home I live with my significant other I live with my spouse/partner and/or children I live with my parents/guardians I live with my children Some other reason Number of Respondents 400 On Campus Off Campus Figure 24: Reasons for Lack of Interest in Proposed Housing 20 Survey respondents who indicated that they would not live in on-campus housing were permitted to select more than one reason from a list. Respondents could also select other and write in a reason. A list of those responses is in Attachment 3. Page 27 ANDERSON STRICKLER LLC

96 DEMAND ANALYSIS TEXAS A&M UNIVERSITY STUDENT HOUSING MARKET STUDY DEMAND ANALYSIS Summary of Findings ASL estimated demand based on ASL s standard methodology, resulting in an estimate of incremental demand for 4,484 beds of housing for the fall 2013 semester. Of this demand, 1,222 students would only have been interested in one of the single bedroom options, while the remaining 3,262 would have been interested in a bed in a project consisting of only double-bedroom semi-suites. Demand Methodology and Results Target Market The first step in the analysis is to determine the population of the target market. The target market is the group that will provide the incremental demand for housing. For this study, the group is full-time, undergraduate, non-corps students who live off campus. According to data provided by the Office of Data Research Services, there are 28,247 full-time, off-campus undergraduates as shown in Table 8. As Corps students are required to live on campus, presumably the university s numbers below do not include a significant number of Corps students. Classification Count Freshmen 3,400 Sophomore 6,319 Junior 8,072 Senior 10,456 Total 28,247 Table 8: Target Market The university sent invitations to complete the survey to randomly selected students in the target market in two mailings. The first was to 2,200 students with approximately an even mix of on- and offcampus residents. The second mailing of 7,000 was sent solely to off-campus residents. With 360 responses from on-campus students, the response rate was 33%; with 683 responses from off-campus students, the response rate was 8% Though the total sample of 683 from off-campus respondents exceeded the statistical target of 379 responses, there were only 16 responses from off-campus freshmen. However, the demand calculations do not rely solely on this population. Page 28 ANDERSON STRICKLER LLC

97 DEMAND ANALYSIS TEXAS A&M UNIVERSITY STUDENT HOUSING MARKET STUDY Demand Calculation ASL s standard methodology for calculating demand uses the responses from the target market to Question 34 on the survey asking where respondents would have lived had student housing been available to them when making a decision of where to live for the academic year. The first step in calculating demand is to determine a capture rate using the following equation: Capture Rate = Count of Target Market Definitely Interested in Housing by Class Number of Full time Target Market Respondents by Class The capture rate reflects the percentage of respondents at each level of interest (e.g., definitely interested). A closure rate is necessary to reflect that not all students who express interest will sign a lease. ASL typically assumes a 50% closure rate for those who indicated that they definitely would have lived in the housing and a 25% closure rate for those who indicated that they might have lived in the housing (or 50% of those with 50/50 interest). The target market count is multiplied by the capture rate; then the closure rate is applied to yield the demand as shown in Table 9. The potential demand for housing from full-time definitely interested undergraduate students would be between 1,345 and 2,422 beds with a midpoint of 1,884. Demand from might be interested undergraduate students is in a range of 2,332 to 2,870 with a midpoint of 2,601. The ranges are based on the statistical confidence level of ±3.81% in student responses based on the number of responses received and the target market count. 22 The table below is a breakdown of demand at the mid-point of the range showing potential demand of 4,484 beds. 23. FALL 2013 Full Time Off Campus Non Corps Enrollment Definitely Interested Might Be Interested Potential Incremental Demand Capture 50% Capture 25% Class Rate Closure Rate Closure Freshman (U1) 3,400 6% % Sophomore (U2) 6,319 18% % 559 1,142 Junior (U3) 8,072 16% % 780 1,426 Senior (U4) 10,456 10% % 783 1,331 28,247 1,884 2,601 4,484 Table 9:Potential Incremental Demand Unit Preference Survey respondents selected their preferred unit type, if they had one, from eight options and were instructed to mark the others either as acceptable if their first choice were not available, or would not live there. 22 Assumes an overall +/- 3.81% Confidence Interval at a 95% Confidence Level, meaning we are 95% confident that demand is more than the low end of the range and below the high end of the range. 23 Though the total sample of 683 from off-campus respondents exceeded the statistical target of 379 responses, there were only 16 responses from off-campus freshmen. Page 29 ANDERSON STRICKLER LLC

