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Potential bidders puzzle over Kentucky project
Published March 16, 2009
The University of Kentucky has given developers more time to submit bids on a package of privately financed athletic facilities projects that would include a new basketball arena.
The school issued a request for proposals in late January to gauge interest among developer-led teams in funding a downtown Lexington basketball arena that would replace 33-year-old Rupp Arena. The document also calls for building a new baseball stadium and renovating Commonwealth Stadium, where the Wildcats play football.
The university has asked bidders to include a model for private financing. Officials from HOK Sport, Hunt Construction and Spanish developer Acciona, who would be partners in a bid if they decide to submit a proposal, requested an extension to further study how to generate a return on their investment, said John LaRue, Acciona’s technical director.
The deadline has been pushed back from March 27 to May 5.
The private finance model was originally proposed by sports marketer IMG College and its business partner, International Stadia Group. Last summer they approached the school and Lexington Center, which owns and operates Rupp Arena, to propose a feasibility study on a privately financed basketball arena.
But after the three parties reached an agreement, the university found that state law required it to issue a public proposal. The university then expanded the scope to include the two other venues. The RFP says that IMG College and ISG are a likely bidder for the projects.
IMG College’s idea is to generate enough incremental revenue from selling naming rights, increased signage, and suites and club seats in the new and expanded facilities to pay building costs, said Tom Stultz, IMG College’s senior vice president and managing director.
Rupp Arena has no suites or clubs, and there is demand for new high-end inventory and more football premium seating, said Rob Mullens, Kentucky’s deputy director of athletics. Stultz said, “We wouldn’t have taken the offer to them in the first place if we didn’t think it would work.”
But other developers question whether the model can support the debt and generate a profit for investors. One published report estimated project costs of $300 million to $400 million, but there has been no budget established for the project, Mullens said,
The school and its landlord remain open to all ideas for how to privately finance the project, said Mullens and Bill Owen, Lexington Center’s president and CEO.
“Our goal is to allow interested parties to be creative and offer solutions,” Mullens said. “We will then evaluate the proposals.”
LaRue is spending the additional time analyzing how Acciona could best use its expertise in developing major infrastructure projects to finance the deal. “At this stage, we know just enough that we can’t figure it out,” said LaRue, who works in Irving, Texas.
Acciona, a newcomer to sports development, is based in Madrid and is one of the world’s largest contractors. One of its divisions builds college structures on an international level, including student housing. Other potential bidders include Hammes Co., a developer with experience helping NFL teams plan stadiums, and HNTB, officials at those firms said.
Ellerbe Becket had a financing partner in place but could not find a construction firm to commit and disbanded the group, said design principal Jon Niemuth. He thinks it makes greater sense for Kentucky to focus solely on the arena piece, or maybe include new premium amenities for Commonwealth Stadium.
“Baseball is a loss-leader; that college sport is not a revenue producer,” Niemuth said. “They’re basically asking you to donate a new stadium for free.”