BALTIMORE, Maryland. November 26, 2020 (Baltimore Business Journal) — Morgan State University has earned state clearance to close on a $70 million loan deal to support campus construction projects and debt refinancing. The Baltimore university is seeking the funds to help finance a student housing and dining facility construction project on campus. In addition, the school is taking advantage of the opportunity to refinance some of its other outstanding debt at a lower interest rate.
The plan to secure the loan was recently presented to and cleared by state officials with the Maryland Board of Public Works (BPW). Sidney Evans, vice president of finance and management at Morgan State, said about $32 million of the $70 million loan total will go toward funding a new 670-bed student housing project and 30,000-square-foot dining facility, deemed the Thurgood Marshall Project. It will be the first new student housing facility to be added to campus in almost 20 years.
“When we were looking at financing options, we needed to find an option that met the needs of our board approved debt policy, would be affordable for the university and would take advantage of extremely low interest rates,” Evans said. To that end, Morgan State is borrowing the money from Georgia-based Rice Capital Access Program LLC, which is the the designated bond authority for the U.S. Department of Education’s Historically Black College and University (HBCU) Capital Financing Program, Evans said.
The loan program was established to provide federal assistance and low-cost capital for HBCUs like Morgan State. Rice Capital has facilitated more than 50 loans for higher education institutions through the program, to the tune of nearly $2 billion, according to its website. Evans explained that working with Rice Capital allowed Morgan State access to particularly a low interest rate on the new loan — an expected rate of about 1.3%. The loan deal is expected to close Thursday, Evans said.
Morgan State has also entered into a public-private partnership with Maryland Economic Development Corp. (MEDCO) to develop the Thurgood Marshall Project. Through the partnership deal, Evans said MEDCO will help subsidize the cost to build the facilities, so that the school will not have to significantly increase housing prices for students.
While considering the deal with Rice Capital, Evans said Morgan State also decided to replace some other debt obligations. The remaining $38 million of the $70 million loan will be used to refinance existing debt at the much lower interest rates. The entire loan term is up to 30 years. Morgan State will refinance about $18 million in 2012 tax-exempt bonds, as well as an existing $25 million outstanding loan debt — of which about $8.4 million is currently outstanding — which was acquired to facilitate construction of a new public safety building on campus.
Evans noted Morgan State expects to see just under $3 million in savings overall from this deal, which will allow the school to have “more financial flexibility for the future.” He added that Morgan State has already discussed the new financing plan with Standard & Poor’s Global Ratings, which recently reaffirmed the university’s A+ bond rating.