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IMG venture to offer private financing for college facilities
Published August 25, 2008
Expensive facility upgrades often require university athletic departments to go into debt or seek public funding, but IMG College is partnering with affiliated company International Stadia Group to offer schools private financing for such projects.
ISG, a London-based joint venture between IMG and Bastion Stadiums LLP, has used the private-financing model to pay for construction of Wembley Stadium, as well as projects in Brazil and India. Now it wants to take this idea to the U.S. and it’s starting with the university partners of IMG College, formerly Host Communications.
IMG/ISG last week launched a feasibility study on replacing 32-year-old Rupp Arena, the iconic home of University of Kentucky basketball. The project will also include significant upgrades to Kentucky’s football facility, Commonwealth Stadium, and a new baseball stadium, all of which are projected to cost $300 million or more, school officials said.
The idea is to build enough revenue-generating opportunities into the facilities — premium seating, sponsorships, naming rights, signage — to secure a return for the private investor.
ISG is in the process of selecting the investor, likely a firm like a Goldman Sachs, and will announce the name in the next 30 days, said Steve Moore, president of North and South America for ISG. Moore wouldn’t comment specifically on Goldman Sachs.
HKS, designer of new football stadiums for the Indianapolis Colts and Dallas Cowboys, will work with Kentucky and the city of Lexington on the feasibility study.
The concept is one that IMG College hopes to use as a model for its other university partners, as well as a selling tool to attract new clients.
“So often, arenas are public/private partnerships, maybe it’s a municipal stadium of some kind,” said Tom Osborne, athletic director at Nebraska, an IMG College partner. “But not a lot of universities are building stadiums on their own. You get financing wherever you can.”
In addition to eliminating the need for debt, the concept mitigates risk for the universities. If the facility doesn’t deliver the revenue and IMG College can’t sell it, IMG/ISG, and not the school, are on the hook to the investor.
There could be a trade-off, warns Chris Fuller, associate athletic director at Tennessee. He said college stadiums are already looking and feeling more like pro stadiums, and that trend will gather even more momentum as schools try to increase the revenue that flows from their facilities.
“With the marketing and branding components, are we talking about selling gates?” Fuller asked. “There is a threshold and we’ll just have to see how much the market will bear.”
Moore understood the concern, but replied, “All schools are different and facilities will be tailored to that. … This approach will not threaten the traditions of the school.”