Basketball spending

[brianstl]

1 hour ago, Old guy said:

OK guys, when you have a major project and not enough cash to finance it, you borrow, or take the money out of the endowment to  pay for the project. We all know 2007 was not a good time to  borrow large amounts of money. The credit markets and interest rates sank in 2008 to unheard of levels and have not fully recovered yet. However debt assumed in 2007, unless it was refinanced successfully later on, stayed at the same interest rate level (not true if it was borrowed in a variable rate type of deal). As far as the endowment goes, whatever it was at in 2007 you can be certain that it went lower in 2008 and 2009. It is a major triumph for SLU to have a billion dollar endowment. 

I want to point out that endowments of hundreds of millions of dollars or billions of dollars may appear inexhaustible. Not so by a long shot. It all depends on how large an institution you are and how much money you spend.

Harvard for example appears to have inexhaustible funds at its disposal. Harvard has the largest University endowment in the US at $ 36.7 B, and it collects around $ 5+ B in their fund drives. Of course the endowment is invested and yields profits. It should be evident that Harvard operates in a very different financial league than SLU does. You may think that with this kind of money and donors like these, Harvard has no financial problems. Nope, under the Faust administration, which ends this year, Harvard regularly spent all the money collected in their fund drives, plus all the profits made by the endowment, plus had to dip into the endowment principal at the tune of a few hundred million a year to pay expenses. Harvard operates at a deficit and can continue to do so for a long time. SLU on the other hand cannot afford to operate at such a deficit. 

It really does not matter how much money you have in the endowment. What matters is how much money you spend, this includes payments for all kinds of debt you have incurred. Central to the spending issue are the goals the administration has for the University. If SLU wants to  improve both the academic standing of the University and grow their endowment, something has to  give. SLU may be able to operate with a modest deficit but cannot allow the deficit to grow out of control.

They sold bonds to finance the arena.  You can refund the bonds to take advantage of better interest rates later on.

[Major Majerus]

1 hour ago, willie said:

Pickens  was very involved at least early on. Funny story: Pickens was the head of the Okie athletic booster club. He and friends gave multi millions of dollars to the club. They took the money and bought life insurance on themselves naming the club as beneficiary. The problem was no one died and they ran out of money to pay the elevated premiums as they aged. I believe it was 60 minutes who did a report on this. All in all he gave well over 100 million to Oklahoma State. 

Terrible strategy / single premium would be the way to go & cements the charitable deduction

[Slu let the dogs out?]

12 minutes ago, brianstl said:

I think the original plan was to make up most of the gap through the sale of arena naming rights if a donor hadn't emerged.

 

Got it, thanks. So his $12M was part of the capital stack then. I was going to say....I find it hard to believe that any lender would obtain committee approval, agree to close,  and provide loan proceeds (assuming, of course, that part of the financing included debt??) without that.

[Old guy]

Slu let the dogs out please read the big short to find out what lenders were doing before the crash of 2008.

[Slu let the dogs out?]

41 minutes ago, Old guy said:

Slu let the dogs out please read the big short to find out what lenders were doing before the crash of 2008.

Oh I'm well aware of how "generous" lending institutions were to pre-2008  borrowers (on commercial loans). I saw it firsthand.  I saw lenders accept personal financial statements and project financial projections that were clearly exaggerated (by millions), agree to guarantors that weren't worth more than the paper the contract was written on, and accept some suspect collateral . To no one's surprise, a few of these projects were foreclosed on less than 5 years later. But all of these projects had 100% of their sources and uses lined up (on paper) at close. Breaking ground when 15% of the project's sources were still unaccounted for? Never saw that. I'm sure it happened though!

Not saying that is what happened on Chaitetz...

[almaman]

4 hours ago, TheOne said:

Didn’t Chaifetz do $12m for the arena?  Not including the $15m he recently did for the Business school to bring total giving to $27m?

 

I’m not sure of Picken’s involvement, but I would assume Chaifetz is more active than Pickens - attending home games, traveling with the team, etc.

I'll take the bigger wallet no show in a heartbeat

[Adman]

5 hours ago, billiken_roy said:

and compared to the total cost of the arena and the fact the arena was already in construction progress, as willie detailed, getting dr chaifetz's donation did not build the arena.   make the financial future of chaifetz a little easier, but the arena was going up regardless.  

Correct, Broy. Dr C is the program’s best friend - maybe the U’s best friend, period!, and his lead gift was crucial, but it represented a fraction of the $80M+ it cost to build.

To Old Guy, the Top 50 commitment was made by Fr Biondi many years ago, before the initiative was finally prioritized and plans to make it happen were created - fundraising, operational, etc.

Where the money comes from — University, donor(s), government, use/rentals, sponsorships, etc., or some combination of all — is of course important. But it does not change my point from yesterday: Universities make strategic marketing/product investments to achieve dreams and fulfill commitments before revenue begins to roll in.

I’m sure the Doisy Research building is another example. Its role in generating research $ revenue from gvmt and private sources was huge. So the U figured out how to raise the money, make it happen and generate revenue for the long run.

If the Athletic Dept thinks another $1M in budget is likely to drive another $3M a year — long term in NCAA units, attendance, TV rights — you invest.

Same as for-profit businesses.