98 DEMAND ANALYSIS TEXAS A&M UNIVERSITY STUDENT HOUSING MARKET STUDY First Choice Preference for All Units The following table shows demand by unit preference for interested respondents using the preferred unit type and does not take into account the acceptable units. If housing with all eight options were to be developed strictly on student preferences, the unit mix would look like that described below in Table 10. Unit Type Off Campus Interested Student Preference Potential Incremental Demand 2 Dbl BR Semi Suite 8% Dbl BR Semi Suite 6% Sgl BR Semi Suite 14% Sgl BR Semi Suite 21% BR/2 BA Apt 9% BR/4 BA Apt 23% 1,037 2 BR Apt 10% 431 Studio Apt 10% 444 Total 100% 4,484 Table 10: Demand by Unit Preference Preferred Doubles Out of those who comprise the demand for housing, about 593 students had one of the two doublebedroom unit types as their first choice, as shown as shown in the first two rows in Table 11 below. Unit Type Off Campus Interested Student Preference Potential Incremental Demand 2 Dbl BR Semi Suite 8% Dbl BR Semi Suite 6% Sgl BR Semi Suite 2 Sgl BR Semi Suite 4 BR/2 BA Apt 4 BR/4 BA Apt 2 BR Apt Studio Apt Table 11: Preferred Doubles 593 Beds 87% 3, % 4,484 Acceptable and Would Not Live There As Table 12 shows, the 3,892 demand remaining after subtracting the those who preferred doubles includes a total of 2,670 who would accept either or both of the two double units tested; the other 1,222 would find the doubles unacceptable (they selected Would not live there for both). Page 30 ANDERSON STRICKLER LLC

99 DEMAND ANALYSIS TEXAS A&M UNIVERSITY STUDENT HOUSING MARKET STUDY Off Campus Interested Who Did Not Prefer Dbl BR Semi Suites Potential Additional Demand Both Dbl BR Semi Suites Acceptable 39% 1,509 2 Dbl BR Semi Suite Acceptable; WNL in 1 Dbl BR Semi Suite 14% 544 WNL in 2 Dbl BR Semi Suite; 1 Dbl BR Semi Suite Acceptable 16% 616 WNL Both; (Neither Acceptable) 31% 1, % 3,892 Numbers add unexpectedly due to rounding. WNL=Would Not Live Table 12: Acceptable and Would Not Live There Double-Bedroom Semi-Suite Unit Preference Summary Table 13 shows a summary of the maximum number of doubles 3,262 beds in the demand calculation using the distributions in the previous two tables. It is important to note that this analysis of demand for doubles requires that only doubles are provided. Though the 593 beds from students who prefer doubles is sound in any case, the acceptables only can be included in the absence of singles in the unit mix provided. To the extent that units with single bedrooms are built, these singles will draw from the other 2,669 beds, as students who found the doubles acceptable only if their preferred unit type were not available might select a single instead of a double. Unit Type Potential Incremental Demand (Preferred Unit) Potential Additional Demand (Acceptable Unit) Additional (Both Units Acceptable) Grand Total Total 2 Dbl BR Semi Suite ,509 1 Dbl BR Semi Suite ,160 1,753 1,509 3,262 Table 13: Unit Preference Summary Page 31 ANDERSON STRICKLER LLC

100 ATTACHMENTS TEXAS A&M UNIVERSITY STUDENT HOUSING MARKET STUDY ATTACHMENT 1: FOCUS GROUP NOTES ANDERSON STRICKLER LLC

101 Texas A&M STUDENT HOUSING STUDY FOCUS GROUP NOTES Group Cohort: Community Bath Residents Participants: Session Moderator: 8; 5 female, 3 male 4 freshmen, 1 sophomore, 1 junior, 2 seniors 3 live in Legett and 5 live in Moses 2 have no roommates and 6 have 1 roommate Linda Anderson Session Date: October 2, 2013 Session Location: Hullabaloo 105 Advantages to living on campus: Sense of community among residents Convenience: o o o o o o o Community bathrooms: o o o o Walking distance to class, dining, and games No need to get up early Close proximity to off-campus food/groceries No commute to campus or parking hassles Easy access to dining on campus and events Place to go between classes Proximity facilitates last minute participation in campus events which in turn fosters school spirit Layout encourages interactions among residents RAs can interact with residents as they go to facilities Multiple stalls make shower scheduling easier than bathrooms in suites Conditions can be nasty ; janitors do not want to work there anymore Several student lounges and decent common areas Disadvantages to living on campus: Community bathrooms some residents abuse the facilities, less convenient No late dining hours for some dining facilities are inconvenient to some students late schedules; hours are ridiculous Popular on-campus housing: Legett (for residence halls with community bathrooms); highest retention Hullabaloo (printing area, study areas, game/lounge area, piano room, community learning area) The Commons (for convenience to common areas with study space, dining, and game space) Page 1 of 5 ANDERSON STRICKLER, LLC 10/15/2013

