Author Archives: Scott M. Helfrich, D.Ed.

About Scott M. Helfrich, D.Ed.

I am a higher education professional with over 20 years of full-time university student affairs experience. I earned a doctorate (D.Ed.) in higher education from Penn State University and am the Principal Owner of Helfrich Advisory Services, LLC.

Effects of COVID-19 on the P3 Student Housing Industry

Those of us in the student housing profession have been facing complicated challenges because of the COVID-19 pandemic. With campus closures and the rapid pivot from face-to-face to remote learning, students were required to vacate campus housing communities to comply with directives coming from various state governments and associated educational agencies. As a result, multitudes of institutions also refunded various student fees, including housing and dining charges. This posed a myriad of systemic implications for student housing public-private partnerships (P3) given the complexity of the business relationships that exist with this type of arrangement. While universities with wholly owned housing portfolios will certainly suffer the effects of refunding millions into tens of millions of dollars for housing fees, universities with P3’s, on the other hand, will face unique financial and operational challenges.

Because of the various entities that are involved in a student housing P3, the effects will not simply be confined to a campus to manage. Between ownership entities, operating firms, investors, underwriters, and various campus departments, there will plenty of shared distress to go around. In some cases, the host university has picked up the bill for refunds given to students mandated to vacate while in other cases the project itself may dip into their own reserves to cover this.

The Downside

S&P Global and Moody’s Investors Service have already negatively downgraded the outlook for multiple privatized student housing projects given the precarious situation that colleges and universities will face with the challenges of paying debt service. The uncertainty with how the 2020-21 academic year will play out adds to the situation as institutions that decide to go to fully remote will quickly put P3 campus projects in financial risk. Financial stress will still occur even if there are plans to open, but with decreased occupancy to conform to social distancing standards. Given the partnership dynamics that exists, any direct and / or subordinate personnel expenses will be negatively affected resulting in the potential for position layoffs. Additionally, any net revenues contributed to the university will essentially be eliminated should debt covenants not be met. This will have ripple effects throughout the institution as those funds are utilized for operational expenses, discretionary projects, and even student scholarships that feed a recruitment and retention strategy.

The Upside

Privatized housing that offers apartment-style housing in most cases is more suited to accommodate the types of conditions for prevent the spread of COVID-19. Apartments with single bedrooms, bathrooms, and full kitchens can easily house two to four students each unlike large residence hall buildings that can house dozens to hundreds of students on a single floor. Universities that have P3 arrangements with affiliates with apartments are better positioned to permit students to remain with a certain level of social distancing that can not necessarily be accommodated elsewhere. Additionally, institutions that do not panic with occupancy management decisions and responsibly balance business operations with CDC guidelines will certainly weather the storm quicker.

The Outlook

Given the ability for the higher education industry overall to bounce back from the pandemic financial crisis, analysts are relatively confident that student housing will get back to normal from a cashflow, construction, and credit standpoint. P3 projects are typically positioned to have reserves that can help to alleviate short-term financial distress. Also, given that the universities will typically step in to help with a short-term emergency, the outlook is even more encouraging. Seeing the hope for a vaccine on the horizon, the stress on P3 communities is temporary and should not extend over the course of multiple years.

Helfrich Advisory Services, LLC is a boutique consultancy that specializes in college and university Housing Operations and Residence Life development, including the public-private partnership (P3) market. With 20-years of professional experience, my mission is to be a leading provider of affordable and practical solutions for the college and university student housing industry.

Understanding Debt-Service Coverage Ratio (DSCR) for Student Housing

A very important concept that is inexorably tied to student housing financing is the Debt-Service Coverage Ratio or DSCR. Not only must college and university chief financial officers understand this, but all senior housing officers should also know what this is as well in order to fully appreciate the financial requirements and ramifications that come with borrowing money in order to develop, construct, and operate new student housing. This post will explain the basics behind the Debt-Service Coverage Ratio and how it impacts that day-to-day operations of managing student housing communities.

Investopedia defines the debt-service coverage ratio as follows: “…the debt-service coverage ratio (DSCR) is a measurement of the cash flow available to pay current debt obligations. The ratio states net operating income as a multiple of debt obligations due within one year, including interest, principal, sinking-fund and lease payments.”

