Kernel finds no evidence that Greystar had power in campus reopening decision

Lewis Hall at the University of Kentucky on Friday, Jan. 29, 2021, in Lexington, Kentucky. Lewis, which also houses the honors college, is one of the university’s newest dorms. Photo by Jack Weaver | Staff

Sarah Michels

When campus reopened in August for the fall semester, some were skeptical of the university’s motives.

In September, United Campus Workers, a campus union open to all UK graduate students, staff and faculty, suggested that UK’s dorm housing partner may have had a part in the reopening decision.

UK announced they would bring students back for the fall semester on May 1, 2020 at the end of a spring semester forced online by COVID-19.

In June the university released a “playbook” for the reopening, which included suggestions like limiting occupancy in dorms. Around 6,500 students lived on campus in the fall semester.

The university’s public-private partnership with Greystar, a rental housing management company, was worrisome, UCW members said. UK’s delay in fulfilling their open records request for documents related to the partnership increased their concern that the university was prioritizing profit over health and safety of the campus community. 

The Kernel also filed an open records request for UK’s contract with Greystar, as well as all email communications between the two parties, in accordance with the Kentucky Open Records Act, to independently assess the evidence. 

After reviewing the 50-plus documents, which included leases, guaranties, land descriptions and email correspondence, the Kernel did not find any language that would have given Greystar undue influence in the campus reopening. 

Greystar partners with 50 universities across the country to develop student housing. According to their website, they focus on development, design and construction, finance and management in order to revitalize campus living. They own many of the dorm housing structures on campus, including Woodland Glen I-V and Jewell Hall. A few others are separately owned by the university, including Smith and Baldwin halls.  

In the legal documents, the University of Kentucky is referred to as the “Landlord” and EDR LLC is referred to as the “Tenant.” EDR LLC, or Education Realty Trust, is a public real estate investment trust that was bought by Greystar in 2018. Greystar is under the same contractual obligations as EDR LLC, said UK spokesperson Jay Blanton. 

UK partnered with Greystar (formerly EDR LLC) in 2013, for several reasons, including updating “obsolete” housing as well as drawing in and promoting the success of more students. 

“It’s these residence halls that have been built over the last five to seven years that enable the university, in part, in large part to provide safe living space for students,” Blanton said.

Since 2013 the university has constructed or renovated 13 dorms totaling $459,479,717 and 6,850 beds.

According to the lease, the agreement between UK and EDR stands until at least 50 years after the “Construction Term” of each housing project ends. At that point, the parties have the option to renew the lease for 25 additional years. 

Greystar’s revenue comes from various student housing operations, including student rent, vending and laundry income and related fees. 

Many of those revenue streams are exactly those lost during the pandemic as students moved out and campus shut down. However, UK has recouped much of those early losses with government aid like higher ed funding in the CARES Act.

The university is required to collect student rent on behalf of Greystar monthly, but they are not liable for students’ unpaid rent or lack of rental revenue. UK is not required to pay Greystar any set amount; the university only serves as a middleman. 

UK has no other financial obligations to Greystar. Penny Cox, UK treasurer, said that there is no guaranteed occupancy, and Greystar only gets what UK collects from students’ rental fees. 

“Once the bill is paid, that’s when Greystar gets funds,” Cox said. “It’s only on what we collect and we do not have any obligation to provide students for the buildings.” 

Blanton said the fact that there is no minimum guaranteed occupancy completely undercuts any argument that UK has “some extreme profit motive to keep housing open.” 

Greystar pays UK a portion of their earnings as base rent each year. In addition, if in any given year, Greystar exceeds their goal internal rate of return (IRR) of 9 percent, they will pay UK a quarter of their excess net income.  

Conversely, if Greystar fails to reach their goal IRR for any reason, UK does not owe them that unearned expected revenue. 

Greystar does have several areas of influence, including the determination of student rent. As of the 2017-18 school year, Greystar can increase rent by at least 4% each year. 

In December of 2020, the finance committee of UK’s Board of Trustees did vote to increase housing costs for 2021 – 2022 by 3 percent for both private and university-constructed dorms.

Greystar is also permitted to enforce leases and “control the Premises.” However, this does not mean that Greystar is able to determine when the campus is open or closed; in fact, any Greystar actions that UK deems as not in “good faith” are subject to the parties’ dispute resolution procedures.

Cox said that the university’s partnership with Greystar was part of what set UK apart from other schools in its ability to keep campus open for the entire fall semester.

“When you looked at schools like Notre Dame and Michigan that closed after two weeks, they don’t have the same sort of design, where a student had a private space,” she said. “What we had before (the Greystar partnership) was a room and you could put your arm out and touch the other person in the band across the room from it.”

UCW has raised awareness about UK’s relationship with Greystar and says they are currently conducting an investigation into the same records the Kernel received. One of their concerns was at lest one member of the Greystar team, Garret Buehner, was using both an UK email address and Greystar email address in his correspondence.  

This is by design, said James Frazier, executive director of risk management and administrative services. As with UK’s dining partner, UK provides some third party individuals with UK email addresses to create a more “seamless” experience for students. Frazier said they want students to think that they are reaching out to the university, not a third party. Cox added that this helps cultivate the connection students have to the campus family. 

“When you write to an email address that has .uky, you get that level of confidence that the person you’re writing to is going to take responsibility and get back to you,” she said. “We’re responding on behalf of the university, not as the individual.”