102 Texas A&M STUDENT HOUSING STUDY Unpopular on-campus housing: Moses (all freshmen residence hall) Mosher (no sense of community or student activity) Desired amenities: Access to updated community kitchens; there should be one per floor Lounges, TV/game rooms, and study lounges are well-used Parental role in housing decision: Most parents decision was affected by cost; not all students can afford to live in Hullabaloo Price of a car part of the decision One student s parent wanted her to live on campus for involvement One student s relatives lived in his dorm in the 1980 s Quality of campus housing relative to price: The value depends on the housing students live in. Both Hullabaloo and Moses are both a good value for their price points; Hullabaloo offers more amenities. Legett offers good value because of its location and room size. Modulars in southside (Underwood and Rudder) are not a good value because of price relative to buildings physical condition. Moses value is not as good room sizes are decent but building lacks a kitchen Popular off-campus housing complexes or neighborhoods: The Callaway House they kinda have everything you could need there. (e.g., pool, study lounge, gym, and computer lab) Z Islander Reveille Ranch The Cambridge facility has a dining area and gym but location is inconvenient to campus Traditions apartment style configuration and amenities include on-site dining area, gym, and movie room Best housing: o o The Rise newly built, a CVS store on site The Stack new, apartment style configuration Page 2 of 5 ANDERSON STRICKLER, LLC 10/15/2013

103 Texas A&M STUDENT HOUSING STUDY Floor plan review: A. TWO-DOUBLE-BEDROOM SEMI-SUITE Students like having two bathrooms Having sinks located outside the toilet area is helpful A common living space is desirable The unit feels small and cramped; there isn t room for a television or fridge Few participants would pay more than $3,000/semester for this unit B. TWO-DOUBLE-BEDROOM SEMI-SUITE Four sinks is good More space and layout makes the floor plan desirable Small wall in bedroom between beds is helpful to give some personal space to occupants Participants were willing to pay $3,500/semester for this unit at most C. ONE-DOUBLE-BEDROOM SEMI-SUITE The unit feels cramped The area around the entryway and sink could be better utilized A more open layout for the bathroom would improve the configuration Page 3 of 5 ANDERSON STRICKLER, LLC 10/15/2013

104 Texas A&M STUDENT HOUSING STUDY D. TWO-SINGLE-BEDROOM SEMI-SUITE The unit needs a common living area The sink outside the toilet/shower area is very helpful, though moving it inside the bathroom would create more common space The unit feels more spacious and private than the other floor plans Participants would still prefer some common area within the unit Two students per bath is a good ratio Participants would be willing to pay $3,250 per semester for this unit E. FOUR-SINGLE-BEDROOM SEMI-SUITE Bedrooms should not be lined up in a row Separated sink and toilet/shower configuration is highly desirable Bathroom shelves/storage near the bathroom is also preferred Individual thermostat is desirable Four-single-bedroom apartment floor plan would be desired but likely not affordable Interest in housing plans: The majority of participants would stay in their current housing over the proposed floor plans at the discussed rents; one student would consider Unit E Housing at other campuses: So much better than TU o o o o Jester Hall is not attractive There are nice community areas but living space is poor TAMU has better prices than TU Having built-in furniture, storage space, and shelving makes efficient use of TU space One participant stayed overnight in a semi-suite at UTSA in San Saba Hall; two single rooms shared a bath Page 4 of 5 ANDERSON STRICKLER, LLC 10/15/2013

105 Texas A&M STUDENT HOUSING STUDY University of Pittsburgh housing had triple occupancy bedrooms with a single bed and bunk beds with a common area with a countertop, sink, and microwave as well as a bathroom If the new housing included, I would definitely consider living there. Lower rents Affordable living options Common area within the unit or residence hall Door to the bedroom If the new housing included, I would definitely not consider living there. Useless, annoying space Poorly configured bathrooms No privacy Additional comments: Students are generally undecided about living on or off campus next year. Two are considering staying because of the convenience. Participants on-campus housing decision is impacted by cost and its location relative to students classes. Two or four occupants are the ideal for the unit. Two occupants per bathroom are ideal for suite configurations; four occupants can be accommodated. The west campus location is not convenient for many freshmen. Page 5 of 5 ANDERSON STRICKLER, LLC 10/15/2013

106 Texas A&M STUDENT HOUSING STUDY FOCUS GROUP NOTES Group Cohort: Hullabaloo Residents Participants: Session Moderator: 5; 3 female, 2 male 3 sophomores, 2 juniors 5 live on Hullabaloo 2 have no roommates and 3 have 1 roommate Linda Anderson Session Date: October 2, 2013 Session Location: Hullabaloo 105 Advantages to living in Hullabaloo: Kitchenettes are great It feels like I m at home High ceilings (to stack loft beds and also makes the room feels larger) Support columns in rooms are hard to work around Each unit has its own thermostat Bathrooms Amenities Trash o o o o o o o o o o o Sinks located inside and outside the toilet area Tall shower heads Lots of towel bars, racks, and hooks Built-in corner shelf in bathroom and storage above the toilet is helpful Convenient and well-used (e.g., lounges, computer lab, game room, Starbucks) Music room and piano are a nice touch Game room adjacent to laundry is convenient Electronic laundry Windows and folding surfaces in laundry Nice to have recycle bins in trash areas Trash chutes are cleaner than trash cans Disadvantages to living in Hullabaloo: Recycle bins are too small for the number of people on each floor A larger computer lab would be desirable Music rooms need better sound proofing, especially since they are located next to study space Page 1 of 5 ANDERSON STRICKLER, LLC 10/15/2013

