Corvias
About Corvias
Corvias is a real estate company owned by John Picerne-- a Rhode Island real estate heir who founded Picerne Military Housing (now Corvias Military Living) in 1998. He also founded Corvias Campus Living in 2012 to enter the emerging higher education public-private partnership real estate market.
Corvias’ student housing operation is leaner and more reliant on a few anchoring institutions, most notably the University System of Georgia. Present in only five states, Corvias is actively looking to leverage its limited experience to expand into the field.
Military housing comprises most of Corvias’ portfolio has historically developed and managed on-base military housing for the U.S. government. In 1998, John Picerne founded the company as an offshoot of his family’s existing real estate and development business to cater to military contracts and clients. Since then, the company has expanded to include other public sector clients, including colleges and universities and private sector universities for a market share of $10 billion.
Corvias entered the student housing business with a major, multi-campus deal in Georgia. Picerne described Corvias' impetus for entering the field as a desire to find a new market, similar to military housing, wherein the company could partner with institutions to provide its development and management product. In its marketing, Corvias emphasizes “partnerships” as central to its business strategy and highlights its experience in working for the government on military housing. Like Greystar, however, its most sustained and detailed arguments to universities are around the financial benefits and debt-relief potential of P3s for struggling universities and systems.
Picerne describes his excitement about the student housing market, saying their model is “recession resistant” and functional for a multi-decade outlook. After the USG deal, Corvias also sees a future for expansion in higher ed at other campuses and is aggressively marketing the deal as a scalable model while hoping to maintain a development monopoly in Georgia. In scaling up, Corvias is hiring campus housing staff and development staff away from other housing companies to put more of its resources into that aspect of its business model.
Notably, apart from the USG deal, Corvias has an equal presence in public and private universities with partners including Notre Dame, Howard, and Wayne State University. It is clear Corvias looks to rapidly scale up and to cast itself as a modernizing, affordable, and efficient partner to campuses of all types.
However, Corvias's history of poor-quality housing and questionable business practices is a hindrance to its progress. Congressional investigations into Corvias’ military housing found that many of the company’s 26000 base apartments were in disrepair and neglected. The lack of attention to the base housing was particularly notable when juxtaposed with the opulence of Picerne’s own homes and apartments. During the COVID-19 pandemic, a student ally of the UCW chapter at the USG uncovered evidence that Corvias had pressured the university into adopting unsafe reopening plans to ensure their properties reached a profitable capacity.
John Picerne, CEO and Founder
John Picerne is the CEO and President of Corvias--the parent company of Corvias Military Living and Corvias Campus Living. In 1982 Picerne joined his family company, Picerne Real Estate Group, and founded Picerne Military Housing (renamed Corvias Military Living in April 2013).
Picerne is also the CEO of Thee Food Group Enterprises, LLC and was the owner of Eleven Forty-Nine Restaurant based in Warwick, RI until it closed in May 2020 “because of the coronavirus pandemic.”
Picerne owns a mansion in Providence, RI and a $6-million-dollar beach home near Narragansett Bay, RI, where his 49-foot Italian-made yacht, Under My Skin, is docked. Picerne also has a villa in Palm Beach and an estate in Ireland. Martyn Lawrence Bullard, a star of the cable TV show “Million Dollar Decorators,” has been employed as Picerne’s designer.
Picerne has developed significant political relationships with RI Senators Sheldon Whitehouse and Jack Reed. Notably, Senator Reed serves as the chairman of the Senate Committee on Armed Services and as a member of the Senate Committee on Appropriations, both of which oversee and approve military appropriations, including those with housing contractors like Picerne’s.
Corvias’ Problematic Role in Governing Public Higher Education in Georgia
In 2014, the Board of Regents of the University System of Georgia initiated a 65-year deal valued at $517 million with Corvias, a private real estate construction, development, and management company. Before 2014 Corvias’ business was primarily concentrated in federal contracts with the U.S. military. The deal in Georgia outlined that Corvias would oversee the new construction of more than 3,700 beds, maintain the entire portfolio of approximately 9,950 beds, and issue over $500 million in debt in exchange for student fees for housing on nine campuses. Corvias also agreed to invest in renovations over the life of the program.
The deal — Phase 1 of USG’s alternative financing arrangement for dormitories planned to “eventually expand to all of Georgia's 30 public colleges and universities” — was held up as “precedent setting” and a model that other universities could replicate by "The Bond Buyer", a public finance trade publication. In 2017 Corvias and Wayne State finalized a partnership valued at $1.4 billion and that same year the ink dried on a similar deal between Corvias and Howard University.
