How museum financing would work

March 31, 2000|By BRENDAN KIRBY

To some, the notion of attracting Wall Street investors to a museum may seem strange. But a group behind a Civil War museum in downtown Hagerstown is proposing to do just that.

Richard A. Bellis, principal at Education Capital Markets in Herndon, Va., would be the point man on Wall Street financing for the Antietam Creek Coalition.

Bellis, who has overseen similar bond sales for several other museums, said it is a fairly common process.

Here's how it works:

First, the nonprofit organization must obtain a letter of credit from a large bank or other financial institution.

That would give museum backers access to the multi-billion dollar municipal bond market.

The letter of credit would guarantee investment, agreeing to pay the investors if the project did not produce sufficient revenues, Bellis said.

By selling tax-exempt bonds, Bellis said the group would offer an attractive option to risk-averse investors or those looking to diversify their portfolios. Because the income would not be taxed, he said investors will accept a lower rate of return.


The customers for such bonds are generally mutual funds and other large money managers. They are constantly looking for new investment opportunities and do not much care what the project is, Bellis said.

"This is not the individual investors," he said.

The key is convincing a financial institution to back the bonds.

Months of preparation are necessary, Bellis said. The group would have to convince an institution that the project is viable and a good risk.

It is similar, on a much smaller scale, to the process a bank goes through in determining whether to loan money to a home buyer.

"They make a regular credit decision on this," he said.

The Antietam Creek Coalition hopes to raise $13 million of the estimated $46 million it would cost to build an 80,000-square-foot Civil War museum in Hagerstown.

Bellis conceded that getting a letter of credit is more difficult for an idea than for an established museum. But he said bond sales have been used to finance the new American Airlines Flight Museum and to pay for a massive expansion of the Chicago Children's Museum.

"It's obviously not a slam dunk," he said. "(But) once we have a letter of credit, billions and billions and billions of dollars are being invested this way today," he said.

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