107 Texas A&M STUDENT HOUSING STUDY Laundry room should more centrally located within the building and have more dryers than washers Lack of storage under sink; providing a medicine cabinet would help Closets - hard to reach top shelf and sliding doors are not very functional Bookshelves that are in other residence halls are not available in Hullabaloo Low shower pressure compared to other halls Having to walk around entire floor to get from one unit to another The courtyard space is not functional enough to be useful; there is too much concrete and not enough green space Popular on-campus housing: Hullabaloo (most desirable) The modular residences on the southside of campus (because of larger rooms and bathrooms within the room) Commons (for the convenience of its common spaces) Unpopular on-campus housing: The balcony and ramp style housing (doors face outside, older units, cramped size, poor aesthetics, critters in the air shaft) Future housing location: Two participants plan to stay on campus; remaining participants are unsure if they will stay on campus next year Reasons/factors for off campus housing decision do not have to do with dissatisfaction with Hullabaloo as a building per se but rather for more autonomy, a private bedroom, access to a private kitchen, being able to have pets, lower cost, and a transportation system that allows easy access to campus Participants would want to stay on campus because of convenient location and proximity to classes One participant wants to stay on campus ideally as a RA Popular off-campus housing complexes or neighborhoods: U Club Aggie Station Callaway Villas The Cambridge Traditions The Rise Cottages Page 2 of 5 ANDERSON STRICKLER, LLC 10/15/2013

108 Texas A&M STUDENT HOUSING STUDY Floor plan review: A. TWO-DOUBLE-BEDROOM SEMI-SUITE An RA noted the way the closet doors swing could lead to roommate problems The bathrooms seem cramped The layout is similar to modular housing One suggestion was to have only one bathroom and to use the other bathroom space for a closet The participants would pay less than $3,500/semester for the unit but would consider more if the unit were larger B. TWO-DOUBLE-BEDROOM SEMI-SUITE The wall between beds makes the space seem larger and allows some privacy Sliding door in bathroom is good Two sinks would be adequate for the bathroom; more counter space is preferable Some participants would be willing to pay $3,800/semester for this unit Two participants would not be willing to pay any additional rent because there is no additional privacy over Hullabaloo s existing plan C. ONE-DOUBLE-BEDROOM SEMI-SUITE The unit feels comparable to the modular units on campus The second door into the bedrooms seems to be wasted space The unit size and configuration does not allow furniture to be rearranged Most participants would not be willing to pay more than $3,500/semester Some would pay less since existing space that is comparable is less expensive Page 3 of 5 ANDERSON STRICKLER, LLC 10/15/2013

109 Texas A&M STUDENT HOUSING STUDY D. TWO-SINGLE-BEDROOM SEMI-SUITE One participant likes the larger bathroom and the vanity outside the toilet The bedrooms could be enlarged and the bathrooms reduced to better optimize the space An additional sink inside the bathroom would be desirable Participants would be willing to pay up to $3,500/semester for this unit. E. FOUR-SINGLE-BEDROOM SEMI-SUITE I like this Participants like separate bedrooms, sinks, toilet, and shower Participants would be willing to pay $4,200 per semester for this unit Interest in housing plans: Most participants would be interested in an apartment unit if the rent and configuration were to be comparable to The Gardens Most participants were undecided between different configurations between Unit B and Unit E and between Unit D and Unit E. Two participants proposed halving Unit E as an alternative as E is less desirable than D because it has more residents. Unit B (Two-Double-Bedroom Semi-suite) is more appropriate for freshmen and Units D and E are better suited to upperclassmen If the new housing included, I would definitely consider living there. Outdoor recreation center and facilities in the West Campus like those found in the off-campus market (sand volleyball, basketball, and swimming pool) Walls and visual appeal of Hullabaloo Page 4 of 5 ANDERSON STRICKLER, LLC 10/15/2013

110 Texas A&M STUDENT HOUSING STUDY If the new housing included, I would definitely not consider living there. Carpet laminate flooring is easier to keep clean and though more sturdy can get dented Cinder block walls cold, uncomfortable Popcorn walls No tile ceilings Rooms any smaller than Hullabaloo at the same rents Additional comments: One participant would like to have some off-campus housing dedicated to upperclassmen. Hullabaloo has experienced growing pains such as problems with the elevators and non-working key cards. Freshmen are generally satisfied with housing, but then they are ready to move off campus. Page 5 of 5 ANDERSON STRICKLER, LLC 10/15/2013