Georgia voters facilitated this privatization of student housing when they approved a referendum that provided tax exemption for property owned by the University System of Georgia, including when private companies operate the facilities. House Bill 788, approved in 2014, was sponsored by a bipartisan coalition and received near-unanimous support in the General Assembly.
In early August 2020, the United Campus Workers of Georgia (UCWGA), Communications Workers of America learned that Corvias exerted heavy influence on the University System of Georgia about reopening plans. In a May 29 letter, Corvias asserted that the System “does not have the unilateral right to: 1) take actions that prevent students or have the effect of discouraging students from living on campus; or 2) exercise any BOR reserved rights that materially interferes or negatively impacts Corvias’ operation and management of P3 housing.”
Corvias’ tactics in Georgia were covered extensively by journalists this summer, including in publications including the Rolling Stone, Inside Higher Ed, and the Washington Post. Shortly after press coverage about the issue, Senator Elizabeth Warren and Representative Rashida Tlaib initiated an investigation into Corvias’ actions on college campuses. This congressional investigation of Corvias is not the first spearheaded by Warren.
A 2018 investigation by Reuters revealed widespread problems in Corvias-owned military housing, including flooding, mold, collapsed ceilings, exposed lead paint, and more health hazards. Federal officials followed up with an investigation of all privately-managed military housing and research continues on the scale of the problems. In 2020 military families in Fort Bragg filed a class-action lawsuit against Corvias; the case is still ongoing. Corvias sealed major deals with higher education institutions long before the complaints about the quality of their military housing surfaced.
United Campus Workers of Georgia Research Findings
Through a FOIA request, UCWGA members obtained documents from the University System of Georgia showing what happened behind the scenes between May and August 2020.
One of the promises of privatization is that private companies shield the public sector from market fluctuation. However, Corvias did not protect USG when campuses shut down last Spring. Students initially paid Corvias for housing, but due to the legal terms of their agreement, Corvias was not required to cover any of the housing refunds. Instead, USG covered the initial refunds, and institutions later used federal CARES ACT money to pay themselves back to the tune of over $15 million. This CARES ACT money could have saved university jobs or saved other seriously underfunded areas at our higher education institutions.
Communications from Abraham Baldwin Agricultural College indicate that administrators wanted to reduce occupancy to only one student per bedroom as a heightened measure of precaution. ABAC was required to pay Corvias up to $300,000 to take these extra safety precautions and make up the difference between projected and actual revenue.
College of Coastal Georgia planned to close campus after Thanksgiving Break to prevent students from traveling back to campus after the holiday. However, the College of Coastal Georgia could not make this decision to protect students, faculty, and staff on their own. Any decision to reduce rent associated with the closing campus at Thanksgiving would have to include Corvias.
Despite remaining whole during the spring semester, after a summer of revenue loss, on July 2 Corvias sent a 2020-2021 proposed budget to the University System of Georgia that reduced the annual operating budget by 24%.
Cuts meant that Corvias would not provide institutions with custodial staff and would not be responsible for meeting COVID-19 cleaning protocols recommended by the CDC and the Georgia Department of Health. USG told all P3 institutions that they would need to create a cleaning protocol for the Corvias-owned dorms themselves, or the system office would cover these costs. On some campuses, these plans involved hiring outside contractors to do Corvias’ jobs at considerable expense. For example, the Georgia State plan cost almost $100,000.
In late July, University of North Georgia administrators heard about Corvias’ plan to cut their budget and staff; Gerald Sullivan, Associate Vice President of Real Estate and Auxiliary Services sent a letter to Cook noting that: The proposed cuts would result in a reduction of staff from four persons to a single person and possible suspension of essential maintenance, including an HVAC system. Sullivan stated that “Any severe operations reduction, and any suspension of necessary facility maintenance, is objectionable to UNG as we have experienced historically high occupancy, exceeding the contract requirements, for the two Corvias managed properties at UNG.” He went on to note that the Corvias properties were already over 97% capacity and that Corvias was provided with refund reimbursement when UNG went virtual last Spring.
Throughout July 2020, several universities noted that Corvias was not meeting cleaning and maintenance standards. For example, residential life staff at Augusta University noted significant issues with the dorms at Oak Hall and Elm Hall, such as painting and general maintenance needs, door handles not working, and uncleaned rooms.
They went on to say they have serious concerns about moving students into run-down rooms, where door handles did not work for general safety and fire safety, air conditioning units went untested, and air filters were expired.