While the definition may sound complicated, the DSCR is essentially an annual calculation that illustrates whether or not you have enough funds to cover the payments for the money you borrowed. When an institution borrows millions upon millions of dollars to construct new student housing, the lender needs reassurance that the project is financially healthy enough to make the required payments on the debt (i.e., debt-service). Just like any loan, there is the expectation that the money borrowed will be paid back by the agreed-upon terms (i.e., length of loan, interest, etc.) In this particular case, because it’s a real estate-based transaction, the lender uses a DSCR test as a means to set a benchmark for what is acceptable from a cash flow standpoint.

One important distinction, however, is that the lender expects a project to be more financially successful over simply just earning enough money to cover the debt payments. They want to see that a project is operating prudently so that there is enough money remaining over and above the annual debt payment amounts. A student housing project that is essentially living “paycheck-to-paycheck” (or not even to that level) is a huge financial risk, which lending institutions attempt to avoid. Having sufficient cash flow permits the ability to make the principal and interest payments, pay for operational costs (e.g., personnel, facilities maintenance, etc.), set aside funds for capital projects (i.e., building and property improvements), and still have some money remaining.

Therefore, a lender will typically require an annual debt-service coverage ratio (DSCR) of 1.20, which is generally a national industry standard. This means that, overall, the income must be 120% of what the annual debt service requirements are. This extra amount up-and-above the debt-service is essentially a buffer. Understand that the lender does not keep this extra amount, but simply uses this as a annual requirement to make sure that the administrators of the housing project are managing it soundly. The borrower must illustrate annually what the DSCR is via required financial statements and budgets provided to the lending institution.

The DSCR is calculated in two different steps: 1.) First, subtract the operating expenses from the revenue earned to obtain the Adjusted Income; and 2.) Second, divide the Adjusted Income by the Debt Service Requirements to calculate the Debt-Service Coverage Ratio (DSCR). Let’s look at a successful theoretical calculation from a fictional 400 bed student housing community. Please note these numbers are just for illustration’s sake:

Revenue Earned – Operating Expenses = Adjusted Income

$2,400,000 – $1,200,000 = $1,200,000 Adjusted Income

Adjusted Income ÷ Debt Service Requirements = Debt-Service Coverage Ratio

$1,200,000 ÷ $1,000,000 = 1.20 DSCR

As you can see, this fictional student housing community meets the 1.20 DSCR test. In this particular case, they are exactly meeting the mark for what is financially required. 


Now let’s look at the same 400 bed, student housing community, but reflecting less income earned (i.e., lower student occupancy), but the same level of operating expenses:

Revenue Earned – Operating Expenses = Adjusted Income

$2,250,000 – $1,200,000 = $1,050,000 Adjusted Income

Adjusted Income ÷ Debt Service Requirements = Debt-Service Coverage Ratio

$1,050,000 ÷ $1,000,000 = 1.05 DSCR

As you can see in this example, they are clearly below the required 1.20 DSCR by $150,000. While they would still be able to make the debt service payments, they would still be scrutinized for not meeting the debt-service coverage ratio test. This can cause some proverbial alarms to sound as the DSCR test not being met could be symptomatic of one or a combination of many factors, including, but not limited to, poor asset management, new competitors in the local market, enrollment issues at the institution, and financial mismanagement. Because of this, the financiers can require various remedies to occur, including financial and management advisers to scrutinize all operations because they would not want this trend to continue into subsequent financial years.

In some dire situations, the DSCR can go below a 1.00, which essentially means that the housing community is not only unable to meet its debt obligations, but neither its budgeted operational expenses as well. At the end of the day, the only way to remedy a DSCR lower than a 1.20 is to increase revenue and / or decrease expenses. However, it’s important to understand that you cannot “cut” your way to financial success; you cannot make enough cuts to make up for the revenue that you are not earning. You must be able to earn enough revenue to meet the debt requirements. As with the case of the 1.05 DSCR example, attempting to cut $150,000 from the operational budget of a 400 bed community is going to next to impossible without significantly altering the services provided. This is why maintaining a strong occupancy is crucial. If, theoretically, the average fee for an academic year of housing costs $8,000 per student at that community, only 19 additional housing contracts would need to be obtained in order to meet the debt service requirements. 

