NEW BRUNSWICK, NJ—In February, the New Brunswick Development Corporation (DEVCO) sold the city’s first downtown dormitory, Rockoff Hall, for $44.1 million to a company based in Pittsburgh with a reputation for student housing.
As NJBIZ.com first reported, Pittsburgh-based McKinney Properties formed a joint venture with Virtus Real Estate Capital, a private equity real estate firm based in Texas, to buy the a 186-unit apartment building that opened in 2005 as an official Rutgers residence hall.
But a spokesman for Rutgers confirmed the school will no longer be playing a role in the facility starting next year, which could mean big changes and higher rents for the building’s tenants.
“After [May of 2014], we’re going to run it like student housing,” said Rodd Werstil, a spokesman for McKinney. “It’ll be leased to students on a by-the bed basis.”
Rutgers confirmed that it will be pulling out of the building: “For the next academic year (2013 to 2014), all programs and services at Rockoff Hall remain the same,” said University spokesman EJ Miranda.
“After May 2014, students who wish to live in Rockoff would negotiate with McKinney, the property owner, just as they would for any other off-campus housing.”
Werstil could not say what credentials would be required to live in the building–for instance, whether part-time or community college students would be welcome.
“We haven’t set those policies yet,” Werstil said, adding that pricing and other details were still in the works.
The biggest change, perhaps, will be that the housing will be available on the private market, and no longer subject to the university’s complicated housing lottery process, which gives seniority to students with more academic credits.
Nevertheless, Werstil said it would still be an “option” to continue a similar relationship with Rutgers to the one DEVCO enjoyed, where Rutgers leased and supervised the downtown building like any other dorm.
“If Rutgers tomorrow asked to continue the relationship,” Werstil said, his firm would strongly consider it.
As the Star-Ledger’s Kelly Heyboer reported in 2005, DEVCO’s arrangment to own the Rutgers dorm was unusual, but growing in popularity:
In an unusual arrangement, Rutgers University will not own its new dormitory. The building was constructed by the New Brunswick Development Corp., a nonprofit developer that has worked on several projects with Rutgers.
Devco will own and maintain the building while Rutgers will provide the students, run programs and provide security within the residence hall.
After 30 years, Devco will have the option of continuing the arrangement, selling the building, converting it into commercial apartments or making other changes, company officials said.
Partnerships between private developers and public universities are growing increasingly popular as schools struggle to keep up with demand for upscale dorms without taking on more debt.
McKinney has varying levels of collaboration with the eight universities it currently provides housing for, including at least one arrangement where the school manages the facility: West Virginia University.
However, last October, Rutgers Vice President Richard L. Edwards told the Daily Targum that the university “would no longer be involved like they were in the past with running the facilities as an official Rutgers residence hall.”
In the same article, appeared that the new owners would keep it a Rutgers residence hall after DEVCO President Chris Paladino assured it would be a “seamless transition” to new owners.
Paladino described Rockoff Hall as an “extradordinarily successful property” for his company, citing it never dipped below 96% occupancy in the seven years DEVCO owned it.
DEVCO said last year that it wanted to sell Rockoff in order to focus on other projects near Rutgers College Avenue campus, including new buildings on the current site of the New Brunswick Theological Seminary and the parking lot famous for being home to New Jersey’s most famous food trucks.
According to their website, McKinney Properties was started in 1946 and describes itself as a “real estate investment company that has quietly gone about the business of creating value, building wealth and preserving capital for its investors and partners through the ownership and management of quality real estate assets.”
Today the firm operates student housing in eight different college towns as well as more than a dozen additional commericial, industrial, and residential properties. This is their first property in New Brunswick.
McKinney’s website advertises, “Enjoy the lifestyle you deserve to achieve your academic and career goals. Play, study and experience outstanding surroundings with convenience to campuses, spacious floorplans, and many features and amenities for you to enjoy!”
Editor’s Note: A previous version of this article indicated a sale price of $44.1 million. That was the size of the mortgage obtained, but the sale price was $57 million, according to property records.