111 Texas A&M STUDENT HOUSING STUDY FOCUS GROUP NOTES Group Cohort: Athletes Participants: Session Moderator: 11; 9 female, 2 male 1 sophomore, 5 juniors, 4 seniors, 1 Graduate 4 live in a duplex/townhome, 5 live in a house, and 2 live an apartment complex 7 have 2 roommates, 3 have 3 roommates, 1 has 4 roommates Linda Anderson Session Date: October 2, 2013 Session Location: Nye Academic Center Advantages to living on campus: Convenience; proximity to dining, classes, and other services such as the post office Sense of community among residents Provides a place to go between classes Disadvantages to living on campus: Parking Meal plan Congestion/traffic on campus (especially on game days) Small rooms Lack of privacy and quiet space Popular on-campus housing: Hullabaloo o o o o Common areas are cited as the most desirable aspects (e.g., Starbucks, c store, game room, study rooms, music room, kitchens on every floor, computer lab) Level of technology makes some students feel old Rooms are not large, but are also not cramped; laminate flooring is a plus Bathroom ratio of two students per bath is attractive Popular off-campus housing: U Club (but no visitor parking, no homey feel) The Callaway House (weekend food is bad) The Traditions The Rise (new, has a pool) Parkway Place ( crazy environment) The District ( getting old, costs too much ) Page 1 of 6 ANDERSON STRICKLER, LLC 10/15/2013

112 Texas A&M STUDENT HOUSING STUDY 2818 Place Selection criteria for off-campus housing decision: Proximity to campus Cost Pets allowed Parking Level of privacy/quiet Homey feeling of the unit and complex Reasons for living off campus: Larger bedroom Larger bathroom Closet space Alone time Some dining halls are closed on weekends; cafeteria food lacks variety Having a kitchen Residence halls are not always open for student athletes (e.g., early return from summer, spring, or Christmas breaks). Student athlete schedule and routine is different than most students so athletes tend to live with other athletes Reasons for living in duplexes/townhomes as opposed to apartment complexes: Noise in the complexes Other athletes live nearby The community of a dorm but the convenience of having your own room House amenities yard, garage Not cookie cutter housing Affordability o o o It is less expensive to split cost of living in a duplex/townhome than an apartment Less expensive than on-campus housing (room and board plus dining plan and parking) A typical cost for housing and food per month is $600; at Hullabaloo, housing alone is $875/month Quality of off-campus housing relative to price: Several participants feel the price is not comparable to the quality of off-campus housing (e.g., The District, 2818, U Club, The Woodlands); new housing runs down quickly Page 2 of 6 ANDERSON STRICKLER, LLC 10/15/2013

113 Texas A&M STUDENT HOUSING STUDY Participants agree that duplexes or houses are generally a better value than student oriented apartment complexes; some participants even believed they were underpaying for houses Floor plan review: A. TWO-DOUBLE-BEDROOM SEMI-SUITE Unit needs common space Student athlete schedules would conflict with a non-athlete roommate Shared bathroom between two people is an improvement over some existing housing layouts A kitchenette would be desirable (like at Callaway) Might be appropriate for freshmen B. TWO-DOUBLE-BEDROOM SEMI-SUITE Small wall separation between beds is good This floor plan has better circulation flow than Unit A This floor plan feels less cramped than many residence halls; not a typical dorm Page 3 of 6 ANDERSON STRICKLER, LLC 10/15/2013

114 Texas A&M STUDENT HOUSING STUDY C. ONE-DOUBLE-BEDROOM SEMI-SUITE This is nice Separate bathroom area is desirable The unit lacks privacy This unit configuration would be appropriate to freshmen or sophomores - they need to learn to get along The entry area feels like wasted space with two doors in close proximity to one another; however, having the two doors will help keep the unit quieter between bed and bath Having a separate study area would make the unit more attractive D. TWO-SINGLE-BEDROOM SEMI-SUITE This floor plan is similar to Callaway s configuration, but without a common area Lack of common living area deters interaction between roommates One participant would be willing to give up some private bedroom space to have a common area Page 4 of 6 ANDERSON STRICKLER, LLC 10/15/2013

115 Texas A&M STUDENT HOUSING STUDY E. FOUR-SINGLE-BEDROOM SEMI-SUITE This would be fun Location of bathroom areas at ends of unit is good Lack of common space is still an issue for a few participants More people per unit while retaining private bedrooms is desirable Housing at other campuses: Siblings lived in similar housing at a Georgia college (with kitchenette and common area in unit) Floor plans look identical to best accommodations at other universities University of Arizona student athletes live in cramped housing with community bathrooms Vanderbilt good housing Princeton senior housing is unique and drawn by lottery Notre Dame student athlete rooms were cramped and had community bathrooms Mississippi State new housing has no privacy Indiana old facilities with community bathrooms but huge windows with natural light make it appealing ( B and C Ramp corner rooms have large windows so they are highly desired at TAMU) Perception of large space (e.g. with natural light, vaulted ceilings, large windows) is key to appeal even over newness Impact of housing on school decision: Some coaches take student athletes directly to Callaway or Traditions; coaches did not provide tours of on-campus housing. Other coaches choose to have their athletes live on campus. Some athletes stayed off campus and others on campus during their recruiting trips to TAMU Additional comments: Student athletes find rental housing by word of mouth (from other teammates) or by driving through surrounding neighborhoods One participant would consider living on-campus housing if the room and board cost was more affordable Apartment units on campus would make some athletes consider living on campus A progression of housing configurations that offer differing levels of privacy and community space should be available on campus A cool amenity could attract students on campus housing Page 5 of 6 ANDERSON STRICKLER, LLC 10/15/2013

