On Friday, Nov. 13, New College of Florida will ask the state’s board of governors to approve up to $47.5 million in lending for both the USF-acquired dormitory building and a refinance of the college’s existing debt, in a deal that goes beyond what’s typically allowed in the state university system.
It includes interest-only payments up front, which double in the next several years, plus up to $7.5 million in aid from a private investor that New College has declined to name.
“The investor information will be made public in the next few weeks once the finalized loan agreement is available,” said deputy chief of staff Virginia Zimmerman.
New College President Richard Corcoran told his board of trustees on Nov. 3 that the value of the 32-acre USF Sarasota-Manatee campus New College acquired as part of the Florida state budget passed in 2026 “is somewhere between 200 and 250 million dollars.”
“It's also turnkey ready. We immediately moved into existing everything: classrooms, offices, and all we had to do to finalize the deal,” he said.
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“To finalize it, we had to take over the $28.5 million that was left on dormitory part… which is small in the scheme of things,” Corcoran added.
Below are the key provisions of the plan, with analysis from Eric Croak, an Ohio-based financial planner with no affiliation to New College; Nathan Allen, a former top-ranking official at New College; and the director of Florida’s Division of Bond Finance J. Ben Watkins III, who published a Nov. 4 memo on the deal that can be found in the Board of Governors' documents.
Debt structure
The proposed debt total of up to $47.5 million includes $28.5 million outstanding USF debt associated with Atala Hall, and a refinance of some $15.8 million of existing debt obligations at New College, incurred in part by building other dorms years ago. The total of the Atala Hall debt and older debt is about $44.3 million.
The entire package has to be refinanced -- or paid off in full -- in 2032.
The private lender’s loan is due in 10 years (2036). The remainder of New College’s pre-existing debt may be refinanced at a tax-exempt rate in 2032, which could lead to some savings.
The Atala Hall portion is due in 2056 – by which time the total debt payments on the $28.5 million principal borrowed will include $39.6 million in interest, for an overall cost of $68 million, according to a debt table published by New College.
According to USF’s communications department, the total debt, including projected interest payments, when USF had the bill was about $53 million.
'Debt bomb'?
“The deal structure creates a debt bomb and kicks it down the road,” warned former New College vice president Nathan Allen in a Substack post on Tuesday.
Allen pointed to both tranches of debt, old and new, being refinanced at a “substantially higher interest rate than the college was paying.”
“In total cost, the new debt adds about $72 million to the current debt,” Allen wrote, referring to New College’s existing debt of $15.8 million.
By the end of the 30-year finance term, the college will have paid a total of $89.6 million in housing system service, according to New College’s debt schedule.
“This potpourri of desperation has all the sound judgment of financing a diamond engagement ring from a Rent-A-Center,” Allen wrote, blasting “interest-only payments” and “insufficient income to make those payments.”
In a memo attached to the Board of Governors’ agenda item on Nov. 4, the director of Florida’s Division of Bond Finance, J. Ben Watkins III, pointed to “uncertainty” in the deal.
“As a small liberal arts college in transition with a limited operating history, New College does not have a credit rating or access to the public markets,” Watkins wrote.
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“The financial viability of the financing is largely dependent on the continued success of New College, which has benefitted from extraordinary financial support from the legislature,” Watkins added.
Income to debt?
A New College board of trustees meeting earlier this month focused on the debt service coverage ratio of 1.1, which trustees framed as a positive sign.
“For every $1.00 of debt service the housing system is expected to generate $1.10. That’s a 10% buffer on dorm revenue,” said Eric Croak, a certified financial planner and president of Ohio-based fiduciary financial firm Croak Capital.
“That buffer can be wiped out very quickly with lower occupancy or a surprise repair,” Croak added. The state of Florida’s guideline is 1.2.
New College acknowledged in its financial documents that “operating income won't quite cover the debt service until 2037. The plan is therefore entirely reliant on the forecasts holding up over the next 10 years,” said Croak.
Allen pointed out New College “claims its enrollment will grow to 1,360 students by 2029,” which would mean adding about 500 students in three years, “something it has never done before.”
Even if it does add those students, it is “irrelevant to the debt deal because acquiring USF Sarasota-Manatee adds only 14 beds to New College’s current supply. That’s because New College was already housing students in USF Sarasota-Manatee dorms,” Allen added.
The private investor
Whoever the investor is, the person “will naturally charge a premium,” said Croak. “That's the structure you see quite commonly in private real estate and less so in the case of public universities,” he added.
The investor’s rate of interest is 6.19%, compared to 5.4% on the rest of the old debt refinance. The rate on the Atala Hall debt is 6.84%. These rates could change when the deal is closed.
Allowing a private investor to help secure a loan goes against Florida guidelines for the state university system.
“The fact that the investor isn’t named makes it very difficult for anyone looking at the deal from the outside to assess that element of it,” Croak said.
According to Watkins, the private individual helps limit “the risk of adverse consequences of a default and workout if the occupancy, housing revenues or operating performance are insufficient to service the debt.”
However, Watkins also noted in his memo to the Board of Governors, the private investor, along with use of reserves from the New College Foundation and a plan to raise housing rates: “strengthen but do not eliminate the credit risk of the financing.”
The 2032 refinance
The entire plan must be refinanced in 2032, and what remains of New College’s older debt of about $16 million could be tax-exempt at that point.
But the short-term nature of the deal raises questions.
“The terms of that refinance will be dependent upon interest rates and the college’s financial position at that time and neither of those is known at present,” said Croak.
For Watkins, “the mandatory six-year put on the financing creates uncertainty in the medium term because of the refinancing or rollover risk associated with the mandatory tender.”
ALSO READ: Emails detail plans to ‘transfer’ USF Sarasota-Manatee campus to New College
The appeal for the BOG to allow some deviations from standard guidelines for state universities includes the issuing part of the debt “on a taxable basis, a senior and subordinate lien structure, deferral of principal, and projected debt service coverage below 1.20x,” said Watkins.
These “appear reasonably necessary to satisfy the statutory conditions mandated by the legislature to effectuate the transfer of the USF Sarasota/Manatee campus to New College,” he wrote.
Bottom line?
For Croak, positives include “the fact that a bank is willing to lend $40 million,” which he described as “a clear indicator that they found the housing revenue projections credible.”
One way of thinking of the deal is if a family wanted to buy a house “on an interest-only mortgage, having a second loan to cover the gap and a plan to refinance in six years. That can work but it all hinges on things going to plan,” said Croak.
Allen said taking on the new debt means “New College could potentially rank in the top 1% of all small colleges for debt-to-revenue ratio.”
“New College is the most heavily subsidized state college in America. (In fact, no other state college even comes close in the proportion of direct government funding it receives.).” Allen wrote.
He said the state could save millions by using a system of “pooled credit so every college has access to the good credit of the entire system.”
If the Board of Governors approves New College’s plan, “reckless behavior would be approved, and, in the final analysis, Florida taxpayers will have to pick up the pieces,” Allen said.
