(Featured image via eflon, licensed CC BY 2.0.)

Lancaster University's accommodation deal with private provider UPP has negatively impacted its credit rating, according to New York-based credit rating agency Standard and Poor's.

In a recent report, Standard and Poor's analysts downgraded Lancaster University from an AA- rating (negative outlook) to an A+ rating (stable outlook). Standard and Poor's is considered one of the 'big three' international credit rating agencies alongside Moody's and Fitch. A credit rating assesses a debtor's ability to pay back debt on time, and the likelihood of default.

The September 2019 report, written by S&P's Associate Director of International Public Finance, Izzet Dizdar, revealed that the long-standing accommodation agreement between the University and UPP was a factor in the downgrade.

Lancaster signed an agreement with UPP in 2003 as part of massive expansion plans. UPP was to build and maintain on-campus accommodation until 2051 on the University's behalf. They now own 4,347 rooms on campus, according to the most recent accounts of UPP (Lancaster) Ltd. UPP property includes Southwest Campus (Graduate, Cartmel, and Lonsdale Colleges), and the County and Grizedale townhouses.

According to the report, Standard and Poor's 'believe the university could become ultimately liable for the debt related to these accommodation units, given that they are on campus'. S&P therefore decided to 'add this obligation to Lancaster's reported debt'. The result is that 'Lancaster's S&P Global Ratings-adjusted debt exceeds £300 million'.

The report said the new credit rating assessment was, however, largely based on sector-wide issues. These included potential changes to tuition fees following the Augar Review (something that former vice-chancellor Mark E. Smith criticised), a potential drop in EU student numbers post-Brexit, and future staff pension liabilities. The other two UK universities rated by Standard and Poor's, Sheffield and Nottingham, both also have A+ ratings.

Residents of UPP accommodation may be surprised to learn that the Chinese government is one of two ultimate owners of their housing. A 60% stake in UPP Group Holdings Ltd is held by PGGM, a Dutch pension fund, and the remaining 40% stake is held by Gingko Tree Investment, a state-owned Chinese wealth fund. According to their accounts, UPP is resident in the UK for tax purposes.

UPP has been criticised for embedding above-inflation rent rises year-on-year for students who live in its accommodation. A video by Real Media detailed some of the concerns raised by UCL Cut the Rent activists about UPP in 2016. In Lancaster, the Affordable Student Housing motion passed by the LUSU AGM mandated the formation of a Rent Control Working Group in order to work towards a Campus Rent Control Board, composed of directly-elected students, to which the University must justify any rent rise before it goes ahead. Spineless understands the Working Group is due to launch soon.

Despite the negative impact of the UPP deal on the University's finances and the living costs of students, one individual associated with the deal is nevertheless enjoying a successful career. Mark Swindlehurst, the University's Director of Estate Management (2003-9), and Director of Facilities (2009-18), left the University to head up UPP's asset management company, UPP Management Ltd. As their Managing Director, he now oversees all of the UPP student accommodation developments across the country, including Lancaster's.

Although civil servants who take on such private sector roles are regulated, the same rules don't apply to university staff, even though universities are public authorities. So here at Lancaster University, the revolving door can keep on spinning.