They needed an immediate solution that would allow them to consider their other long range plans and use of capital.
A Plan to Grow Enrollment
Cornish College of the Arts is a private performing and visual arts college located in the thriving urban market of downtown Seattle, WA. In 2012 when Cornish began seeking a solution to its student housing needs, it had an enrollment of just 800 students with a plan to grow that enrollment to approximately 1,200 students over the course of the next 5-10 years. Approximately 265 of Cornish’s enrollment enjoyed living in Cornish-leased student housing that was located approximately three blocks away from campus.
How a Partnership Began
As Cornish began relocating their small campus from the Capital Hill neighborhood of Seattle to South Lake Union in 2002, they saw a steady increase in demand for more facility space located close to the ‘new’ core campus. When the redevelopment wave, spawned by the growth of Amazon, hit the Seattle neighborhood of South Lake Union a few years later, the property that Cornish used for student housing was purchased and their lease was to be terminated.
Very quickly their search for a permanent housing solution became critical, as they needed a “new” housing facility ready by August 2015 or they risked putting nearly 300 students on the streets of Seattle to fend for themselves in an extremely challenging housing market. While Cornish was analyzing its housing options, nearby City University of Seattle was also searching for an affordable and convenient location to house a portion of its growing student population. City University agreed to join with Cornish and lease a portion of a housing project if Cornish could provide an adequate solution.
Together, the two institutions provided a demand for 400-450 student beds. As the developer broke ground on the construction that would ultimately demolish Cornish’s existing housing, the two institutions knew they needed to solve their housing problems quickly. With all of this in mind, Cornish then approached a real estate development company in 2013 with an immediate need for new housing.
Cornish’s Objectives for the New Housing / Partnership
Through a market demand study, it was determined that between Cornish and City University of Seattle, the project could support a development that housed approximately 450 students. In addition to housing, Cornish also expressed a need for a space where all students could gather to socialize or study, as the college did not have a student center. Thus, the project team worked with Cornish to program a ground level “living room” that would welcome all Cornish students in to study, socialize or even practice their craft. The college also wanted their new housing and student center to be programmed with academic and administration space for art studios, music practice rooms, movement studios and conference rooms.
The Cornish Commons Transaction Structure
The transaction for Cornish Commons was structured in a unique way that was tailored to the specific needs of delivering a large-scale project for a small institution in a rental-rate-impacted, rapidly developing urban environment. The project, sensitive to Cornish’s desire to leverage outside capital, was financed with 50% (of cost) private equity, a construction/ mini-perm loan, and a forward commitment/ rate-lock for a fully amortizing permanent loan. The real estate development team, along with an equity partner, closed on the equity and construction/ mini-perm loan and entered into the rate-lock agreement in March 2014. The permanent loan to replace the construction/ mini-perm loan closed at completion of construction in fall of 2015.
The low-cost financing was achieved based on a combination of commitments from Cornish and a “burn off” master lease for a small portion of the housing from a neighboring institution. The project is inclusive of housing, which is rental revenue supported, and academic and administration, which is supported by a “zero profit” lease to Cornish. A creative financial structure and terms enabled the team to secure and provide competitively priced debt and equity for this major, $50M development.
Along with the housing, the real estate development firm constructed and master leased to Cornish multiple floors of classroom and administrative space, as components of the development. The team entered into a long-term ground lease of the site from the College. Cornish is compensated by receiving a percentage of the project revenues each year for the term of the ground lease. At the end of the ground lease the land and improvements transfer, debt free, to Cornish for ongoing and continued use by Cornish and their students.
A State-of-the-Art Recruiting Tool
The new residence hall provides Cornish an iconic, state-of-the-art recruiting tool. Upon opening, Cornish Commons was 100% leased. After over six months of operations, Cornish is seeing healthy percentage increases in key enrollment statistics for Fall 2016. Thus far their prospect interest is up nearly 30%, and applications have increased nearly 25%. The number of students admitted has also increased from the prior year when the development was under construction. Additionally, Cornish is seeing increased retention and growing numbers of students returning to live on-campus after their first year.
The Cornish Commons Housing Program
The team architect, Ankrom Moisan Architects, was challenged to design a building for a 10,000 square foot site that would embody the culture of the arts college while at the same time raising the standard of architecture for Cornish buildings. Though this 20-story tower is mostly residential, the first three floors are public to the Cornish community. The first floor is highlighted by 24- foot high glazing, which allows the living room/lounge space to be seen from afar and welcome students inside. This space serves as an icon for the campus and gives students the space to collaborate, display their artwork, and just hang out.
A striking feature staircase leads up to the second floor where four full-size movement theatre studios can be found. Level 3 houses building management offices and staff apartments. Levels 4-19 feature modern, oversized dorm-style units, some including kitchenettes, and a semi-public floor lounge providing unique spaces where students can decompress and connect with each other. The top floor contains a jaw-dropping, dramatic resident amenity space, including a fitness center, media room, community kitchen, gaming area, lounge, laundry room, and music practice rooms, as well as a sky deck with panoramic views of downtown and nearby Lake Union.
The new on-campus, mixed-use high-rise residence hall and student center opened in July 2015. The facility is 20 stories tall and 157,623 square feet with 224 student rooms, totaling 432 beds and 4 staff apartments (including two for Cornish and two for the resident property management team). With nearly 17,000 square feet of academic space, the first and second floors house Cornish administrative offices, studio movement classrooms, and the campus “living room”. Cornish Commons achieved LEED for Homes Gold certification.
After five months of operations, Cornish Commons was voted the 2015 Building of the Year by the Seattle Daily Journal of Commerce – a testament of how not only the college has been positively impacted by their new residence hall but how the Seattle Denny Triangle neighborhood has embraced this new addition to their community.
A few months later, Cornish Commons achieved Innovator awards for Best New On-Campus Development, Best New Public/Private Partnership and Most Creative Financing. As the first ground-up project for Cornish since 1921, this creatively conceived and executed public private partnership development is a work of living art. Cornish Commons is a landmark building for Cornish and a positive addition to the Seattle skyline.