Friday, November 27, 2009

Kansas Athletics seeks football fans to invest $34M for Gridiron Club

This view of Memorial Stadium, taken from the top floor of The Oread, shows the east side of Memorial Stadium in the foreground. KU’s season ticket seats for sporting events are organized on a points-based priority system based on donations, and a new “junior” fund allows students to contribute as well.

This view of Memorial Stadium, taken from the top floor of The Oread, shows the east side of Memorial Stadium in the foreground. KU’s season ticket seats for sporting events are organized on a points-based priority system based on donations, and a new “junior” fund allows students to contribute as well.


Timeline to come

Kansas Athletics Inc. is sticking with its original schedule for opening its new Gridiron Club at Memorial Stadium. That would be to have the 3,000 seats and lounge added in time for the 2010 football season.

The department also plans to use money generated from Gridiron Club memberships — “ideally you’re talking over $200 million,” said Jim Marchiony, an associate athletics director — to finance construction of an “Olympic Village” for nonrevenue sports, south of Allen Fieldhouse.

The department also would send $40 million to the chancellor’s office, to address academic needs at her discretion.

The precise timeline for those last two components remains undetermined.

“We can’t answer that now, because we’re still in the process of selling the project,” Marchiony said. “As soon as possible. If we could do the whole thing in the next couple of years, it would be terrific.”

Kansas football stock is taking a beating this season, just as its top officials ask fans to invest in what could amount to more than a $200 million Initial Public Offering.

The prospectus offers individual memberships in the Gridiron Club, whose seats and amenities will be limited to no more than 3,000 people considered loyal, committed and long-term supporters of all things crimson and blue.

The complication: Since Kansas Athletics Inc. unveiled the donor program at the beginning of the 2009 football season, the team followed a 5-0 start by losing five consecutive games, falling into last place in the Big 12 North and watching its coach come under investigation by the parent company’s CEO regarding treatment of players.

Such adversity hasn’t persuaded officials to pull back on the Gridiron Club plan — at least not yet.

“From what we’re hearing, people are thinking much more long-term than a five-week term,” said Jim Marchiony, an associate athletics director. “They understand our commitment to football, and so they’re looking at it from that perspective — a long-term perspective.”

But in the short term, decision time is fast approaching on the project that has been hailed as a way to address a variety of KU needs — both in athletics and academics — without relying on the use of increasingly scarce tax dollars during the worst economic downturn since the Great Depression.

Marchiony remains confident that Kansas Athletics will secure the $34 million it needs, up front, to build the Gridiron Club, the cornerstone of a larger program intended to also finance construction of a $25 million “Olympic Village” for track, soccer and other so-called nonrevenue sports, and to contribute $40 million toward KU’s overall academic programs.

The Gridiron Club remains slated to open in time for next football season, and officials with the Williams Educational Fund continue working to attract donors to buy into the plan for anywhere from $25,000 per seat for a five-year membership to $105,000 per seat for a 30-year membership.

Buy, sell, trade

Officials emphasize that donors, in the future, will be able to sell their memberships to anyone at any time for any price, much like stocks. Each Gridiron Club membership includes a ticket, food, drink and other amenities as part of the initial membership price.

Those costs cannot increase, although ticket prices, concessions costs, parking fees and other expenses could continue to rise for everyone else.

“It gives the fan a real asset that they can sell, that they can trade,” said Lou Weisbach, CEO of Stadium Capital Financing Group, a Chicago-based division of Morgan Stanley Principal Investments that put together KU’s financing plan. “You have a hard asset on your books that escalates in value as ticket prices escalate in value.”

Kansas Athletics’ initial plans called for donors to pay for all of each membership up front, but in recent weeks prospective donors have been offered the ability to pay memberships in interest-free installments. Buyers of memberships also accumulate points to apply toward basketball seat assignments at Allen Fieldhouse.

Marchiony declined to disclose how many people have signed up thus far, but he acknowledged that time was getting short.

“If we want it ready this fall, we have to make a decision before the end of the year that we’re going to start construction,” he said, confirming that Kansas Athletics needs at least $34 million to move the project forward. “I can tell you that the new payment structure has resulted in a dramatic increase in interest.”

Joe B. Jones, a longtime KU booster, is among prospects Kansas Athletics would consider interested. He has 10 season tickets for football. He buys season tickets for basketball. He’s previously held one of the Hall Family Scholarship Suites on the west side of the stadium.

Jones also is president of the Executive Benefits Network in Lawrence, managing financial products for financial institutions and corporations, including many that support Kansas athletics.

But he’s yet to come across anyone who has agreed to buy into the Gridiron Club, which he regards as an untested investment product in a volatile market.

Sure, he said, KU recorded its best season in history just two years ago, posting a 12-1 record and an Orange Bowl victory. But as investment professionals often remind clients, past results offer no guarantee of future performance.

