Developing RMIT University Vietnam

Developing RMIT University Vietnam 30 March 2012 Emeritus Professor David Wilmoth Learning CiEes InternaEonal Pty Ltd previously FoundaEon CEO/General Director, RMIT Vietnam Outline 1.  IntroducEon 2.  Origins 3.  Project development 4.  Project financing 5.  Campus development 6.  Discussion 5 April 2012 EduBuildWilmoth RMIT VN 2 1. IntroducEon 5 April 2012 EduBuildWilmoth RMIT VN 3 Dubai Knowledge Village •  Campus development is now a specialized business •  LCI currently working on university, TVET and school developments in Vietnam, Papua New Guinea, Gujarat and Andhra Pradesh. •  The program was EducaEon City Qatar, an ‘educaEon hub’ •  Instead, focus will be on RMIT Vietnam, now 10 years old •  Lessons of project development, financing and campus development are relevant today •  Vietnam is sEll a promising university, TVET and schools market 5 April 2012 EduBuildWilmoth RMIT VN 4 Branch campus development trends > 3m terEary students study abroad, others take internaEonal programs in their home country. OBHE report on branch campuses 2012 noted: Ø  200 degree-­‐awarding IBCs Ø  37 more will open over the next two years Ø  A shia in acEvity Middle East to E Asia Ø  Growth of ‘south-­‐to-­‐south’ IBCs Ø  Mainland China increased 10-­‐17 and Singapore from 12-­‐18, 3 more planned Ø  A trend towards more ‘niche campuses’ Ø  Governments establishing ‘educaEon hubs’ 5 April 2012 EduBuildWilmoth RMIT VN Stages of cross-­‐border educa7on (Knight): •  Movement of students •  Movement of programs including branch campuses, twinning etc •  Educa7on hubs 5 Home countries with ≥2 internaEonal branch campuses 2010-­‐11 (OBHE 2012) 5 April 2012 EduBuildWilmoth RMIT VN 6 Host countries with ≥2 internaEonal branch campuses 2010-­‐11 (OBHE 2012) 5 April 2012 EduBuildWilmoth RMIT VN 7 Top 10 internaEonal branch campuses, 2010-­‐11 (OBHE 2012) 5 April 2012 EduBuildWilmoth RMIT VN 8 RMIT University Vietnam summary •  Established 2000, first teaching 2001, campuses HCMC and Hanoi •  RMIT Vietnam a 100% subsidiary of RMIT •  Fully foreign owned university licensed in Vietnam •  Over 6,000 students English learners, UG and PG; over 4,000 graduates, wide spread of degree programs •  AcEve research and engagement programs •  For-­‐profit though parent RMIT is government-­‐owned university 5 April 2012 EduBuildWilmoth RMIT VN Speaker was project developer, board director and foundaEon CEO of RMIT University Vietnam, not now involved. 9 5 April 2012 EduBuildWilmoth RMIT VN 10 IncepEon •  RMIT acEve in Vietnam from 1992 •  Joint Masters program with VNU Hanoi 2005; RMIT funded building on VNU Hanoi campus 1997 •  Joint programs with other universiEes •  Buildup of goodwill e.g. one of first internaEonal conferences in Vietnam •  Vietnam faced huge shorkalls 5 April 2012 •  1996 Minister invited a proposal for an internaEonal university in Vietnam •  1998 license in principle issued; prefeasibility study •  1998-­‐99 feasibility, financing, project planning •  Enabling government decree covering for-­‐profits issued 2000 with RMIT assistance •  License granted 2000 EduBuildWilmoth RMIT VN 11 Further milestones • 
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First teaching interim campus district 3 HCMC 2001 Finance secured 2001 Regional university learning resource centres started 2001 First teaching Hanoi campus 2004 Saigon South campus started 2005 New campus Hanoi 2010 Further expansion under way 5 April 2012 EduBuildWilmoth RMIT VN 12 Why a campus? If not a campus, what? -  Be virtual? But distributed infrastructure was poor -  Twinning? But no reliable partners then -  Lease a building in town? But need dedicated e-­‐
learning setup -  Joint venture? Experience of others in Vietnam and of RMIT in Malaysia says not. Ÿ  Environmental integrity and benefits of Saigon South special zone Ÿ  InvitaEon and license were on the basis of a campus Ÿ  One offshore campus was part of RMIT internaEonal strategy Ÿ  Moderated online learning environment needed special design and dedicated services Ÿ  Then poor infrastructure in Vietnam; needed conEnuing control over standards Ÿ  Strong brand idenEty and investor support Ÿ  Opportunity for returns from assets e.g. housing, retail 5 April 2012 EduBuildWilmoth RMIT VN 13 5 April 2012 EduBuildWilmoth RMIT VN 14 Project development issues •  Prefeasibility study assessed sites •  Ho Chi Minh City allocated 62ha site quickly •  RMIT helped set own regulatory framework: for profit preferred by Ministry P&I over not-­‐for-­‐profit •  Wripen exempEons from EducaEon Act on fees, quotas, curriculum; MOU with MOET for annual joint QA reviews •  50-­‐year license had legal capital of •  Feasibility study elements at USD62.5m (daunEng), for 62 ha, arm’s length: market, Vietnam’s largest FDI deal for any reseplement, student loans sector that year. 5 April 2012 EduBuildWilmoth RMIT