University of Iowa paid company $75,000 to extend rate offer
'This is one of the worst deals possible'
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IOWA CITY — Officials with the private company charged with developing and maintaining new graduate student housing on the University of Iowa campus didn’t decide last week to extend a discounted renewal rate out of pure goodwill.
UI administrators essentially paid Balfour Beatty to do so by agreeing to forgo an about $75,000 payment the company owed the university on the condition it extend the lower rate increase offer to all renewing tenants. Originally, Balfour Beatty said only the first 100 tenants to renew their leases would get a reduced renewal rate — which still represents an increase over this year’s rent, albeit a lower one.
The deal came after graduate students voiced outrage and launched an online petition over rising rental rates at the Aspire at West Campus apartments, which replaced the old Hawkeye Court Apartments in 2014.
Aspire rent is more than 100 percent higher than at Hawkeye Court, and tenants learned after Thanksgiving break that rates will be increasing again.
The petition demanded UI take action and stand up to Balfour Beatty, despite the administration’s limited power. The UI had agreed with the company on a 41-year ground lease that tasked the company with constructing the buildings, filling the units and setting rental rates.
UI officials last week said they were working with Balfour Beatty and making progress in discussions.
But UI graduate student Sam Lustgarten on Monday said the deal is a bad one — with the university essentially paying $75,000 or more to Balfour Beatty to offer a rental rate to an unknown number of students.
UI officials told The Gazette they don’t know how many students this deal will help — those students who did not get the lower renewal rate but want to stay in the complex next year.
“They have no estimation or idea of how many students would take advantage of this,” Lustgarten said, adding that UI officials did not survey the residents or conduct research before making the deal. “They are just giving this money away for free.”
The university’s partnership with Balfour Beatty started in 2013, when the company won the bid to replace the Hawkeye Court Apartments, which were built in the 1960s and would have incurred significant maintenance costs. Balfour Beatty financed construction of the project’s $31 million first phase to build a 270-uit complex, which opened in 2014, and then it entered into the second phase.
Phase two to build a $34.5 million complex of 252 units is scheduled for completion in August. Current occupancy in the community is 99.8 percent, and the UI’s ground lease provides for revenue sharing when occupancy exceeds 95 percent.
“We didn’t expect that to occur, but if it did, planned to use any revenue sharing to recover costs the university incurred in demolishing the former Hawkeye Court or to benefit graduate and professional students, particularly the tenants at Aspire,” Vice President of Student Life Tom Rocklin said.
Last year, the UI received a $79,000 payment from Balfour Beatty per the occupancy agreement.
“This year, occupancy again exceeds 95 percent, so Balfour Beatty will owe us a payment,” Rocklin said. “We have foregone that payment on the condition that Balfour Beatty extend the renewal rate to all renewing tenants.”
That means tenants paying $1,120 a month for a two-bedroom, two-bathroom unit this year will pay $1,199 rather than $1,239 next year.