📡 Private equity coming to college football (Updated) - B1G in discussions for months

[SEC Sports]

Private equity coming to college football (Updated)

After spending the past few years circling from above, the private equity industry is at last swooping in to take a bite out of the college athletics industry.Sports Business Journ

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After spending the past few years circling from above, the private equity industry is at last swooping in to take a bite out of the college athletics industry.

Sports Business Journal reported Monday that the firm Elevate will create a $500 million fund backed by the private equity firm Velocity Capital Management and the Texas Permanent School Fund to invest in college athletics programs, and that the new venture has already closed deals with two Power 4 schools. The schools were not disclosed, and the number of Power 4 institutions to strike deals is expected to grow to as many as eight by the beginning of the football season.

Typically, private equity firms inject capital in exchange for an ownership stake in a company, often stripping off unprofitable sectors of the firm before turning around and selling the company for profit. The folks the College Investment Initiative say this is different. Per SBJ, the CII will not take an equity stake in the athletics department it invests in, and will instead recoup its money by taking a percentage of the new revenue its investments create.

One of the needs that we’ve seen that’s gone unfulfilled is the need for project-based or bridge capital that a school might not be able to achieve within the university debt structure or via bonds,” one executive told SBJ. “We’re looking more to provide debt-type capital or credit, [and] that ultimately we can help a school monetize that investment and that return on capital more than anyone else.”

The move is viewed as a downstream effect of the House settlement, which was finally approved Friday night. Up until about 15 minutes ago, athletics departments fundraised to build and renovate facilities, since that money could not go to players. Now, obviously, it can. Donors are going to be less likely to donate to renovate a locker room when they can instead contribute to acquiring players to fill that locker room, but the need to build and/or improve facilities will still exist, which is where the CII comes in.

“The sheer amount of investment in infrastructure on these projects is astounding,” another executive said. “If you just forecast over the next call it five years … you’re talking at the lowest-end level, conservatively, roughly $10 billion of infrastructure projects that I would consider publicly or at least quietly being talked about on these campuses. I truly think that the winning combination is a service provider that has access to capital where deemed appropriate.”

The first executive said Elevate has also considered investments in conferences as well, which has been previously reported. Since conferences do not build facilities on their own, private equity would recoup its money through jersey patches, field logos, ticketing, or other revenue streams.

Read the full report here.

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Monday afternoon update: Sportico reports Penn State and UCLA are the two schools to break the seal on private equity in college athletics.
Double update: UCLA and Penn State both say they're in business with Elevate but have not taken investments from them.

 

[BamaFan334]

Oh boy, private equity gets involved it's truly all over. Boosters is one thing, but pumping hundreds of millions from a handful of firms will kill it all.

 

[OldPlayer]

Oh boy, private equity gets involved it's truly all over. Boosters is one thing, but pumping hundreds of millions from a handful of firms will kill it all.

They will want their money recouped ASAP so that only profit is generated. I would imagine that all of the deals will include minimum revenue streams.

 

[BamaFan334]

They will want their money recouped ASAP so that only profit is generated. I would imagine that all of the deals will include minimum revenue streams.

They're gonna want certain matchups, at certain times, on certain channels, with certain broadcaster talent. They'll want to see certain out of conference games, buy voting power with Playoffs etc. They will run it all to make more money.

 

[TerryP]

Boosters is one thing, but pumping hundreds of millions from a handful of firms will kill it all.

A pissed off booster that didn't recoop his NIL donations versus a PE firm that's pissed off because they aren't ...

I'll take the former.

 

[It Takes Eleven]

The idea of monetizing the value that a stadium has, sitting on a campus. Hard to get a good appraisal on that - plus, how would one leverage it as collateral? PE getting a mandated percentage or amount of future revenue. If revenues fall short, then the won't foreclose on the stadium or arena. Perhaps they would get all revenue from naming rights or something like that, I'm not sure.

"the need for project-based or bridge capital that a school might not be able to achieve within the university debt structure or via bonds." Mortgaging the future of the program to entities with no interest in the long term.

 

[RTB X Bot]

In early June, Elevate unveiled a new $500 million college sports investment fund, touting that it had already signed two university partners.

The schools’ identities were not divulged, but Elevate’s official announcement—as well as subsequent comments to various media outlets—indicated those would be revealed “soon,” perhaps within a few weeks. That has yet to occur, nearly 15 weeks later.

When Sportico published a story reporting that UCLA and Penn State, two existing Elevate partners, were the institutions being referenced, both universities firmly denied any such agreements. This week, they said nothing has changed.

Elevate, meanwhile, declined repeated requests to be interviewed for this story and would not comment about the schools it had previously claimed were part of the so-called “Collegiate Investment Initiative,” or how its fund has been marketed.

Instead, late Wednesday, Elevate chief business officer Jonathan Marks sent a statement via text, stating, “The response we’ve received has been tremendous, both from current and prospective partners.” He went on to tout the nearly 80 college athletic departments that now work with Elevate in other parts of its business.

He declined to provide further specifics.

The saga underscores the sensitivity and volatility surrounding the Wall Street financing models now creeping into college sports. Private equity and private credit, once unthinkable, have suddenly become both intriguing and contentious prospects for athletic departments. That mix has made schools especially wary of being identified as the first to take the PE plunge.

It is also a reminder for news outlets, like Sportico, to heighten our skepticism and vigilance about supposed agreements emanating from this uncharted territory.