VN 15 4. Project financing 5 April 2012 EduBuildWilmoth RMIT VN 16 Financing issues •  Significant upfront project development costs •  Deal structure came out of RMIT vision, feasibility study and banks’ due diligence •  An eventual exit was seen to be via share sale or issue (but not intended at this stage) •  AcEve finance hunt for equity and debt went in parallel •  Business kept on track, exceeded some targets, different (and exciEng) plans now anyway 5 April 2012 EduBuildWilmoth RMIT VN 17 Debt issues •  Commercial insEtuEonal finance offers from Vietnam (high rates) and Australia (low rates) typically wanted full guarantee •  ADB and IFC willing to ‘project finance’ (without guarantee), but with a higher spread and a security package •  Co-­‐financing both ADB-­‐IFC was probably not necessary •  Was difficult for state-­‐owned RMIT with prescribed state government loan limits •  Victorian government took a year to allow RMIT to borrow: key people didn’t understand or implicaEons of project finance deal (i.e. not fully guaranteed) 5 April 2012 EduBuildWilmoth RMIT VN 18 Equity issues •  IniEally an RMIT holding company to hold all shares and provide oversight •  Some project costs capitalized •  AcEve search among equity prospects was challenging, (some offered ‘quasi-­‐equity’ e.g. with a ‘put’ opEon) •  Solved by a remarkable USD
$15m gia from Chuck Feeney, AtlanEc Philanthropies to RMIT •  Business discipline retained throughout; i.e. gia not treated as ‘free money’ 5 April 2012 RMIT Vietnam Investment brochure EduBuildWilmoth RMIT VN 19 RMIT Vietnam corporate structure RMIT%
University%
100%%
Originally%later%equity%
partners%were%
contemplated%for%
capital%expansion%
RMIT%Vietnam%Holdings%Pty%Ltd%incorporated%in%Australia%%
RMIT%International%University%Vietnam%
Incorporated%in%Vietnam%under%foreign%investment%law%
Structure of phase 1 proposal Project cost phase 1 (USDm) Project financing (USDm) Land Development (Infrastructure Cost) 5.00 Reseplement Comp (later was higher) 3.10 Sub-­‐total Land Development Cost 8.10 Buildings & Fitout 7.50 FF&E, IT, & EducaEon Resource Centre 4.40 Project Management Fee & ConEngency 4.60 Project Development Costs 1.50 Working Capital 2.90 Interest During ConstrucEon 4.60 Total Project Cost 33.60 Equity RMIT 16.50 Internal Cash GeneraEon 2.60 Sub-­‐total Equity
19.10 Loans IFC and ADB ‘A’ Loan 14.50 Total Financing 33.60 5 April 2012 EduBuildWilmoth RMIT VN 21 5 April 2012 EduBuildWilmoth RMIT VN 22 Interim campus •  Pham Ngoc Thach Street, ex-­‐
Shell compound, leased 20yrs •  Pool, tennis; added IT building •  In District 3 with good local universiEes and schools near •  Self-­‐funded startup a helpful demonstraEon of RMIT commitment to proceed •  Became an internaEonal school when RMIT moved, now back with RMIT Vietnam 5 April 2012 EduBuildWilmoth RMIT VN 23 Saigon South / Phu My Hung Development Area •  USD800m Taiwan-­‐Vietnam JV •  RMIT took up good site – large, riverside, designated •  Keeping to the city plan •  But poor subsoil and early despite ups and downs doubts about investment in •  Doing very well with middle-­‐
transport link to CBD class housing 5 April 2012 EduBuildWilmoth RMIT VN 24 Saigon South site •  62 ha site designated for universiEes in Saigon South development authority area •  Close to CBD but needed roads and bridges to downtown, then seemed ‘far off’ •  Various master plans, shiaed to a southern first stage •  Main site offered as free opEon for staged take-­‐up with reseplement in stages •  But costs of reseplement escalated •  RMIT also saw a risk of HCMC requiring full purchase so relinquished opEons •  Sepled for 14 ha first-­‐phase site already resepled (but paid the past reseplement) 5 April 2012 EduBuildWilmoth RMIT VN 25 Early master plan KEY
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Timber walkway
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floodzone
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1 Main Campus Bldg
2 Sports Hall
3 Clubhouse
4 R + D Institutes
5 Faculty Building
6 R + D Institutes
7 Executive Residences
8 Faculty Building
9 Executive Residences
10 R + D Institutes
11 Faculty Building
12 R + D Institutes
13 International Teaching Staff
14 Faculty Building
15 Chancellory
16 Executive Residences
17 Aquarium /Toxicology Research
18 Executive Residences
19 International Teaching Staff
20 International Teaching Staff
21 Student Housing
22 Commercial/ Residential
23 Commercial/ Residential
24 Commercial/ Residential
25 Commercial/ Residential
26 Commercial/ Residential
27 Commercial (RMIT control)
28 Commercial (RMIT control)
29 Commercial/ Residential
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33 Pool
canal
dyke
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South Saigon Way
Note:
-Canal, dyke and natural flood zones are existing, or an
extension of natural features existing on the site.
