Grand Canyon University (GCU) has successfully completed a $1.2 billion bond offering to refinance the remaining balance of the secured note that was issued in 2018 as part of the purchase of the University related to its transition back to 501(c)(3) tax-exempt nonprofit status and additional loans made to acquire capital assets after the transaction closed. The $1.2 billion GCU refinancing transaction marks the largest real estate deal in the history of Arizona.
The initial interest-only note, which was due in 2025, allowed GCU to purchase all of the tangible and intangible assets comprising the University’s campus from Grand Canyon Education (GCE). Refinancing the note early allows GCU to take advantage of today’s lower interest rates and realize substantial interest cost savings.
“The scope of this refinancing is pretty significant in the higher education bond market and speaks to GCU’s solid financial performance in the three years since reverting to our historical nonprofit status,” GCU President Brian Mueller said. “This will help in our efforts to continue to freeze tuition costs on campus, which we have done for 14 straight years, while also continuing to invest in academic infrastructure in order to keep up with the growth of the University.”
GCU’s financial model has allowed it to invest $1.6 billion into academic infrastructure over the past decade without relying on state taxpayer subsidies or passing those costs on to students with tuition increases on its Phoenix campus. GCU’s 270-acre campus has been rated as high as No. 7 in the country by niche.com. Affordable tuition levels have also resulted in graduates who take on less debt than the average at public universities with student loan default rates well below the national average.
John Augustine, who leads the Higher Education and Academic Medical Center sectors in the US Municipal Finance team at Barclays, said the offering generated significant interest from close to 30 investors, including major insurance companies, bond funds and investment managers. Barclays served as sole book-running manager on the offering.
“Grand Canyon University’s mission to make private, Christian education affordable and accessible to high achieving students, regardless of economic status, was received well by investors,” Augustine said. “The University now joins a very select group of not-for-profit and public universities who have successfully closed a bond offering of this magnitude.”
GCU Board of Trustees Chairman Will Gonzalez said the bond offering is a significant milestone for the University.
“As both an alum of GCU and the Chairman of the Board of Trustees, I couldn’t be more proud of the path the University has taken to benefit not only our students and families, but the surrounding community as well. This bond offering positions the University well for the future.”
In the three years since GCU returned to its nonprofit status, audited financial results clearly show that the University is thriving:
• From the closing of the acquisition on July 1, 2018 through June 30, 2021, GCU generated $341 million in cash from operations.
• GCU increased its net assets to $443 million as of June 30, 2021.
• GCU closed fiscal year 2021 with over $407 million cash on hand.
• From the closing of the acquisition on July 1, 2018 through June 30, 2021, the University reinvested $368 million in new educational infrastructure.
The refinancing was arranged by Colliers International Mortgage Advisory in Phoenix, Arizona, led by Managing Director of the Southwest Region Robert Kline and Todd Noel, National Director of Education Services, who noted that the blending of GCU’s industry-leading higher education platform, along with its sizable real estate campus, made this financing extremely attractive to both bond buyers and lenders.
“To my knowledge, this is the largest real estate related financing in the State of Arizona and could not have been finalized without GCU’s innovative approach to higher education,” Kline said. “Due to the size of financing request, the entire team set up this unique finance structure by utilizing the bond markets with more room to incorporate future tax exempt and conventional financing to support GCU’s continued growth.”
GCU was represented in the bond offering by Ballard Spahr LLP.