FAU trustees approve stadium financing plan - South Florida Business Journal
The largest sports venue in Palm Beach County is closer to groundbreaking after Florida Atlantic University’s board of trustees unanimously approved a plan Wednesday to seek $44.6 million in financing for a football stadium.
The final hurdle for approval for the 30,000-seat stadium on the public university’s Boca Raton campus is garnering support from the State University System of Florida’s Board of Governors. If approved, the FAU Owls’ new home should be ready by about October 2011.
The construction project would employ 200 people and generate about 1,000 jobs overall while work is underway, said David Kian, FAU senior VP for strategic relations and general counsel.
“To fully grow the football program and to attract the student life benefits of that program, we need to move it on campus,” he said. “We are expecting there will be additional realignment of football conferences. By having a 30,000-seat stadium on this campus, we will position ourselves to be competitive.”
Kian projected that annual ticket sales would increase 25 percent, or about 3,500 extra seats, at the new stadium versus what FAU has attracted at Fort Lauderdale’s Lockhart Stadium. He said that’s a conservative estimate, as most new college football stadiums see a much larger sales boost.
“We believe that increase is reasonable, and that is what you will have to hold us accountable for,” he said.
The stadium would include a team store, 1,076 premium club seats, 4,448 priority club seats, 16 air-conditioned boxes and 20 luxury suites for lease. Since the southern end zone would have palms trees at both corners, FAU plans to trademark the phrase “Between the Palms” to refer to scoring there.
To finance the project, FAU expects to secure a $44.6 million loan with Regions Bank. The loan would apply for acceptance as a Build America Bond, which has the federal government pay 35 percent of the interest costs. That program is part of last year’s stimulus bill.
Kian said the Build America Bond program was crucial for the project because it lowered the interest rate. The project could not seek bond financing because it was too new.
The debt is being issued by FAU Finance Corp., a direct-support organization formed by the university. It would repay the loan through stadium revenue, student athletic fees, the sale of naming rights, fundraising and at least $1 million in funds annually from playing away games.
The lender would not have the right to seize the property or go after the university to collect on the loan, Kian said. Its only recourse for collections is taking the operating revenue of FAU Finance.
One risk, Kian said, is that Regions Bank would have the right to call for full payment of the loan after seven years. By that time, chances are that interest rates won’t be as low as they are today, he said. While he believes the stadium revenue can handle an interest rate as high as 12 percent and still make debt service, Kian said he is working on a backup plan.
Through a $1 million annual fundraising campaign and the retention of the stadium’s operating income, he said FAU could reduce the outstanding debt on the stadium to $30 million in seven years. At that point, the university could probably refinance it as a bond, Kian added.
The total projected cost of the stadium is $63.5 million – with $44.5 million from the loan and the rest from FAU and its fundraising foundation.