East Georgia State College similarly noted concerns with readiness in their dorms that July, noting there was a ton to do, including replacing damaged blinds, missing furniture, and wall patchwork. They also said the cleaning was of poor standard, the rooms looked bad, and that nothing changed since the students left in March, four months prior.
On July 28, in emails from financial advisor emails Cynthia Alexander, USG Executive Finance Director, noting that “S&P has been aggressive in rating projects,” and the Corvias project might be under “significant scrutiny” and may get downgraded.
Alexander suggested to USG Executive Vice Chancellor Tracy Cook that, between their lenders and S&P, Corvias may be “desperate.” Notes for an April 19 internal discussion indicate that, in the case of a Corvias default, the lenders could step in and take over the project.
The union is deeply concerned about what this might mean for the system, institutions, and students. Who are these lenders, and what would it mean if they took over the project? Where is there any regulation ensuring public accountability and control?
Our review of documents demonstrated that Corvias engages with other institutions in a similarly uncooperative manner. According to a Corvias e-mail sent to USG on June 1, 2020, the Company sent a version of the letter claiming the BOR could not unilaterally reduce student housing population to all of their campus partners which include: California State University, Alabama College of Osteopathic Medicine, Wayne State University, University of Notre Dame, Purdue University, North Carolina Central University, and Howard University.
Once again, in the middle of a pandemic, when everyone’s chief concern should have been life, health, and safety, Corvias revealed that its priorities were limited to its own financial well-being. It should also be noted that USG spent considerable time and effort in responding to Corvias’s declarations while neglecting the serious concerns expressed by thousands of USG employees, students, and others.
Corvias has engaged in other kinds of behavior that should trouble anyone who cares about good governance, whether corporate or academic. On March 27, 2020 Corvias sent a proposal to USG to infuse the project with $5.47 million in cash over the summer either directly or through a restricted charitable gift to the USG Foundation. On April 13 USG rejected this proposal.
It appears that Corvias did this in order to achieve a 1.2 Debt Service Coverage Ratio (DSCR), meaning that the records would show that the project had earned revenue equal to 1.2 times the required debt payments. Corvias’ financing agreement with its lenders requires that Corvias maintain this ratio for 24 months in order to gain access to a $9.2 million management incentive fee. In addition, according to Corvias emails and our document review, dropping below this ratio could affect the credit rating of bonds for the project. If this was the goal, then Corvias was attempting to make the project appear more profitable than it actually was in order to extract further gains and avoid the possible consequences of a downgraded credit rating. To someone with an accounting background, this appears to be a violation of the accounting principle of substance over form, which requires that a transaction be recorded and reported in a manner that reflects its actual economic impact. The incentive was intended to reward actual good management of the project, not the manipulation of numbers.
Documents reveal that USG officials, including the chancellor, were uncomfortable with what they characterized as either a “gift,” or “scheme.” USG asked Corvias to provide approval from their lenders for the proposal, which never happened. Eventually, the proposal was withdrawn by Corvias. However, the fact remains that Corvias attempted to make the University System of Georgia complicit in a potentially misleading accounting maneuver.
In addition, while USG is to be credited for its skeptical response, the attention to the requirements of lenders once again serves as a reminder that there is a whole other set of parties involved in this partnership about whom the public knows nothing. The documents provided by USG have carefully redacted all information about the owners of the more than half a billion dollars in notes issued by Corvias to finance this partnership. Repeated references to the wishes of lenders indicate that their role in the USG-Corvias venture is far from passive.
Our review of the emails provided evidence of USG leadership’s increasing impatience with Corvias.
A July 27 email from USG Executive Finance Director Cynthia Alexander noted that “USG/BOR is disappointed with Corvias’ response during this period.”
On August 2 Ms. Alexander shared notes on possible next steps with Corvias, one of which was to reevaluate “options for the venture, including the cost of separating from Corvias.”
On August 6, 2020, Executive Vice Chancellor Tracey Cook responded to the July 2 Corvias proposed budget cuts, citing the ways in which Corvias did not meet its contractual obligations. Cook was clear about the Board of Regents’ attitude toward Corvias, stating that “BOR is no longer interested in rehashing conversations that begin or end with Corvias’s request for BOR to “creatively” resolve any P3 Housing revenue shortfalls. Corvias fully accepted this financial risk and agreed that BOR does not guarantee occupancy levels at P3 Housing projects or Corvias’s projected revenue.”
However, Corvias’s actions have repeatedly demonstrated that it will use every opportunity to transfer this risk back to the university system. This relationship has not benefited the USG community and the United Campus Workers of Georgia will continue to campaign to ensure that our public higher education institutions are publicly owned and controlled and that student and employee health and safety is placed above private profit.