“The product on the field is a relatively new product,” said Jones, who has heard the formal Gridiron Club pitch twice and expects a third soon. “My business is looking at performance. This would be like me selling a stock on its last six months’ return, when it ran up 40 percent. But what about when it’s down? What they’re trying to do is sell it on the high, and it hasn’t panned out like they thought it would.”

Long-term support

Jones already has translated his prospects into dollars and cents. Even buying in at the lowest membership level for him and his wife, and accounting for not having to “buy” season tickets anymore or to pay for parking, Jones figures he’d need to be mighty hungry and thirsty for the arrangement to pencil out.

“I’d have to eat $7,900 worth of food and drink” each season, he said, noting that he’d rather use the money to help hire a new employee or invest in new equipment. “That’s basically $1,000 a game. There’s just no way. It just doesn’t make sense for me right now, no matter how much I love KU.”

Craig Richardson, executive vice president for Stadium Capital Financing Group, said the financing plan wasn’t designed with everybody in mind. Kansas will continue to sell season tickets. Others can opt for lounge seats in the south end zone, or to occupy suites on the west side.

“The reality is, we’re not trying to appeal to 10,000 Kansas fans,” Richardson said. “We’re trying to appeal to the fan who says, ‘Whether it’s this year or next year or any year, we’re going to support Kansas, through the good times and the bad times.’ …

“This is for committed fans. It’s not always the wealthiest fans we’re looking for. It’s whoever is the most loyal.”

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Jhawk59 10 years, 6 months ago

I'll take 2, you won't find a more loyal fan than me. Do you take IOU's? Or you can wait till my investment in the Kansas State Lottery pays off. Seriously, is Mr. Richardson trying to use reverse psychology to get people to invest in this venture? "This isn't for the wealthy fan, it's for the LOYAL fans". Yeah, the most loyal fan with deepest pockets!

klip 10 years, 6 months ago

Throwing Mangino under the bus - makes it an opportunity to slide away from the Grid Iron club being no fan funding = easy out.

The Grid Iron was TOAST the day Lew and Gale introduced it in Memorial Stadium. The initial sales pitch was disasterous.

jakzhumans 10 years, 6 months ago

"This is for committed fans. It’s not always the wealthiest fans we’re looking for. It’s whoever is the most loyal.”

Get a new spin doctor, Lew, because this comment is insulting to every real KU fan. Are you so stupid that you can't recognize that your most loyal fans are the ones who buy plain ol' season tickets despite they fact that they really can't afford them at $300 each, let alone $25,000?

Philip Bowman 10 years, 6 months ago

I wouldn't be able to prove it but don't you suspect Perkins is secretly hoping for a Mizzou win on Saturday? It would give him a better excuse to fire Mangino. Sure, it would cost KU 6 million, but hey its only money and isn't even his.

The only way out of this mess for KU is for Perkins to announce the investigation has determined Mangino is not a monster after all and will stay on as head coach. Barring that KU is in for years of miserable football. Thanks Lew.

Maracas 10 years, 6 months ago

The economy is circling the bowl, the football team is taking a nose dive, and they want to sell the Gridiron Club as something just for the loyal fans. You aren't a loyal fan if you don't buy into their questionable scheme. Yeah, right. That idea really worked out well for Carl Peterson when he indicated fans weren't "true fans" if they didn't buy Chiefs' season tickets. That went well for him. Now KU is borrowing from that knuckleheaded idea.

FlaHawk 10 years, 6 months ago

I don't see where this can fly in a down economy and KU in a down FB season (again). Lew is competing with Pres Obama for the rich folks tax dollars. I don't see KU beating out the US Governament for tax $$$.

This Gridiron Club idea should have been hatched in2007 or even 2008 with the promise of 20009.

Now the FB program is up in the air and no prognosticator can predict which way the winds will blow in 2010 and beyond!

kuhawksr1 10 years, 6 months ago

I think it may be time to begin investigating the athletic department. Let's not stop at HCMM. Looks to me these good 'ole boys are out of touch.

KU 10 years, 6 months ago

I usually don't complain about the writing style, but what a skewed article. At least explain the financing plan--in terms of how much it would cost me per year to join the Gridiron Club--so I can decide for myself whether it's a bad idea. I don't need to assume just because Joe B Jones thinks it's a bad deal for him it's a bad deal for everyone.

Bill Kackley 10 years, 6 months ago


Bill Kackley 10 years, 6 months ago

JAKSHUMAN I totally agree with you. Lew doesn't understand that we people who are far from rich, making under $50,000 per year, paying $600 for a pair of tickets, $300 to the Williams fund, $800 for traveling expenses are the truely loyal fans. $$$ don't equal loyality

milwaukeeJAYHAWK 10 years, 6 months ago

Yeah. Truly loyal fans (i.e.....the unclean masses that show up rain or shine) are the ones that need to be targeted. Heck, we're the ones that fill the stadium.

Jacobpaul81 10 years, 6 months ago

As long as Lew Perkins is an employee of the University of Kansas, I'm not donating a dime.

djgratt59 10 years, 6 months ago

If you have to ask how much it will cost, sorry you can't afford it. :)

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