Interesting Development for Student Housing Providers

It will be interesting to see if the University of Kentucky is starting a trend:

The University of Kentucky is getting out of the student-housing business and plans to turn over its dormitories to a private company that will upgrade and manage the aging properties.

The university said Monday it’s negotiating with Education Realty TrustInc. to transfer control of nearly 6,000 beds and apartments. The new owner will redevelop much of those rooms and build more than 2,500 beds in the next five to seven years…

The university won’t receive cash for its dorms but would get ground-lease payments for its land. In exchange, Education Realty will spend as much as $500 million on upgrades and construction of new dorms and will collect rent payments from students…

The school and Education Realty are still negotiating terms of the arrangement, such as who would set rental rates. Currently, the University of Kentucky charges between $2,255 and $3,327 per semester per student for traditional dorms. Rents increased 9% for 2011-12 academic school year.

The school cautions that the negotiations, which should be finalized in January are tentative and could be terminated at anytime. Some industry watchers expect other big schools to follow. “It’s a name school looking to the private sector,” said Brian Dinerstein, president of Sterling University Housing, a large developer of off-campus housing. “It could be a game changer.”