Archive for Sunday, July 20, 2008

Investors buy into KU success

Kansas University is preparing to make improvements at Allen Fieldhouse, including a basketball team practice facility. The sale of $32.8 million in athletics revenue bonds is helping fund the projects.

Kansas University is preparing to make improvements at Allen Fieldhouse, including a basketball team practice facility. The sale of $32.8 million in athletics revenue bonds is helping fund the projects.

July 20, 2008

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Self-made Champions

The Lawrence Journal-World looks back at the men's basketball season of 2007-2008, in which the Jayhawks claimed the NCAA championship title for the first time in 20 years and its third ever.

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As if an Orange Bowl championship and national basketball title weren't enough already, Kansas University is riding its athletic prowess into unprecedented success in what just might be the most competitive market around.

High finance.

After winning on the football field and the basketball court, Kansas Athletics Inc. is cashing in through both donations and investments.

This week, the department will get a $29 million deposit for its construction account - proceeds from the sale of $32.8 million in athletics revenue bonds by the Kansas Development Finance Authority.

The bonds went on the market earlier this month and sold out within a day, with unusually high support from individual investors, officials said. Fewer than 30 percent of the bonds went to institutional investors, such as retirement funds, regional insurance companies and others that typically snap up more than half of such offerings.

Instead, individual investors - the large majority of them Kansans, and most of them supporters of KU - managed to secure the revenue bonds, which were offered in $5,000 increments.

"There were five buyers for every one bond that we had," said Jim MacMurray, the authority's vice president for finance. "Our actual retail orders were over $40 million, but we could only fill $30 million of those."

Unusually high demand

Issuers rarely can fill every order they get, MacMurray said, but the sheer volume of orders proved unusual. And it was the Jayhawks' football and basketball success that generated the high pent-up demand among such "retail" investors, said Steve Weatherford, the authority's president.

"It's fair to say it was worth at least $10 million, and possibly even $15 million of retail sales," Weatherford said, of the football and basketball success. "We were very fortunate. There have been a number of (other bond) issues that don't have the support that we got, and they had to pull them off the market."

Proceeds from the bond sale will serve as a series of loans to Kansas Athletics Inc., which will use the revenue to tackle a number of construction and remodeling projects at Allen Fieldhouse, the Horejsi Family Athletic Center, the Wagnon Student Athlete Center/Parrott Athletic Center and vicinity.

The projects picked up speed once KU won the national basketball title in April. Basketball will get a new practice facility, remodeled locker rooms and other upgrades, and other tasks are in the works.

The work ultimately will be financed by donations and department revenues, which will be used to pay off the bonds. Kansas Athletics already has secured $4 million in donations to go toward the bond projects, MacMurray said.

'Stupendous growth'

Investors, meanwhile, are getting an opportunity to earn interest on money that supports the athletics program.

"This is a way to help the Jayhawks and get paid for it," said Sean Williams, a Lawrence Realtor and descendant of founders of Kansas Athletics' fundraising operation, the Williams Fund. "I don't think it adds to your Williams Fund points, though."

While Williams didn't buy into the latest bond issue, he has done so in the past. And even with financial markets exhibiting plenty of volatility, he considers KU a crimson-and-blue chip investment.

"Right now, people are looking for solid investments, and what better investment is there than the KU athletics department?" Williams said. "It's certainly had stupendous growth and performance. If I was a betting man, I'd say they're moving forward."

Dan Watkins, a Lawrence attorney who serves on the board of directors for the authority, said he wasn't surprised that the bond sale went well - for all involved.

The average interest rate being paid to investors, 4.78 percent, came in below what some other comparable bond issues were offering, authority officials said. And Kansas investors had the opportunity to show tangible support for their Jayhawks, through purchases in the free market.

"We were very pleased with the sale and how it went, in what obviously have been tough market conditions," Watkins said. "We got good results."

Just like a couple of KU teams that ended their seasons on winning notes.

Comments

Sigmund 7 years, 1 month ago

"The average interest rate being paid to investors, 4.78 percent, came in below what some other comparable bond issues were offering, authority officials said."Assuming these were triple tax exempt, 4.75% is a good return on your money these days. You would have to get 6.33% taxable return to match it assuming a 25% marginal federal and state tax. Wonder why my broker never called me on them?

LJD230 7 years, 1 month ago

Perhaps the LJW will donate the proceeds from it's self serving "Bill Self on Your Shelf" ad campaign to a fund dedicated to the improvement of the academic infrastructure at KU.

Sigmund 7 years, 1 month ago

LloydDobbler (Anonymous) says: "Meanwhile, academic buildings crumble."KU will hit up Kansas taxpayers to pay for the repairs and they will always pay it.

LloydDobbler 7 years, 1 month ago

Meanwhile, academic buildings crumble. This has gotten way out of hand. I am going to get a bunch of feedback from sports fans (of which I am one) about how important athletics are as the public face of the university, blah, blah, blah. But the athletic department would not exist if not for the university itself. Why is the athletic department in charge of all trademarks? Shouldn't the academic units reap some benefit from the sale of KU merchandise? Trumpet all you want about national championships and Orange Bowls, but while all this is going on, segments of the academic side of the house are lagging in quality at the same time that tuition is skyrocketing. Something, eventually, is going to have to give...

LJD230 7 years, 1 month ago

Sigmund (Anonymous) says:"KU will hit up Kansas taxpayers to pay for the repairs and they will always pay it."As they will for all the other institutions under the aegis of the Kansas Board of Regents.

penguin 7 years, 1 month ago

Yes KU will hit up taxpayers to pay for state buildings. When Allen Fieldhouse and other athletic facilities (also state buildings) made it into to deferred maintenance inventory...everyone was screaming. So they find a way to raise the money through donations and bond issuance ...and people still complain.DM does effect academic buildings, but it is hard to raise money for this issue. Most people do not want to donate to fix infrastructure that does not contain their name. In addition, did I mention these are all state buildings at a state-sponsored institution. Unfortunately, this just says that people want to give money to athletics, but not academic buildings...and let them.

overthemoon 7 years, 1 month ago

lloydagree completely. Might as well just shut down the university and declare the KU a sports corporations that keeps 27000 kids entertained with some classes between games. they pay their tuition (aka entry to sports venue ticket lottery) and get a degree.

Quigly 7 years, 1 month ago

Great, Yeah! I want to invest in some heart attacks. Or how about stock in a aneurysm. Investors won't be so happy when their ticket to the "big games" drops dead from choking on a chicken wing. OH SNAP B!

Solutions101 7 years, 1 month ago

Can someone answer this: Why are the students funding the sports scholarships (from tuition) and women's sports (from student required fees) where the federal government has bribed the school from either withholding school funding or equal women sports. The school is taking this money but forcing each 26,000 men and women students $40.00 a semester for women's sports. This is not mentioning required fees for sports clubs... Are you serious?? You can see that there are many investors/donators with millions of dollars flooding into the sports programs. When, in actuality, the students, who still have to pay for sports tickets, are suffering by not only increasing tuition and so-called required fees, but the out-dated buildings highly needed of restoration and technology improvement. The money the school is charging the students should be going towards education. The money donated to sports should fund the sports activities.

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