Prior to starting Provident Resources Group in 1999, founder — and now chairman and CEO — Steve Hicks was an attorney who worked with state and local governments, universities, and health systems to issue bonds for publicly financed projects. In his conversations with municipal finance professionals, Steve Hicks discovered there was an intermediary role missing in the market. As a result, Provident Resources Group was formed as a national non-profit borrower/owner for essential projects that fit within a variety of IRS-recognized charitable missions. These mission areas include higher education, healthcare, affordable housing, senior living communities, and lessening the burdens of government. The company is headquartered in Baton Rouge, Louisiana, with an additional office in Raleigh, North Carolina.
The first projects that Provident undertook were senior living facilities and select government facilities. As a broader need for public facilities developed, Provident expanded into the education sector. The company financed its first student housing project in 2004.
“What really created Provident was the need to offer public entities and other non-profit entities access to the capital markets while maintaining many of the benefits of a private transaction,” says Chris Hicks, president and vice chairman of Provident Resources Group, and son of Steve Hicks. “Those benefits include risk mitigation and the transfer of responsibilities.”
Provident’s structure allows another big benefit: the ability to maintain long-term ownership of the assets without materially impacting the institution’s balance sheet.
“In most instances, our higher education projects are on-campus,” says Hicks. “The university maintains ownership of the land, and we enter into a long-term ground lease with the university. We then contract with our partners to finance the project — whether that is an acquisition or a new development — through the tax-exempt bond market. The proceeds raised through that process fund the construction and development, or redevelopment, of the asset. A special purpose entity is created specifically for each property we undertake.”
Today, Provident has approximately 40 such entities for projects around the United States. The entity becomes the borrower and raises the funds. The rents and other revenues from operations go to repay the bonds utilized to finance the project over time. Provident also budgets for the cost of maintenance and upkeep. Once the bonds mature — usually a 30- to 40-year term — the student housing asset reverts to the university free and clear of debt and at no additional cost to the university. Because maintenance has been budgeted, the project is kept up-to-date as it matures, so the building is sound when handed over.
“At the end of the day, the university gets a quality asset for less risk,” says Hicks.
The first student housing project that Provident had was at the University of Missouri-Kansas City. The project — developed in 2004 — also contained structured parking.
“At that time universities realized that student housing attracted and kept students, but also realized that students who lived on-campus generally maintained better grades and had higher graduation rates,” says Hicks. “As student housing started to gain traction, the same universities were trying to put capital to work in their core academic mission. Those assets don’t individually create project-specific revenues, so they were better suited for direct financing from the institutions, paid for through tuition, endowments and/or state appropriations. The non-profit P3 [public-private partnership] entity became a popular way to develop revenue-generating real estate assets for public and private universities because they pay for themselves and allow the university to keep their powder dry for more capital intensive academic-oriented projects that are at the core of their mission.”
As interest rates fell after the Global Financial Crisis, long-term borrowing in the municipal bond market became much more attractive. That allowed major student housing projects on college campuses to become a reality. From 2010 to 2020, Provident Resources Group accessed roughly $2.5 billion to finance 25 student housing projects with 23 separate colleges and universities. The company has developed 29 student housing projects on campuses across the country. Among its more notable partnerships, Provident now serves as owner/borrower on eight buildings — totaling approximately 4,600 beds — for Howard University in Washington, D.C., and more than 3,500 beds at Louisiana State University. Today the company has 22,000 beds of student housing in its portfolio. Since the company’s inception, it has financed more than 25,000 beds, but some of the projects have been transferred to the universities early or sold to another entity.
Provident’s most recently completed student housing project was with Lynn University in Boca Raton, Florida. There it completed the first phase of a multiple-phase student housing project, a 113 unit, 342 bed on-campus student housing facility. Additionally, Provident recently opened a 580- bed student housing and medical student housing facility in New Orleans, Louisiana, affiliated with the LSU Health Science Center and LSU Health Foundation. The $100 million project opened in January, serving LSU Health Sciences and other institutions like Xavier University and Tulane University.
In Fall 2021, Provident opened the final phase of housing at North Carolina Central University in Durham. The company also recently acquired about 2,500 additional beds at Howard University. Serving the nation’s historically black colleges and universities (HBCUs) is part of the company’s core values, says Hicks.
In partnership with Balfour Beatty Campus Solutions, Provident was awarded a project that will replace 2,000 beds of student housing at the College of William & Mary in Williamsburg, Virginia. William & Mary is the second oldest college in the U.S., and its student housing has been parceled together over centuries. The Balfour Beatty-Provident partnership will vastly improve the university’s housing stock, while moving the campus toward its targeted policy of net zero carbon emissions through the installation of a substantial geothermal energy system as part of the project.
In addition, Provident, in partnership with RISE: A Real Estate Co., was selected last month to serve as the non-profit borrower and owner of approximately 2,000 beds of new on-campus student housing on the flagship campus of the University of Tennessee in Knoxville. Continued growth in enrollment for the university has created a need for additional housing, and the non-profit model was determined to be the best fit for UT, says Hicks.
Overall, Provident has executed over $5 billion in public-private partnership projects over the past 24 years. The company has just under $4 billion of assets under management at present, ranging from academic and research facilities; student housing; ambulatory surgery centers; a cancer center; and senior living properties. About 70 percent of the company’s assets are in the higher education sector.
“One of our IRS mandates is to lessen the burden of government and foster economic development,” says Hicks. “That has allowed us to take on some unique transactions in partnership with local governments.”
As such, Provident is currently under construction on a 375-room hotel and conference center just outside the gates of the U.S. Air Force Academy, in partnership with the city of Colorado Springs. Provident has created other conference hotel offerings, including two projects in Texas and a newly opened hotel at Radford University in Virginia. Provident also recently financed 500 build-to-rent single-family houses on the campus of the Brooks Development Authority in south San Antonio, Texas, that will be used for essential workforce housing.
Provident has 27 full-time employees, many of whom are CPAs, lawyers, and as is the case with Hicks, former investment bankers.
“We take very seriously our role as a steward of these assets,” says Hicks. “We commit the resources to make sure we are here for the long haul. We have put together a great team, and a viable succession plan, realizing that our projects’ maturation may outlast our tenure. We want to ensure that Provident is here for the long-term to see the projects through, and to be an active partner as the projects mature.”
—Randall Shearin
This article was originally published in the March/April 2023 issue of Student Housing Business magazine.