Student Housing: Clark Atlanta housing vacancies threaten bonds
By Russell Grantham for The Atlanta Journal-Constitution
A student housing project at Clark Atlanta University has run into financial trouble that could push nearly $52 million of the Atlanta Development Authority’s bonds into default, recent bond filings indicate.
A nonprofit company that was created by the Atlanta Development Authority to funnel money to the student housing project “has experienced significant operating deficits” as a result of vacancies and “might not be able to continue as a going concern,” Atlanta accounting firm Reznick Group warned bond investors in a recent filing.
The Atlanta Development Authority issued $51.9 million worth of bonds on behalf of the university in 2004 to refinance an earlier $20.7 million bond issue and to expand the student housing facility by 598 beds, according to bond documents.
The so-called revenue bonds were structured so that they will be repaid over the next 25 years from rental revenue from the student housing project. Beyond that, the development authority isn’t on the hook for the debt.
Clark Atlanta University has struggled financially in recent years, and it cut staff in 2009 after seeing a drop in enrollment.
A spokeswoman for the university had no immediate response or details about the bonds or the project’s financial condition.
In a Nov. 30 report, the auditor said the development authority’s nonprofit company, ADA/CAU Partners, had to use money from reserves to meet a July payment to bondholders after the student housing unit lost money in its last fiscal year due to rising vacancies.
“Management has recently increased marketing efforts to improve occupancy” and hired a new management company in an attempt to turn around the housing project, which usually loses rent for an “entire year” if a room isn’t leased at the beginning of the school year, the auditor said.
Lost revenue from “vacancies and concessions” more than doubled in 2010 to $1.9 million, pushing revenue down to $5.1 million from $6.3 million the previous year, according to the report.