5 April 2012 RMIT International University
Vietnam
MvdE
EduBuildWilmoth RMIT VN 250499
26 Early master plan RMIT International University Vietnam
South Saigon
5 April 2012 Site Plan
May 2000
Ashton Raggatt McDougall Pty Ltd
EduBuildWilmoth RMIT VN 27 Early master plan: stage 1 moved to south 5 April 2012 EduBuildWilmoth RMIT VN 28 Air photo of Saigon South Campus 5 April 2012 EduBuildWilmoth RMIT VN 29 Present campus development 5 April 2012 EduBuildWilmoth RMIT VN 30 Present site layout plan 5 April 2012 EduBuildWilmoth RMIT VN 31 Present master plan merged 5 April 2012 EduBuildWilmoth RMIT VN 32 Present campus: indoor sports 5 April 2012 EduBuildWilmoth RMIT VN 33 Present campus: housing 5 April 2012 EduBuildWilmoth RMIT VN 34 Present campus: housing 5 April 2012 EduBuildWilmoth RMIT VN 35 Original Hanoi campus 5 April 2012 EduBuildWilmoth RMIT VN 36 Present Hanoi campus 5 April 2012 EduBuildWilmoth RMIT VN 37 Learning resource centres •  Built, stocked and trained up for 4 LRCs in regional universiEes, funded by AtlanEc Philanthropies •  This helped with early cash flow, RMIT Vietnam gained early contracEng experience •  PotenEal to form partnerships with the 4 universiEes 5 April 2012 EduBuildWilmoth RMIT VN Thai Nguyen University
Hue University
University of Danang
Cantho University 38 Hue University and Can Tho University LRCs 5 April 2012 EduBuildWilmoth RMIT VN 39 5. Discussion 5 April 2012 EduBuildWilmoth RMIT VN 40 Discussion: project development •  Many differences between original plans and realisaEon •  Assessing educaEon markets in developing and emerging countries can be a shot in the dark •  Choose a corporate structure to ensure standards sought; beware minority JV posiEon •  Keep close startup control, risk manage, and have an ‘exit’ strategy around each milestone •  Where there is no coverage help regulators find appropriate rules •  Work with a good ‘insider’ adviser every step 5 April 2012 EduBuildWilmoth RMIT VN 41 Discussion: financing •  Don’t sEnt on funding project development •  Seldom one clear ‘go/no-­‐go’ point; incremental and parallel approvals and decisions •  The effort of fundraising is worthwhile also for conEnuing university relaEonships •  Student financing to help affordability; use loans and scholarships •  Don’t underesEmate expense and implementaEon Eme on ‘soa’ infrastructure such as course development, academic architecture, student and admin systems – some developers don’t see that 5 April 2012 EduBuildWilmoth RMIT VN 42 Discussion: campus development •  Don’t compromise on site selecEon •  But don’t bite off too much •  See campus design and corporate idenEty through eyes of local students and stakeholders •  Use internaEonal PM firm with local contractors •  Choose campus development standards fit for purpose – not too high, not too low •  Manage reseplement compensaEon expectaEons and communicaEons where this is a factor 5 April 2012 EduBuildWilmoth RMIT VN 43 Thank you [email protected] hpp://www.wilmoth.com.au 5 April 2012 EduBuildWilmoth RMIT VN 44