While there are others nuances and operational strategies in order to meet the debt-service coverage ratio, the key is making sure that your occupancy levels generate enough income to cover both the principal and interest payments as well as operational costs. 


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*Photos courtesy of Marcelo Moura and Ayhan Yildiz.

How to Get Away: Finding Balance in Our Overworked, Overcrowded, Always-On World (book review)

There is much ongoing discussion in Student Affairs regarding wellness and self-care. However, it is rarely discussed comprehensively and, in most cases, ends up being lip service when actually applied to our day-to-day professional lives. A great book to help with this discussion is How to Get Away: Finding Balance in Our Overworked, Overcrowded, Always-On World by Jon Staff and Pete Davis. They are both are the founders of Getaway, which is a company that designs and rents small cabins in the woods for personal relaxation and rejuvenation.

The book has 186 pages of content (not including appendices, etc.) and is divided into three sections or “virtues” as referred to in the book: Balancing Technology & Disconnection; Balancing City & Nature; and Balancing Work & Leisure.

The first section explores the current problems we face with using technology as much as we do and some suggestions for how to disconnect without completely going off-the-grid.

Virtue I – Balancing Technology & Disconnection

  1. Technological Overload is a Problem
  2. Technology is Hurting Our Relationships
  3. Technology is Hurting Our Work
  4. Technology is Hurting Our Memory
  5. Technology is Hurting Our Health
  6. Do a Digital Detox
  7. Audit Your Tech Use
  8. Dumb Down Your Phone
  9. Carve Out Space for Disconnection
  10. You Are Not Alone

The second section expands upon the first section and offers lessons from historical figures, such as Henry David Thoreau and Margaret Murie, as well as modern examples of individuals who have found the importance of purposefully including nature in our lives. There is also a look into how we can more effectively balance our urban lives with the ability to be outside more and why that is so important.

Virtue II – Balancing City & Nature 

  1. We Are Experiencing Massive Urbanization
  2. We Aren’t Going Outside
  3. Nature is Good for Our Bodies and Minds
  4. Nature is Good for Kids
  5. Nature is Good for Our Neighborhoods
  6. Join a Community Garden
  7. Take a Forest Bath
  8. Ask Your Doctor about Park Prescriptions
  9. Participate in Cabin Culture
  10. Reimagine Cities

The final section explores how we can and should balance both work and leisure. Particularly for those of us in the United States, we are working more than ever. This is clearly taking a toll on our lives in many unproductive and unhealthy ways. This section I found to be the most salient for the Student Affairs arena given the ever increasing demands and pressures that we face every day with our work.

Virtue III – Balancing Work & Leisure

  1. The 40-Hour Workweek We Fought for Is Eroding
  2. We Are a No-Vacation Nation
  3. We Are Part of the “Cult of Busy”
  4. Breaks Are Key to Creativity
  5. We Don’t Spend Enough Time Being Bored
  6. Vacation really Works, and We Need More Of It.
  7. We Are Experiencing The Great Spillover
  8. We Should Experiment With 4-Day Workweeks
  9. Hygge Can Help Us Learn to Slow Down
  10. We Can Practice Holy Leisure

I found How to Get Away: Finding Balance in Our Overworked, Overcrowded, Always-On World by Jon Staff and Pete Davis to be an interesting and very practical read. It was also a good personal reminder that I need to do a better job at consciously slowing down and doing my best to avoid the “FOMO” (i.e., Fear of missing out) ethos that can very much plague Student Affairs professionals. The book can serve as a great resource for staff professional development discussions as well as a way for supervisors to symbolically (and strategically) communicate to their employees that slowing down does matter.

We cannot serve our students and employees fully if we are constantly on the go and not taking care of our own wellness. Furthermore, this would be an excellent resource to share and discuss with students, particularly those in First Year Seminar or First Year Experience (FYE) courses and programs, as we continue to see anxiety and depression on the rise within our student populations. The book offers many suggestions and strategies that could be easily explored with our students.

Thanks to Jon and Pete for writing a wonderful book!