Private Equity Funding: Elevate's "College Investment Initiative"

[TheOriginalCane]

Could they assign a portion of their Conference and CFPO payouts?

To both you and @Fluffhead , I am hearing that this would likely be structured as a loan to be collateralized/repaid with identified revenue streams, such as a "new fee" placed on tickets/student athletic fees, etc.

Obviously, some schools are moving to split-off the athletic department into an LLC (Kentucky, I believe?), but schools that "want the money now" and are not set up with a separate entity yet...will likely have to do the "payday loan" option described above.

 

[canesbaby]

To both you and @Fluffhead , I am hearing that this would likely be structured as a loan to be collateralized/repaid with identified revenue streams, such as a "new fee" placed on tickets/student athletic fees, etc.

Obviously, some schools are moving to split-off the athletic department into an LLC (Kentucky, I believe?), but schools that "want the money now" and are not set up with a separate entity yet...will likely have to do the "payday loan" option described above.

I for one am glad to not hear Miami’s name in all of this. I’m not naive enough to think the discussions don’t take place but hoping they are taking the UNC route of knowing the new large conference payday is coming soon.

 

[Fluffhead]

Could they assign a portion of their Conference and CFPO payouts?

They potentially could, it just needs to be set up correctly. Also, based on gross and not net revenues. My big concern whether athletics remain part of the University's exempt purposes and at what point is it unrelated income and taxable. You have PE investors, athletes are now employees, coaches making 7-8 figures. It sure looks like a pro league, even more than it has. That's a big tax hit, if so. Do athletics need to be spun off into a taxable subsidiary if UBI become large enough to put exemption at risk? And those bond issues would come up in both cases, which would have huge financial implications.

To both you and @Fluffhead , I am hearing that this would likely be structured as a loan to be collateralized/repaid with identified revenue streams, such as a "new fee" placed on tickets/student athletic fees, etc.

Obviously, some schools are moving to split-off the athletic department into an LLC (Kentucky, I believe?), but schools that "want the money now" and are not set up with a separate entity yet...will likely have to do the "payday loan" option described above.

This seems like a logical way to go about it. However, the above questions remain with the investors, employed athletes, high salaries for players and coaches.

 

[Bender]

Here is what PE has done to my industry since its arrival.
1. Loss of culture.
2. Loss of people.
3. Loss of customers.
4. Loss of quality and service.
5. Focus on growth.
6. Focus on ROI.

A huge overall consolidation - big fish buying up all the smaller fish. Resulting in a washed down product for consumers.

My experience.

Companies all hit the phase of standardization and treating customers like a number on the sheet the moment they get investment or support from the big PE or they get so big that they have to take care of the overflowing amount of new customers that standardization is necessary. The last one is fairly rarer, used to be more, so PEs make it happen mostly nowadays.

But this is what happens when the customer isn't king anymore and only the Benjamins count. As long as the Benjamins flow, regardless of the product, all is fine.

 

[Caned Peach]

Private equity firms = loan shark that expects 10%+ ROI yearly. Good luck to any program that allows this trojan horse through their gates.

 

[DTP]

This whole thing screams of “our athletic department is costing us more money than we can afford to spend but instead of cutting spending we’re going to borrow money from loan sharks.”

 

[TheOriginalCane]

They potentially could, it just needs to be set up correctly. Also, based on gross and not net revenues. My big concern whether athletics remain part of the University's exempt purposes and at what point is it unrelated income and taxable. You have PE investors, athletes are now employees, coaches making 7-8 figures. It sure looks like a pro league, even more than it has. That's a big tax hit, if so. Do athletics need to be spun off into a taxable subsidiary if UBI become large enough to put exemption at risk? And those bond issues would come up in both cases, which would have huge financial implications.


This seems like a logical way to go about it. However, the above questions remain with the investors, employed athletes, high salaries for players and coaches.

I agree with everything you are saying.

As an aside, I believe that is why many campus bookstores (Miami's included) were sold to companies like Follett, because it was probably triggering UBI above and beyond the non-profit filing. The current version of the bookstore barely has any books, it is packed with about 1000% more merch than we had back in the 80s and 90s.

UBI, *******...

