Regarding program valuations: these 'valuations" of these private not for profit programs by Forturne have always seemed kind of bogus.
They seem liike saying that Goodwill is more valuable than Salvation Army. It appears problematic to try to think about these organizations in capitalized business valuation terms.
Hey, Fortune, what is the capitalized value of Russia? USA? The Crown of Great Britain? How about Henry and Claire’s foundation? How about Bill Self’s Assists Foundation? No, let’s just focus in on Henry and Claire’s foundation. Then let’s compare that with the Rockefeller’s foundations, and the Mellons’ foundations and talk about how much they are worth in capitalized value.
Athletic departments are reputedly particularly idiosyncratic in their book keeping and creative donation activities. What is the impact on capitalized value of an athletic department that has the donations in house, versus those that maintain a fire walled foundation? What is the value impact of a private oligarch being willing to donate mega bucks when he dies 15 years out in exchange for a lot of “influence” now, when compared to another school where the private oligarch writes the check now, not later. How do those differences wash out in a capitalized value? How do you account for the difference between an arena on university land owned by the university, an arena owned by an athletic department built on university land, it does not have to pay for, an arena built and owned by a private for profit entity that leases it back to the university, and each option already mentioned in which their is a 20 year ground lease on one, and 50 year ground lease on another, and donated land without a lease on another.
Details, details.
The valuation problem is not so much that athletic departments are not-for-profit, but rather that there is no standardized way of accounting for all the bizarre ways that donors can give money in pursuit of tax deductions and influence.
You don’t have to do a capitalized business valuation to know that a larger arena triggers more revenues than a smaller one, assuming they both have the same percentage of corporate boxes and regular seats. Hey, speaking of which, how do you compare KU AD with Allen Field House that has no corporate boxes with some school that has some.
The most Fortune can probably meaningfully say is that a school has some annual revenues, some annual expenses, some intermittent costs, and some donations with all kinds of weird structures and some kind of infrastructure sunk costs, and most of all of these probably have inconsistencies in accounting criteria from school to school.
And since these athletic departments so far are not sold that I know of, any capitalization, or discount rate, is made up. Since it is made up, then any capitalization, or discounte rate could logically be justified and each one would justify a different cash value with a sharply different magnitude.
But of course presenting a metaphysical value instead of presenting all the boring, disaggregated accounting lines and footnoting all of the ways in which each line item varies university to university, well, that would put people to sleep and not promote the name Fortune in the sports world.
But what do I know? I am just a laymen. Feel free to school me on state of the art of not for profit business valuation.