Taking advantage of historically low interest rates, Tufts borrows to fund construction of undergraduate on-campus residence hall and other projects
Tufts University today completed a $250 million bond offering, the proceeds of which will be used to fund the construction of a high density, on-campus residence hall for undergraduate students on its Medford/Somerville campus, invest in dining infrastructure and expansion of dining capacity, and other capital projects that will strategically position the university for the future.
Taking advantage of interest rates that are near historic lows, the university also will be able to cost-effectively expand and renovate academic and research facilities and make progress on carbon reduction goals through infrastructure improvements.
The new residence hall is part of the university’s plan to increase the percentage of students living on campus. The exact location and the number of beds in the residence hall have not been finalized. The university will conduct a study to determine the best on-campus location and the optimal number of residents.
The 30-year taxable bonds were issued at a fixed rate of 3.099 percent.
“We are in a strong financial position and the current low rates make it an ideal time to secure financing for our 10-year capital plan that will advance our mission and further enhance the experience of all community members,” said Michael Howard, Tufts’ executive vice president.
As the bond was offered, the university received financial ratings of AA- and Aa3, both with a stable outlook, from Standard & Poor’s and Moody’s, respectively. Both agencies noted the university’s stable operating performance, solid management, and national and international reputation for excellence.
“The attractiveness of our offering to the market is a clear sign of confidence in the university’s financial management and an acknowledgment of its outstanding academic and research stature,” said James Hurley, vice president for finance and treasurer.
Bond financing is a type of long-term borrowing commonly used by universities to fund long-term infrastructure investments. Investors, which include individuals, investment managers, insurance companies and others, purchase the bonds and in return receive periodic interest payments and, at the completion of the term, repayment of the original principal.
The Series 2021A bonds are unsecured general obligations of the university. Barclays was the lead underwriter for the university, with J. P. Morgan also participating.
“We are pleased to have partnered with Tufts on this transaction which attracted a significant number of high-quality investors,” said John Augustine, head of the Higher Education Municipals team at Barclays. “This in turn allowed the university to lock in historically low, 30-year financing rates for their strategic capital needs.”