The University of Kentucky announced Thursday that it is developing a plan for a new downtown basketball arena, major renovations to Commonwealth Stadium and a new on-campus baseball stadium.
The trio of projects, with a price tag between $300 million and $400 million, would be financed privately, UK athletics director Mitch Barnhart said.
“No money would be taken from academics. There would be no taxpayer money. It would be all private,” Barnhart told the board of the Lexington Center Corp. “It’s a unique format that’s never been done before in the United States.”
The Lexington Center Corp. manages the 32-year-old Rupp Arena, where the UK men’s basketball team plays. It also would manage the new arena.
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The LCC board endorsed the project and said it would support UK in pursuing a financial feasibility study, expected to be completed in six months.
At that point, Barnhart said, UK and the Lexington Center could decide “whether to move forward with the plan or not.”
The feasibility study will be done by IMG College, the world’s largest sports-marketing company, which bought out Lexington’s Host Communications last year, and by its affiliated company, International Stadia Group.
Financing would be based on marketing and branding opportunities and naming rights and part of an overall strategy to search for ways to maximize revenues, said Steve Moore, president of North and South America for International Stadia Group, a financial affiliate of IMG,
A new source would be non-traditional technology deals that better integrate television, the Internet and consumer advertising at a stadium, he said.
“Finding revenue sources from technology has not been widely done, but it is definitely on the horizon and something we want to try to take advantage of,” he said.
Barnhart said the idea for construction and renovation of the three UK sports facilities originated with IMG/ISG. Initially, the university talked about doing the on-campus facilities immediately and waiting on a new arena until after 2014.
“We then thought abut the power of putting all these into one financing package and bundling all the marketing and premium seating assets into one strong sales and marketing approach,” he said. “We began to get very excited about the possibilities.”
The trick for this plan to go forward is to come up with a business plan to make more money off these new facilities than the existing ones, and borrow against that, Barnhart said.
“We’re all going to have to find ways to win a little bit,” he said. “We have to keep it in perspective and make sure it makes financial sense for everybody. The IMG people told us they would keep us whole, the Lexington Center whole and they want to do well themselves.”
IMG/ISG will pay for the feasibility study.
“If they think they can successfully construct three new facilities without public dollars involved, we have an obligation to explore this proposal,” said Lexington Mayor Jim Newberry, who was at Thursday’s meeting.
Last year, city officials announced they were in the early stages of planning for a state-of-the-art downtown basketball arena to replace Rupp Arena.
Bill Owen, president and chief executive officer of Lexington Center Corp., said in October a new arena — on what’s now a parking lot across High Street from Rupp — could be up and running by the 2014 or 2015 basketball season.
UK has a lease to use the existing Rupp through 2018. At that time the arena would be 42 years old.
UK has been working on plans to replace Cliff Hagan Stadium with a new on-campus baseball stadium.
A site for a new baseball stadium has not been decided on, but along Alumni Drive across from the arboretum will be explored, said Rob Mullens, UK’s deputy director of athletics. “Parking is one (reason). It’s a good piece of real estate, near the main arteries, near the other athletic facilities (soccer and football).”
Improvements at Commonwealth Stadium would include high-definition video boards and scoreboards, more suites, premium seating, plus easy access to in-house restaurants and other facilities, said Thomas J. Stultz, senior vice president and managing director of of IMG College, UK’s multimedia-rights partner.
“We’re talking about total overall upgrades with everything at Commonwelath Stadium,” Stultz said.
As for naming opportunities, Moore indicated it was premature to talk about whether the name on a basketball facility would be Rupp Arena.
He did say that just buying the name to a venue is not enough for many corporations anymore. “What sponsors really want is relationships with the school, the student body and their consumers. Naming rights is not always the best way to do that.”
The feasibility study — which will include marketing, architecture and financing — will ask fans what benefits they want and what they are willing to pay for them, Moore said.
“It’s not like, ‘Will you pay $50,000 for a suite.’ But do they want a suite where they can entertain? How big? What amenities? What do they want it to look like?” Moore said. “This is the direction in which new sports venues are moving.”
Financing, if justified by the study, would be with a private equity company working in partnership with ISG. “We’re not going to have a consortium of 10 banks to deal with. We are going to have a private equity partner, yet with the same amount of financial leverage we’ve had in the past with more traditional forms of financing,” Moore said.
He said he could not name the company at this point, but the name of the financial backer will be released.
A new basketball facility would be owned by the city through the Lexington Center Corp., a quasi-government agency, and have the same arrangement as the ownership of Rupp Arena, Moore said.
ISG and IMG College would enter into a revenue-sharing plan with Lexington Center “until we paid down the debt,” Moore said. “ We would be a limited partner for a limited time.”
The benefit of this type of arrangement for UK and the city is that his company takes on the risk of the construction, “which is a big risk today,” he said.
“The benefit to us,” Moore said, “is knowing it is going to be built right, the right kind of premium services that exactly meet the specs to which people have told us they want and we believe we can sell.”