 

[TheOriginalCane]

Private equity firms = loan shark that expects 10%+ ROI yearly. Good luck to any program that allows this trojan horse through their gates.

Pay. Day. Loan.

 

[TheOriginalCane]

This whole thing screams of “our athletic department is costing us more money than we can afford to spend but instead of cutting spending we’re going to borrow money from loan sharks.”

"And then I'm gonna take that money and buy players and coaches and hit the CFP lottery jackpot, and I'll be able to pay off everyone, and everything will go back to normal..."

 

[Fluffhead]

I agree with everything you are saying.

As an aside, I believe that is why many campus bookstores (Miami's included) were sold to companies like Follett, because it was probably triggering UBI above and beyond the non-profit filing. The current version of the bookstore barely has any books, it is packed with about 1000% more merch than we had back in the 80s and 90s.

UBI, *******...

So the odd thing is bookstores are typically exempted under the convenience exemption. I am not sure why they would have offloaded the bookstore. Maybe they would rather have rent and maybe a portion of sales than actively run it.

 

[TheOriginalCane]

So the odd thing is bookstores are typically exempted under the convenience exemption. I am not sure why they would have offloaded the bookstore. Maybe they would rather have rent and maybe a portion of sales than actively run it.

I would wonder if the heavy shift to clothing/merch takes it out of a "bookstore" classification.

Just a guess.

 

[dycane]

Private equity firms = loan shark that expects 10%+ ROI yearly. Good luck to any program that allows this trojan horse through their gates.

10%? You’ll be able to get that in bonds soon.

More like min 15%

 

[Fluffhead]

I would wonder if the heavy shift to clothing/merch takes it out of a "bookstore" classification.

Just a guess.

I'd be surprised. I haven't seen it, at least. If I had to guess they just ran the numbers and decided, similar to a food court, they are better off partnering with someone who is an expert in managing this function.

 

[OriginalCanesCanesCanes]

10%? You’ll be able to get that in bonds soon.

You sure about this?

 

[dycane]

You sure about this?

Lmao no. What I am sure about is that a 10% pref for HNW LPs barely moves the needle these days. Would you invest in a debt fund for a 10% return — not pref, but c-o-c return? Most won’t look at anything right now that doesn’t present at least a 1.7x TVPI from what I’ve seen. With carried interest, fees, and management expenses, these borrower schools would have to be paying hard money rates to make the fund enticing for LPs, wouldn’t you think?

 

[CaneinBroward]

You can see how ignorant some of these "sportswriters" are about business.

In the UCLA example, the author clearly does not understand the difference between "alternative REVENUE streams" and alternative FINANCING. Getting an investment from private equity is NOT REVENUE. It's a loan or an equity investment, with an expected return on that money.

In the Pedo State example, they can reasonably expect ANOTHER "slate of new fees" designed to provide a return on the investment made by private equity.

As for North Carolina, they realize they are about to hit the conference-realignment lottery soon, and do NOT need to suck-**** for private equity money. "Immediate returns". People need to pay attention to language like that.

Pedo State and UCLA already hit the conference lottery and still needing PE money? Ouch for them.

 

[OriginalCanesCanesCanes]

Lmao no. What I am sure about is that a 10% pref for HNW LPs barely moves the needle these days. Would you invest in a debt fund for a 10% return — not pref, but c-o-c return? Most won’t look at anything right now that doesn’t present at least a 1.7x TVPI from what I’ve seen. With carried interest, fees, and management expenses, these borrower schools would have to be paying hard money rates to make the fund enticing for LPs, wouldn’t you think?

Don’t get me wrong I agree with you about the desired return for PE, and 10% does not move the needle. Totally agree. I was just thinking historically, such dramatic increases in yields over a short period of time are exceedingly rare or, at least anyway to go from 4 or 5 to 10 within this year is something that I’m not anticipating,

But I understand where you’re coming from, given the potential for increased inflation and concerns about the budget deficit.

 

[TheOriginalCane]

Pedo State and UCLA already hit the conference lottery and still needing PE money? Ouch for them.

They squandered their gifts.

 

[Gocanes1990]

Redbird involved here… they have substantial sports backgrounds