116 Texas A&M STUDENT HOUSING STUDY Convenient parking is important Designated parking areas for on-campus versus off-campus residents would be attractive Visitor policies are also a factor in determining whether to live on campus or off campus Page 6 of 6 ANDERSON STRICKLER, LLC 10/15/2013

117 Texas A&M STUDENT HOUSING STUDY FOCUS GROUP NOTES Group Cohort: Off Campus Residents Participants: Session Moderator: 4; 1 female, 3 male 1 junior, 2 seniors, 1 graduate student 2 live in duplex/townhome and 1 lives in an apartment complex 3 have no roommates and 1 lives with family Linda Anderson Session Date: October 3, 2013 Session Location: Cain B 149 Advantages to living on campus: Convenience o o o Close proximity to class No commute or transportation Can get up five minutes before class Reasons for living off campus: Cost cheaper to share rent in an apartment complex; can fit five students in a three-bedroom unit Personal food preparation/cooking Lack of privacy with shared bedrooms on campus Sharing community space with others on campus Single bedrooms are small on campus compared to off-campus housing options Popular on-campus housing: Davis-Gary - for those that want an all-women living environment (but there is no community kitchen) Modular units some students prefer the private bathrooms of this housing Hullabaloo amenities are very nice (e.g., computer lab, private study rooms, multi-purpose room, Starbucks, Rattlers, piano room, and music room) The Commons area (for convenient location) Some halls have different reputations (e.g. party atmosphere, quiet environment, community character) Access for dining options has affected popularity of some halls as some eating establishments moved from the north side halls and/or have limited hours Selection criteria for housing decision: Cleanliness Cost Amenities All inclusive rent (e.g., includes cable and Internet access) Page 1 of 5 ANDERSON STRICKLER, LLC 10/18/2013

118 Texas A&M STUDENT HOUSING STUDY Quiet Acceptable distance from campus and not much traffic (e.g., not on the far side of the railroad tracks) Close to retail/grocery stores Proximate to hospital, gym Well-lit and safe neighborhood Non-student neighborhood Quality of off-campus housing relative to price: One participant believes it is a good value for the price (Meadows Point). Two participants have exceptional value because they pay their parents for the townhome that they live in. Participants found their housing by word of mouth and through a realtor. Floor plan review: A. TWO-DOUBLE-BEDROOM SEMI-SUITE Looks similar to some Hullabaloo floor plans Acceptable to those comfortable living in a group of four Floor plan is ideal if you know your roommates and are community-oriented Sinks located near the door is not desirable There is not enough privacy This floor plan is appropriate for freshmen since it forces social interaction (though some residents could be a bad influence) Page 2 of 5 ANDERSON STRICKLER, LLC 10/18/2013

119 Texas A&M STUDENT HOUSING STUDY B. TWO-DOUBLE-BEDROOM SEMI-SUITE Low wall allows more privacy Placement of electrical outlets would be important in this floor plan; students need equal access The bathroom s configuration will make it important to maintain access to sinks at all time The sliding door on the bathroom is a good idea Floor plan is appropriate for all students and is worth more than floor plan A C. ONE-DOUBLE-BEDROOM SEMI-SUITE This floor plan is similar to modular units on the south side The entryway is not functional so reducing the size and expanding the bedroom or bathroom is preferable D. TWO-SINGLE-BEDROOM SEMI-SUITE This would be where I would go Enclosing the sink outside the toilet/shower area allows more privacy If the sink is moved into the toilet area, the entry space could be better utilized as a gathering space Larger/additional window to allow more natural sunlight would be desirable to one participant The unit would be better if it had two baths Page 3 of 5 ANDERSON STRICKLER, LLC 10/18/2013

120 Texas A&M STUDENT HOUSING STUDY E. FOUR-SINGLE-BEDROOM SEMI-SUITE Having the toilet and shower separate is a good idea Long hallway separating rooms in addition to the main hallway is a negative Participants suggest placing sinks inside bathroom area with toilet Interest in housing plans: Participants stated a four-single-bedroom apartment would be attractive In-unit kitchen space is highly desired by participants Private bedrooms are much preferred so participants would consider living in Unit D, E, or a four singlebedroom apartment One participant would pay $600-$1,000 per person per month (including utilities) depending on furnishings, amenities, parking, etc. Another participant would pay $600-$850 per person per month (including utilities) but only if the unit has a kitchen Desired amenities: Units should have individual thermostats Limited access into the building and parking would also be factors in housing decision Complex amenities should include a Rattler s and eating establishments such as Chick-fil-A, pizza venue, dining hall, and/or an Einsteins Sinks that have open access to the unit should have medicine cabinets that can be locked Housing at other campuses: UT Austin (Jester Hall) cramped, no air conditioning, rollout beds were uncomfortable Texas Tech and Sam Houston lacks the variety of floor plans that Texas A&M has Gettysburg College old, small rooms If the new housing included, I would definitely consider living there. In-unit kitchen Private bathrooms Private bedrooms with doors Single unit with private bathroom Windows Page 4 of 5 ANDERSON STRICKLER, LLC 10/18/2013

