Report: FSU working with JPMorgan Chase to raise institutional athletic department funds

According to a new report from sports business site Sportico, Florida State University is working with JPMorgan Chase to explore ways of raising the athletic department’s equity — including sourcing private funding.

From the site:

PE giant Sixth Street is in advanced talks to lead a possible investment, said the people, who were granted anonymity because the specifics are private. Institutional money has poured into professional sports in recent years, from the NBA and global soccer to F1 and golf, but this would break new ground by entering the multibillion-dollar world of college athletic departments.

The school is considering a structure similar to many of those pro sports investments, where commercial rights are rolled into a new company, the private equity fund invests in that entity, and then recoups its money via future media/sponsorship revenue. That’s how Silver Lake structured its investment into the New Zealand All Blacks rugby team, and how CVC organized its $2.2 billion Spanish soccer deal with LaLiga.

It’s unclear exactly which FSU entity is most involved in the process. Florida law allows its public universities to organize their athletic departments as separate nonprofits, and there is a complex web of entities that includes the school itself, its booster organization and these nonprofit athletic setups. Many public schools also have strict rules around transparent, competitive bidding for university contracts, and certain deal structures would need to be avoided so as not to jeopardize a university’s tax-exempt status.

This comes just days after Florida State publically voiced its frustrations with the ACC, who in the school’s view has failed to adequately adapt its financial model for the modern world of major college athletics.

During a board of trustees meeting on Wednedsay, Florida State University President Richard McCollugh said that, barring drastic changes to the way the conference distributes revenue the school will “have to at some point consider leaving the ACC:”

“We are one of the best media-valued teams in the United States. We, along with Clemson and others carry the value of the ACC — no offense to my colleagues, that’s just the number.”

“FSU helps to drive value and will drive value for any partner, but we have spent a year trying to understand how we might fix the issue. There are no easy fixes to this challenge, but a group of us have spent literally a year. We’ve explored every possible option that you can imagine. The issue at hand is what can we do to allow ourselves to be competitive in football and get what I think is the revenue we deserve?”

The key issue for FSU, as a reminder, has been the ironclad Grant of Rights (GOR) that all ACC teams re-signed in 2016. The agreement “irrevocably and exclusively grants to the conference during the term all rights necessary for the conference to perform the contractual obligations of the conference expressly set forth in the ESPN agreement,” which basically means any money a school makes from a TV broadcast belongs to the ACC until 2036.

What would it take to leave the conference? According to ESPN:

To get out of the league, Florida State would have to pay a $120 million exit fee and go to court to challenge the existing grant of rights, which gives the ACC media rights for its member schools through the length of the contract.

No school has gone to court yet to challenge the grant of rights, which exists in every Power 5 conference. Florida State, along with other schools in the ACC, has studied the contract language in the grant of rights for more a year.

In an interview with ESPN earlier Wednesday, Florida State athletic director Michael Alford said, “We have a great understanding of what opportunities there are in that document. How that document could hold us back, but also what the opportunities are. So this is going to be a discussion. We’ll keep getting legal advice. Our legal team has a good understanding of that document.”