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Penn State purchase of Nittany Village for $21.9M may have tax implications; 1 trustee against move

Posted 9/19/18

Penn State University is buying the 267-bed Nittany Village student housing complex at 451 W. …

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Penn State purchase of Nittany Village for $21.9M may have tax implications; 1 trustee against move

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By Dan Miller

danmiller@pressandjournal.com

and Laura Hayes

laurahayes@pressandjournal.com

Penn State University is buying the 267-bed Nittany Village student housing complex at 451 W. Main St. in Lower Swatara Township.

The university Board of Trustees during its Friday, Sept. 14, meeting at University Park approved buying it from Lawrence Street Partners LP for $21.9 million. It also approved the purchase of approximately 5 acres of a 13.8-acre tract immediately adjacent to campus in Lower Swatara Township for a price not to exceed $2.5 million from Spring Street Property L.P.

The housing complex is comprised of three separate buildings on 5.5 acres, immediately adjacent to the Penn State Harrisburg campus and across from the planned Middletown Amtrak train station.

The Penn State Harrisburg 2014/15 to 2018/19 Strategic Plan said student growth likely would continue, and “recognized the long-term benefits associated with transforming the campus into a destination, four-year residential college.”

“While new, private off-campus developments have helped to meet the demand for student housing, the college’s long-range master plan recommends expanding on-campus, university-owned housing to provide high-quality residence life programs to the student body,” Penn State Harrisburg Chancellor John M. Mason Jr. said in a press release. “These programs promote stronger student engagement, assist with first-year transition and enhance the overall student experience.”

“Acquisition of the Nittany Village complex allows us to begin that expansion now and to broaden the important impact of residence life programs for our students,” Mason added.

Tax implications

The sale could affect more than just students, however.

Penn State Harrisburg’s co-director of marketing and communications Yvonne Harhigh said the university’s mission of teaching, learning and research qualify it as a tax-exempt organization.

“University-owned on-campus housing is a qualifying tax-exempt use,” Harhigh said.

If Nittany Village is taken off tax rolls, it could mean less property tax revenue for Middletown Area School District, Lower Swatara Township and Dauphin County. According to district and township officials, Nittany Village brings in $110,366 in property tax revenue for the district and approximately $23,000 for the township and $35,000 for Dauphin County.

Township manager Betsy McBride said Lower Swatara receives approximately $2.96 million in real estate tax per year. She said the effect of having less money available for township services is a concern.

MASD Chief Financial Officer David Franklin said he had no knowledge of the potential purchase.

“I am disappointed to learn of this possible reduction in tax revenue for the school district as it has the potential to impede other taxpayers within the school district if that revenue cannot be made up through other assessment growth within the school district,” Franklin said.

The school district does not receive any revenue from Penn State to make up for the Penn State Harrisburg campus property that is already off the property tax rolls.

Developer approached PSU

According to Matt Tunnell, one of the two co-owners of Lawrence Street Partners, they approached Penn State regarding the possible sale of Nittany Village.

Lawrence Street Partners was not “actively shopping” Nittany Village to other potential buyers at the time, Tunnell said. Nevertheless, he noted the property is a “marketable asset.”

“We’re real estate developers and owners, and part of our business plan is to develop property and to sell property so we can reinvest the proceeds into other development projects,” Tunnell said. “It’s part of the natural cycle of being a real estate developer.”

A former chairman of the Middletown Industrial and Commercial Development Authority, Tunnell is also the developer behind Nittany Place, another apartment complex for lease to Penn State Harrisburg students in the 600 block of North Spring Street in Middletown which opened in August 2015.

According to Harhigh, buying Nittany Village would address the recent increase in student population and more students enrolling who live outside of the local area. The Board of Trustees’ agenda for the meeting in which the purchase was approved notes that Penn State Harrisburg’s enrollment has grown from 4,441 in 2013 to 5,077 in 2017 and out-of-state and international students comprise 50 percent of freshman.

Penn State Harrisburg is anticipating continued growth, Harhigh said.

Purchasing Nittany Village, she said, fits in the campus’ long-range plan to expand on-campus housing and assuming control over a parcel of land that forms part of the campus’ main entrance.

“Nittany Village presented a unique and rare opportunity to acquire a student housing facility that was built to Penn State construction standards with a 40- to 50-year lifecycle at a cost which is less than what [the] university could construct it for today,” Harhigh said.

“This allows the college to offer important residence life programming to more students. These programs help with student transition and facilitate stronger student engagement on campus,” Harhigh said.

She said Penn State doesn’t have a plan to expand Nittany Village or build any additional housing on campus.

Current on-campus housing can only accommodate 433 students, and Harhigh said it’s available to first year and returning students. She said the university planned to predominantly offer space in Nittany Village for returning students.

When asked if the purchase would affect students residing in Nittany Village, she said, “The goal is to make the transition as seamless as possible for our students.”

Tunnell said that both Nittany Village and Nittany Place are at full capacity. Nittany Place,  is located in the 600 block of North Spring Street in Middletown and has 567 beds and 12 apartment buildings.

Tunnell said Nittany Place is fully built out, with no more room for additional apartment buildings upon its 9-acre tract, all of it in Middletown borough.

At present there are no discussions with Penn State or anyone else regarding sale of Nittany Place, Tunnell said.

While Nittany Village was built to Penn State design and construction standards, Nittany Place was not, Tunnell noted.

For example, Nittany Place has wood frame construction and vinyl siding more in keeping with “traditional” development of a residential apartment complex, in contrast to Nittany Village which is chiefly of brick, concrete and steel construction, Tunnell said.

One trustee opposes

PennLive reported that the purchase resolution was passed by the Board of Trustees 28-1 with three abstaining.

Trustee Elliott Weinstein cast the sole “no” vote.

Weinstein, who is also the founder of Weinstein Realty Consultants in York, told his fellow board members that student housing values are at a peak and that Nittany Village might have been appraised at a lower value in previous years, so it should have been considered then.

“We are paying the highest price in this current student housing cycle — that is not right, it is not good business, and not in the interest of our many PSU stakeholders,” Weinstein said.

He said the campus sits on 200 acres of “largely undeveloped” land. Nittany Village, Weinstein said, isn’t centrally located on campus or near classrooms, recreation facilities or student services.

“Would it not make sense –– and sound policy –– to build new and better housing on our own land without additional land cost, and to integrate the structures into the center of campus life?” he said.

Weinstein said he was excluded from participating in evaluating the purchase and denied data, including the appraisal. Different appraisers at different times could conclude different values, he said, adding that it could mean saving anywhere from $2.5 to $7.5 million.

Tunnell told the Press & Journal that the property, which Penn State is buying for $21.9 million, had been appraised by a third-party, independent certified appraiser for $24.5 million.

The transaction, he said, had been well-vetted by Penn State.

“There was certainly overwhelming support to move forward” with the purchase on Penn State’s part, Tunnell said, noting the board of trustees 28-1 vote in favor of the resolution for the purchase.

Land for athletic use

The Board of Trustees also voted to purchase around 5 acres of land between the Campus Heights development and Middletown Cemetery.

The land is part of a larger 13.8-acre tract, and Harhigh said the university leases the 5 acres as soccer fields.

“Current plans are to continue its use as a soccer field,” Harhigh said.

“That’s ours as well,” Tunnell said, referring to the entity  selling the ground, Spring Street Property LP.

Spring Street Property acquired the 13.8 acres from the Middletown Cemetery Association for $2.82 million to develop Nittany Place.