121 Texas A&M STUDENT HOUSING STUDY Decent sized bedrooms Cost of laundry built into the rent If the new housing included, I would definitely not consider living there. Thin walls White colored walls Incandescent lighting Community bathrooms Meal plan o o Thing of the past One participant noted they would prefer a single with a community bath over a double with its own bath Additional comments: Hullabaloo s music room needs better sound proofing, especially given its proximity to the computer lab Hullabaloo s conference rooms and meeting space are available 24 hours per day so the rooms are booked regularly Need more soundproofing in walls between housing units Custodial cleaning service can impact some students housing decision Easy access to laundry facility is desirable West campus housing should consider incorporating older students into apartment-style units Two students per unit is the ideal number with four being acceptable depending on the layout Individual bathrooms are ideal but no more than two people sharing a bathroom is acceptable Page 5 of 5 ANDERSON STRICKLER, LLC 10/18/2013

122 Texas A&M STUDENT HOUSING STUDY FOCUS GROUP NOTES Group Cohort: Suite Bath Residents Participants: Session Moderator: 2; 2 male Both freshmen Both live In Aston Both have 1 roommate Linda Anderson Session Date: October 3, 2013 Session Location: Cain B 139 Advantages to living on campus: Convenience of being close to classes, games Social atmosphere easy to meet people especially for freshmen Comfortable beds Disadvantages to living on campus: No kitchens, toasters, microwaves in some residence halls Lifestyle differences with roommates (e.g., temperature settings, study habits) Tiled floors instead of carpeting No extension cords allowed and not enough outlets in the bedroom Dim lighting Community bath halls Popular on-campus housing: Hullabaloo (specifically community kitchens, Starbucks, high ceilings, homey atmosphere like a Hilton, courtyard, grill, common areas, game room) Modular units have space (but the halls are less social) Unpopular on-campus housing: Century rate halls Older halls Popular off-campus housing complexes or neighborhoods: The Callaway Villas Traditions The Cottages The Rise The Stack Page 1 of 4 ANDERSON STRICKLER, LLC 10/18/2013

123 Texas A&M STUDENT HOUSING STUDY Quality of campus housing relative to price: The quality of Aston is on par with its price for one participant On-campus housing is slightly overpriced relative to the quality (but does include utilities) Both participants would like to live in Hullabaloo, but it is too expensive: however, those that can afford it get their money s worth The value of campus housing is not just in the facilities but in the experience Floor plan review: A. TWO-DOUBLE-BEDROOM SEMI-SUITE Best of both worlds Floor plan allows interactions with neighbors Two people sharing a bathroom is desirable Female students would like the sinks located outside the shower and toilet Participants believe $3,300 per semester is a reasonable price for this unit. Price could be higher, but west campus location is far B. TWO-DOUBLE-BEDROOM SEMI-SUITE Looks like a lot of room Whole new dimension of privacy Closing off shower and toilet from sink provides privacy Overall layout allows for both privacy and interaction Participants believe $3,500 per semester is a reasonable price for this unit Page 2 of 4 ANDERSON STRICKLER, LLC 10/18/2013

124 Texas A&M STUDENT HOUSING STUDY C. ONE-DOUBLE-BEDROOM SEMI-SUITE Floor plan looks like existing modular units Two entry doors seem redundant Like the privacy of toilet and shower area Participants believe $3,300 per semester would be a reasonable price for this unit D. TWO-SINGLE-BEDROOM SEMI-SUITE Floor plan is similar to Hullabaloo This is definitely cool. Private bedroom is highly desirable Floor plan is not conducive to social interactions Participants believe $3,600 to $4,000 per semester would be a reasonable price for this unit E. FOUR-SINGLE-BEDROOM SEMI-SUITE Seems like sorority housing One participant likes the internal hallway to socialize Compartmentalized bathroom is a good feature Participants believe $3,800-$4,000 per semester would be a reasonable price for this unit Page 3 of 4 ANDERSON STRICKLER, LLC 10/18/2013

125 Texas A&M STUDENT HOUSING STUDY Interest in housing plans: Participants stated a four-single-bedroom apartment would be highly desirable but likely not affordable; UTSA has such housing A mix of single- and double-bedroom units would offer different price points and levels of privacy One participant would move to Unit B over staying in his current housing at the discussed rents; one student would consider Unit E Desired amenities: The housing should have ample study areas, air conditioning, TV rooms, washers and dryers Dining services should be available and have extended hours to accommodate student schedules Housing at other campuses: University of Texas (Jester Hall) uncomfortable pull-out bed, residence hall had a bad smell amd was noisy If the new housing included, I would definitely consider living there. Hot tub Swimming pool Kitchen More outlets in the bedrooms Any rules that allow the housing to feel homey (e.g., ability to hang items on the wall) Shuttle service If the new housing included, I would definitely not consider living there. Curfew Restrictions Additional comments: Both participants are undecided about living on campus next year as sophomores; as juniors, they would live off campus Lower cost of living off campus and freedom would be the reasons for leaving Four occupants is the maximum number of people per unit; six is a crowd Four occupants per bathroom should be the maximum number; two occupants per bathroom is ideal Page 4 of 4 ANDERSON STRICKLER, LLC 10/18/2013