It’s possible that Elevate misrepresented the status of its fund from the outset, or at least overstated its progress in signing deals it believed to be nearly complete. Even under a more generous reading—in which two entirely different schools had signed on to the initiative as of June 9, but, for some reason, still have not been announced—the episode undermines the company’s decision to hype the fund so aggressively, on the apparent assumption that schools would want to be publicly associated with it.

To be clear, there’s been institutional capital in college sports for years. Learfield, for example, has been private equity-backed since 2011, when Shamrock Capital purchased a majority stake, and it has multimedia rights arrangements with schools that look a lot like institutional deals being floated now. Learfield often guarantees upfront money in exchange for cash or revenue sharing on the back end. But while that money is tied directly to services delivered, there’s no “fund” or “credit” terminology associated with the agreements.

Elevate’s pair of purported deals, however, hinted at something very different.

Mum’s the Word​

On the morning of June 9, Elevate announced the launch of its College Investment Initiative, aimed at providing upfront financing to athletic departments for revenue-generating projects like stadium construction or media rights development. Elevate, which consults widely across pro and college sports, said the vehicle was fully funded by private equity firm Velocity Capital Management and the Texas Permanent School Fund (TPSF), a special-purpose government corporation that oversees a nearly $60 billion public school endowment.

As part of the rollout, Elevate sent an email to its existing school partners that there were “two transactions already agreed upon, with public announcements coming soon,” according to documents obtained via open records requests. That claim was echoed and expanded upon by Marks, who told multiple media outlets that they were eight-figure deals involving two Power 4 universities, marking the first instance of a university directly securing institutional capital for athletics.

This was big news in an evolving saga of how college athletics departments, facing seismic financial change, would manage to cope with growing costs like revenue-sharing with athletes. Elevate’s announcement appeared to be a historic turning point.

Sportico, citing multiple sources familiar with the situation, reported later that same day that the two universities referenced were Penn State and UCLA. After the story was published, both schools quickly issued denials, suggesting that not only were they not involved in the fund, but had just become aware of its existence. Sportico updated the story accordingly.

In the frenetic aftermath, Elevate moved to ameliorate the fallout, which it laid at the feet of media misreporting.

At 8:35 p.m. PT on June 9, Al Guido, Elevate’s chairman and CEO, sent an email to UCLA athletic director Martin Jarmond writing to “formally address the media coverage earlier today.”

“To our knowledge, no one at Elevate shared this information, either on or off-the-record,” Guido wrote in the email, obtained through a public records request. “The coverage was neither coordinated with nor approved by our team, and we had no prior knowledge of its release.”

Prior to publication, however, Sportico communicated with both Marks and an Elevate spokesperson to address whether UCLA and Penn State were the two universities in question. Neither agreed to comment or attempted to correct the reporting.

For its part, UCLA also failed to bring clarity to the situation—at least before the story was published.

On June 9, at 11:14 a.m. PT, a Sportico reporter emailed two UCLA communications officials—senior associate AD Liza David and Mary Osako, the school’s vice chancellor for strategic communications, to lay out our reporting and plans to go up shortly with a story. Within seconds, according to public records obtained by Sportico, David routed the query to Daniel Cruz, UCLA’s deputy AD and chief revenue officer.

David followed up 15 minutes later with a text message: “Do you want me to respond to Sportico and refer him to you, or just ignore? He has emailed me three times today.”

Shortly thereafter, David emailed Sportico: “We have no information for you on this.”

After the Fact​

UCLA issued its denial only after Sportico’s story was published, with Martin Jarmond saying that while the Bruins were “exploring the opportunity to expand the partnership [with Elevate] … private equity funding is not involved.”

Likewise, Penn State AD Pat Kraft dismissed any suggestion that his school had any “affiliation or involvement with any private equity firm or fund.” Subsequent records requests by Sportico and other media outlets, for new or amended contracts between UCLA and Elevate, turned up no records. (Penn State, which is largely exempt from Pennsylvania’s Right to Know Law, was so committed to concealing its Elevate deal that a member of its board of regents struggled to access it.)

Reached by email this week, David insisted that there was no new movement between UCLA and the Elevate fund. “Elevate is our ticketing partner and only our ticketing partner,” she said.

Meanwhile, Kristina Petersen, Penn State’s senior associate AD for communications, said, “nothing has changed since our last response in June.”

In the months since the announcement, Elevate has worked to recalibrate expectations around when—–or even if—it would reveal the fund’s school partners, while simultaneously reaffirming its claim that two of them were signed, sealed and delivered as of early June.

“The fund has been deployed,” Marks said in a July 22 episode of the Sports Business Conversations Podcast. “Unfortunately, right now, we are not able to name those schools … we’ve had some success, and we will continue to be able to, and I do believe we will be able to announce some, if not all, of those partners in the future.”

Earlier this month, while appearing on a panel at Bloomberg’s “Power Players” event, Marks said, “When Elevate announced our college investment initiative, we had two deals that were already done.”

While that remains an unverified claim, Sportico has confirmed that the Texas Permanent School Fund has invested in at least one related entity, according to documents obtained via public records request. In January, the TPSF fulfilled a $25 million confiding commitment to Velocity Elevate LP.

This follows a $200 million commitment that had been deployed as of March. Whether that earlier fund is directly involved in the Collegiate Investment Initiative—and, if so, to what extent—remains anyone’s guess.

 

[RTB X Bot]