University will also refinance debt at a lower cost of capital.
The George Washington University will issue $795 million in new bonds to fund residence hall projects, provide additional support for academic priorities and refinance debt, the university announced Monday.
Issuing bonds is a way for the university to raise money. It allows universities or companies to receive cash in exchange for a commitment to pay back the funds plus interest to investors.
The university has always managed its debt portfolio in a comprehensive and strategic manner, with particular focus on managing risk and cost of capital, which support the liquidity needs of the institution. The current bond issue is part of GW’s overall financial strategy to monetize incremental investment real estate cash flow, invest in projects that are important to the university and refinance debt with extended maturities and lower cost of capital, saving money over time.
The university will use approximately $100 million for residence hall projects, including construction costs associated with the new residence hall and major renovations of Thurston Hall, and $150 million to enhance the university's academic mission.
“We are committed to enhancing the student experience, and the funds from this bond issue will allow us to have a direct, positive impact on a critical piece of that experience: our residence halls,” President Thomas LeBlanc said. “We also will have the opportunity to make bold investments that will support our five university strategic initiatives.”
The bond issue also gives the university the ability to refinance at lower rates and extend maturities for $521 million of existing debt whose current maturities are fewer than six years.
“Given the recent rise in short-term interest rates and the relative stability of long-term interest rates, this is an exceptional opportunity to refinance debt,” said Lou Katz, executive vice president and treasurer.
Through this bond issue, the university has maintained its A1 and A+ ratings with stable outlooks from Moody’s and Standard & Poor’s. The university’s Board of Trustees approved the bond issue and believes it to be a prudent and smart financial move.
While the $250 million of new debt from the bond issue will increase GW’s debt payments, it will be offset by increased proceeds from the university’s real estate investments and revenue associated with GW’s residential life system.