126 Texas A&M STUDENT HOUSING STUDY FOCUS GROUP NOTES Group Cohort: Gardens Residents Participants: Session Moderator: 6; 4 female, 2 male 3 juniors, 2 seniors, 1 graduate student 1 lives in Aston, 5 live in Garden Apartments 1 have 1 roommate, 2 live with 2 roommates, 3 live with spouse/child(ren) Linda Anderson Session Date: October 3, 2013 Session Location: UA Community Center Advantages to living in The Gardens: Open space for children to play Washer and dryer in the unit (Phase 2 units) Community center: o o o o Study space Computer room (not usually busy) Children s playroom (gets a lot of use ) Kitchen Located on bus route Convenient location quiet but close enough for short commute to campus Safe Disadvantages to living in The Gardens/Aston: The Gardens o o o o o The Commons o o No gym at housing area and location is too far from main recreation facility Lack of common areas within apartment buildings Space and equipment for game room but not set up Noise complaints sound from people walking on floors, between neighboring apartments, cabinets closing, exterior doors closing Air conditioning breakdowns Tile floors result in cold floors in the morning No kitchen or kitchenette Page 1 of 4 ANDERSON STRICKLER, LLC 10/18/2013

127 Texas A&M STUDENT HOUSING STUDY Reasons for living in The Gardens: Affordability Convenience (e.g., on the shuttle route) Security Desired amenities for West campus: Carpeting Ice machine on each floor Computer lab with ability to print Free laundry Common area with convenience store and other amenities like on the first floor of Hullabaloo Co-located parking would be desirable Functioning thermostat in each unit Quality of campus housing relative to price: Excellent value because price includes furnishings and all utilities; may be less expensive to rent space in a house but costs about as much as living in a residence hall (Aston resident) Good quality for price paid It s perfect Floor plan review: A. TWO-DOUBLE-BEDROOM SEMI-SUITE Two sinks is desirable Sinks at entrance is kinda awkward It would be better if the toilet had its own door Entry space is not well utilized A common area is desirable for socializing Symmetrical unit layout makes equal space for all residents in the unit Page 2 of 4 ANDERSON STRICKLER, LLC 10/18/2013

128 Texas A&M STUDENT HOUSING STUDY B. TWO-DOUBLE-BEDROOM SEMI-SUITE Configuration makes the unit feel bigger, more open than plan A More divided area allows more privacy Four sinks is desirable Bathrooms being further away from beds could help minimize noise Move student desk closer to bedroom area Plan B is better than plan A C. ONE-DOUBLE-BEDROOM SEMI-SUITE It s basic Closeable door between bathroom and bedroom is desirable D. TWO-SINGLE-BEDROOM SEMI-SUITE Larger bathroom is good, but sacrifices bedroom space Two sinks would be preferable Participants like the private rooms Sink area should maximize amount of space and provide more counter space The room closer to the bathroom will be less desirable Consideration should be given to having each student with their own sink, perhaps located in the bedroom Page 3 of 4 ANDERSON STRICKLER, LLC 10/18/2013

129 Texas A&M STUDENT HOUSING STUDY E. FOUR-SINGLE-BEDROOM SEMI-SUITE There should be more sinks Separated toilet and shower area is good One participant likes the internal hallway to socialize Having access to the mechanical systems from the hallway is a good idea Interest in housing in West campus: Private bedrooms and common living space are essential Apartment-style configuration would not encourage interactions among residents West campus location would not be desirable for family housing Some students would not be interested in living on West because it would be too far from their classes Walkway from West campus helps tie the area with the rest of campus. More dining and other amenities would be necessary in West campus to support more students Housing at other campuses: One small university did not have a convenience store or large common area in the housing area; no sense of community Abilene Christian University - housing had community bathrooms, but the unit had a small common area, sink in the bedroom, and a kitchenette At a small university on-campus living requirement for all four years of study At another school, students were separated by year of study; the participants had mixed opinions on this Additional comments: On-campus housing should offer broader range of prices Ability to bunk beds is desirable Having a sink in the bedroom is advantageous Making common space available for residents may reduce the amount of tension between roommates and reduce room switches Keeping families with children separate from single undergraduate housing is desirable, though married student would not need to be as separate (e.g., not live together with freshmen, but with older students) Many international students expect inexpensive housing with few amenities, as TAMU previously offered, including a place for children to play Traditions is an option for single students; though it is expensive, it offers a meal plan and is close to campus Page 4 of 4 ANDERSON STRICKLER, LLC 10/18/2013