The Michaels Organization - University Student Living

Few companies can boast the impressive returns that The Michaels Organization has posted since its inception in 1973. Led by chairman and CEO Michael J. Levitt, the company has exceeded $900 million in revenues and orchestrated $3 billion in development and substantial rehabilitation. The firm owns and manages more than 340 properties.

Having deep roots in affordable and mixed-financed housing markets throughout the United States, The Michaels Organization currently operates several companies under its umbrella including The Michaels Development Company, Interstate Realty Management Company, Michaels Military Housing, Michaels Management Services, Prestige Affordable Housing Equity Partners, Prestige Building Co. and Continental Mortgage Corp.

Through this strong financial and management base, The Michaels Organization was named the top affordable housing owner in 2012 by Affordable Housing Finance magazine.

“The Michaels Organization addresses all aspects of housing development from concept to completion,” notes Nick Zaferes, vice president of development, University Student Living (USL). “We’re unique in that we’re a single entity that can take a project from initial concept to financing to construction and, finally, property management.”

USL is the company’s newest corporate addition. This division focuses on student housing for higher-learning institutions.

“Traditionally, we begin with an idea and a location and design a product that will fit that market,” Zaferes says. “When the design is 25 percent complete, we choose a general contractor who then helps us take the plan through design completion.”

He notes that this allows the general contractor to assist in the design stage and understand the project very well. This, in turn, helps the builder select the right subcontractors for that particular project.

“Using a guaranteed maximum price [GMP] contract, the general contractor hires subcontractors to meet or beat the price,” Zaferes asserts. “As an incentive, if the actual cost is below the GMP, we split this savings with the general contractor.”

Growth Opportunities

A depressed housing market spurred The Michaels Organization to look at stalled projects presented by smaller developers. “There were so many companies coming to us that didn’t have the financial ability or strength to create mortgages for these properties,” Zaferes says.

Seeing a strong need for student housing in a variety of markets spurred Levitt to amass a team of student housing experts to lead this new venture. In addition to Zaferes, who heads development efforts, Jim Malesich is vice president of finance and Rhonda Johannesen is the senior vice president of campus real estate development. The group’s president is Joseph Coyle.

Building affordable housing has given USL a smooth segue into student housing. “We’re well-versed in coordinating with local, state and federal governments on grants, loans and mortgages as well as procuring the proper municipal approvals,” the company states.

“Student housing is a specialty industry and is very different from the conventional apartment complex,” Zaferes says.

For instance, construction must be completed before the academic year begins which means planning is a critical component of the project. Competition from other properties has also become more aggressive.

“In order to attract renters, we have to have the best pool, the nicest clubhouse and Internet access with the highest streaming strength,” he claims. “However, we plan these facilities with affordability in mind.”

Partnering with smaller, local developers has given USL a distinct advantage. “We are looking at good ideas and good plans that were already in motion – so the location and market demographics were already somewhat defined,” Zaferes says.

The first of these projects was for Rutgers University in Camden, N.J., which opened in September 2012. The site is located in an area that offered convenient access to the campus. However, efforts to start the project had slowed due to economic downturns. As housing demands increased due to higher enrollment, the Camden County Improvement Authority joined forces with USL to bring the project to fruition.

The $50 million precast concrete and steel building features a terra cotta exterior and offers 102 units specifically designed for the university’s graduate students. Common areas include an exercise facility, gathering spaces and a roof deck. Each unit is fully furnished and the entire building is wired for high-speed Internet access. “They’re designed like a community and they’re outfitted like a luxury hotel,” Zaferes says.

USL is in the process of building four other housing developments. The Vue in Fayetteville, Ark., for the University of Arkansas, and The View in Waco, Texas, for Baylor University are being built by Parkcrest Builders of Houston. The Edge in Mobile, Ala., is a mid-rise project being built right at the entrance of the University of Southern Alabama by Davis & Sons Construction of Newberry, Fla. Callahan Construction Corp. of Bridgewater, Mass., is the general contracting firm for 159 First in Cambridge, Mass., which will house students attending Harvard and the Massachusetts Institute of Technology. In addition, Stantec will be the Cambridge project’s civil engineering firm.

“We’ve embraced the problems caused by the financial slowdown,” Zaferes says. “These are smaller firms with good investments but no financing to back them up – we help them execute these projects while offering them a fair and equitable share.”

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