Higher Education

In November 2021, RBCCM sold approximately $92 million of tax-exempt and taxable, senior and subordinate fixed rate bonds on behalf of University of Hawai’i Foundation to fund the development of the Atherton Residential Life Innovative and Entrepreneurship Center. Consisting of approximately 373 beds of student housing with approximately 9,000 square feet of co-working/collaborative and academic teaching space, 15,000 square feet of office space and 1,700 square feet for retail on the main campus of the University of Hawai'i at Mānoa. In addition to financing the development of the Project, bond proceeds will be used to fund capitalized interest for seven months beyond scheduled construction completion, certain start-up costs and working capital, a debt service reserve, an operating reserve, a liquidity reserve and costs of issuance. The bonds were certified Green and Social Bonds by the BLX group.

The Atherton Residential Life Innovative and Entrepreneurship Center is being developed to encourage local students to attend the University of Hawai'i at Mānoa, providing them with a unique educational opportunity found in very few global research universities with a goal of attracting entrepreneurial students, inventors and researchers from around the world. The University anticipates extending its partnership with the established Pacific Asian Center of Entrepreneurship (“PACE”) and relocating PACE from their current space at the Shidler College of Business, to the second floor of the Project.

The bonds were structured to include a senior tax-exempt and taxable bonds, and a subordinate series of tax-exempt bonds. The senior bonds consisted of fully amortizing, fixed rated bonds, structured with a minimum 1.44x debt service coverage ratio and rated Ba1 by Moody’s. The non-rated subordinate bonds were structured with a 40-year bullet maturity and a “turbo” redemption feature allowing for prepayment from surplus cash flow. Both the tax-exempt and taxable portions have a 10-year par call.

RBCCM engaged in an extensive pre-marketing campaign for the bonds prior to pricing, including sending an exploratory term sheet to potential investors, followed by two weeks of individualized marketing. Additionally, RBCCM hosted a live investor presentation and many one-on-one calls and correspondences with investors in order to better educate the market regarding the credit. As a result of this effort, strong demand was realized from investors with a successful sale on November 18th. Orders totaled approximately $648 million for the transaction from 21 different accounts, resulting in an oversubscription of approximately 7 times. RBCCM recommended yield adjustments ranging from 2 to 8 basis points throughout the maturity structure.

In 2016, 2017 and 2019, RBCCM sold approximately $404 million of tax-exempt and taxable, fixed rate bonds issued by the Louisiana Public Facilities Authority on behalf of Provident Group – Flagship Properties L.L.C. (“Provident”) to provide financing for the first three of four phases of an overall campus master plan for Louisiana State University (“LSU” or the “University”) that is slated to include the development of 1,955 beds of new student housing and the redevelopment of approximately 2,850 existing beds, as well as the construction of a student recreation center, surface parking and an 808 space parking deck and approximately 40,000 square feet of retail space. The first phase of development is on two sites: the Nicholson Gateway site, which is the primary development site chosen to redevelop a blighted area into a new gateway to campus; and the Spruce site, which was previously identified as an ideal site for a freshman housing facility. The Nicholson Gateway portion includes the demolition and abatement of certain existing facilities and the development of 1,953 beds of residential housing, a student recreation facility, a parking garage and retail space on the west side of campus, across the street from Tiger Stadium. Spruce Hall is a new four story residence hall, being developed on the north side of the campus. The second phase consists of the construction of a new, 405-bed residence hall for first-year students, demolition of the existing Kirby-Smith residence hall, renovation of Evangeline and Highland Halls, and demolition of existing greenhouses and construction of new greenhouses for the LSU AgCenter. This third phase consists of the construction of two new residence halls with 881 additional beds primarily for undergraduate students, and necessary infrastructure, including parking and utilities.

With the State of Louisiana struggling with budget problems and under pressure to reduce its debt burden, LSU’s normal access to capital was not available. So, the University decided to use a public-private partnership for the projects. Under this model, the University ground leased the parcels of land to LLCs of the LSU Property Foundation, which, in turn, subleased them to Provident. Provident owns the facilities and contracted with RISE Tigers LLC to develop each phase and provide the physical property management. The University will provide residence life and programming services, as well as marketing, leasing and rent collection.

The University has master leased the projects on a triple net basis, with lease payments payable from its auxiliary revenues. Such lease payments are subordinate to debt service payments on the University’s outstanding Auxiliary Revenue Bonds. To provide much needed relief to the University’s annual debt service burden, the bonds were structured with principal payments beginning after much of the University’s outstanding bonds are scheduled to be repaid.

In May 2019, RBCCM served as sole managing underwriter on approximately $72 million of tax-exempt and taxable, fixed rate bonds (the “Bonds”) issued by the Illinois Finance Authority, the proceeds of which were loaned to Provident Group-UIUC Properties LLC (the “Borrower”) to fund the design, development, construction and equipment of (a) an approximately 124,000 square foot Campus Instructional Facility (the “CIF Project”) to be located on the campus of the University of Illinois at Urbana-Champaign (the “University”); (b) a new Feed Technology Center on the campus of the University (the “FTC Project,” and together with the CIF Project, the “Series 2019 Projects”) and (c) offsite improvements including the utility improvements. The CIF Project is anticipated to be an integral component to achieving an increase in enrollment for the College of Engineering and advancing the academic mission of the University. The FTC Project will enable the College of Agricultural, Consumer and Environmental Sciences to maintain a reputation of preeminence and leadership in nutritional and animal sciences. Construction of the CIF Project is projected to commence in June 2019 with substantial completion on or before December 15, 2020. Construction of the FTC Project commenced in April 2019 with substantial completion projected on or about July 20, 2020. Bond proceeds also funded capitalized interest on the bonds during construction and for approximately three months thereafter and issuance costs.

The financing was structured using a master lease model, whereby the Projects will be constructed on land leased to the Borrower by The Board of Trustees of the University of Illinois (the “Board”). In turn, the Borrower will sublease the Projects to the Board pursuant to which the Board will assume the obligation for the operation of the facilities and the payments of all expenses related. The Board will make sublease payments from legally available non-appropriated funds equal to the amount necessary to fund debt service on the Bonds. The structure of the transaction earned an “A1” rating by Moody’s, which is equivalent to the University’s rating on its existing Auxiliary Revenue Bonds and Certificates of Participation. The University decided to utilize a P3 structure due to a sunset provision within Illinois statutes restricting the issuance of new money certificates of participation in 2014. Additionally, the P3 structure enabled the University to expedite the procurement and delivery of the new facilities.

The market was relatively strong leading up to the pricing, which allowed RBCCM to take an aggressive approach in marketing the bonds. As a result, we realized strong demand from investors, resulting in a successful sale on May 9th. Orders totaled approximately $804 million for the transaction from 32 different accounts, resulting in an oversubscription of approximately 12.0 times on the tax-exempt bonds and 2.7 times on the taxable bonds. Consequently, RBCCM recommended yield adjustments ranging from 2 to 15 basis points throughout the maturity structure.