KU still hasn’t found a hotel partner for its Gateway project; Girod confirms $100M-plus in debt will be needed

photo by: Chad Lawhorn/Journal-World

Construction work on the west stands of David Booth Kansas Memorial Stadium is shown on June 17, 2024.

Seats are on track. Beds are not.

That may be the simplest update for the University of Kansas’ approximately $450 million Gateway project by the university’s football stadium at 11th and Mississippi streets.

Work to add new premium seating, concessions and a host of other bells and whistles to David Booth Kansas Memorial Stadium is on budget and on schedule to be completed by August 2025. The same holds true for the 1,000-seat banquet and convention space that will be built into the north bowl of the stadium.

But plans to build a hotel that would attach to the stadium and convention center are definitely stalled. Chancellor Douglas Girod said what has been clear for a while now: There will not be a hotel opening when the stadium opens in August 2025. He stopped short of saying that one would open in 2026 either.

“I have to think we are a couple of years off before we have a finished product,” Girod said in a brief interview with the Journal-World.

The delay is because KU has yet to find a private developer that KU is willing to work with on a hotel project. We reported in March that KU was interviewing three private development firms to take the lead on a host of Gateway amenities. Those amenities included the hotel but also included projects like retail and restaurant space, apartments and maybe even a small arena for concerts and other indoor entertainment.

In March, Girod said the retail, restaurant and other similar components of the Gateway project were going to be slower to develop than once anticipated. Higher interest rates charged by lenders, plus rising construction costs, were cited as reasons for the delay.

However, in March, Girod was still talking optimistically that one of the three development companies, which have not been publicly identified, would come through with a winning proposal for a hotel project.

Now, that’s less certain.

“We got some proposals,” Girod said. “We didn’t love them, out of the gate, anyway. I think some of them are being revised.”

But Girod said KU also may try to bring new parties to the table. KU announced earlier this year that it had selected Denver-based Oak View Group as the new operator for the revamped stadium and the conference center. Locally, the company has contracts with the Overland Park Convention Center and the Stormont Vail Events Center in Topeka. Nationally, it has contracts with Citizens Bank Park, home to the Philadelphia Phillies; Neyland Stadium, home to the University of Tennessee football program; and Chicago’s Navy Pier entertainment district, among others.

That puts the company in close contact with many hotel operators, and Girod said the university hopes to use that connection to its benefit.

“We want them to help us with what that hotel partner looks like,” Girod said.

Construction work is underway June 17, 2024 at the University of Kansas’ football stadium at 11th and Mississippi streets.

Preliminary plans have called for the hotel to have about 175 rooms and to be constructed at the northeast corner of the stadium, so that guests could easily access the convention and conference center in the north bowl of the stadium.

Presumably, the hotel also would have underground parking, rooftop patios and other features that would be attractive on KU game days, too.

How much the project would cost and who would pay for it seem to be the details causing delay.

“With some of the proposals we’ve received, they wanted us to take all the risk, and I’m not particularly interested in doing that,” Girod said. “We don’t do hotels. It is not what we are good at.”

The hotel project, though, is a critical component to the overall Gateway District. KU received $50 million in state economic development money for the project, in part, because the Gateway District is expected to attract new dollars into the state via conventions and other events.

While the $50 million in state funding is not specifically for the hotel, it will help build the convention center. The hotel has been viewed as a key component because convention centers that are connected to hotels generally fare better than convention centers that aren’t.

Higher interest rates charged by lenders — as well as higher construction costs — have made developers more cautious about committing to the hotel project, Girod said.

KU soon will have to deal with those higher interest costs.

Girod confirmed that Kansas Athletics will need to take out at least $100 million in new debt to complete the first phase of the Gateway district — which includes the complete rebuilding of the west side and north end of the stadium, but does not include any construction on the east side of the stadium.

Debt levels near $100 million would not be a surprise. The Journal-World reported in November that KU alerted the Kansas Board of Regents that the Gateway project may require up to $115 million in new debt.

Whether KU may need more than $115 million is a detail that Girod didn’t address. Girod rather said he was “certain” that KU would need to issue debt in the “100-plus” range. Girod said KU likely would make determinations about an exact amount by the end of this year.

The prospect of KU needing more than $115 million in debt appears to be a possibility based on some of the language KU has used in recent communications. A May press release announcing a contract extension for Athletics Director Travis Goff touted that Goff had helped raise “nearly $300 million in combined donor and state support” for the Gateway project.

With $300 million raised, KU would be approximately $150 million short of the Gateway project’s estimated price tag.

Whatever the amount of needed debt, Girod said he still expects all of the debt payments to be the responsibility of Kansas Athletics Inc. rather than covered by KU’s general budget.

“There is still no anticipation of the university taking on that debt,” Girod said.

However, Girod said the athletics department debt might be packaged with other university-related debt — he mentioned possible student housing debt — in order to make the debt more attractive to bond buyers.

The ultimate debt number will be an important one to the future of Kansas Athletics. A $100 million-plus debt issuance could require Kansas Athletics to come up with $10 million a year, or more, in annual debt payments. That would come at a time when KU Athletics may be under pressure to find $20 million a year to begin paying student athletes under a proposed NCAA-wide lawsuit settlement.

All of that is giving KU plenty of incentive to try to raise additional donor dollars for the Gateway project.

“Every bit of fundraising helps diminish that number,” Girod said of a potential debt issuance. “You’ve heard about all the other pressures on athletics revenues; the less pressure we can put on debt service, the better, so that we can focus on all these other dynamics we are trying to contend with.”

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