The Kimbell Art Foundation will sell $60.4 million in bonds to help fund construction of the Renzo Piano-designed expansion of the Kimbell Art Museum in Fort Worth.
The bonds, expected to hit the market Thursday, will be issued through the Orchard Cultural Education Facilities Finance Corp., based in Orchard (population 477), near Houston. The Kimbell foundation, not the Orchard finance corporation, is responsible for repayment.
The city of Orchard was chosen because "state law allows you to choose any facility. We knew it was cost-effective, user-friendly and they had the ability to issue bonds," said Brenda Cline, the Kimbell's chief financial officer.
This is the first cultural project that the Orchard Cultural Education Facilities Finance Corp. has handled. It has been in business since 2008.
There is a similar entity, the Tarrant County Cultural Education Facilities Finance Corp., but it was not contacted by the Kimbell, an office representative said.
Officials will break ground this year on the Kimbell's new 85,000-square-foot building, which is scheduled to be completed by 2013. It will be used to house traveling exhibitions so the museum's acclaimed permanent collection can remain on view. The new facility will include three additional galleries, an auditorium, an underground parking garage and office space.
There are two classes of bonds, one taxable and one tax-exempt, and both received investment-grade ratings from two major agencies: Standard & Poor's and Fitch Ratings. Fitch gave the bonds a rating of AA, and S&P graded them just a notch lower at AA-minus.
The agencies cited the Kimbell Foundation's strong finances in support of the ratings.
Fitch said the rating is supported by a "track record of strongly positive operating performance," including what it called "a deep and stable stream of oil and gas royalties" along with "highly experienced management." S&P pointed to plenty of cash, "consistently balanced financial operations" and its niche in Dallas-Fort Worth as an institution of "national and international recognition."
According to the Kimbell's disclosure documents filed with regulators, as of March 31 the foundation's investment portfolio totaled $398.6 million. Investments grew in the first quarter by $9.5 million and distributed more than $3.5 million for foundation and museum operations.
Last year, the foundation reported nearly $20.8 million in investment revenue, which was down considerably from prior years. Museum contributions, memberships, ticket sales and other activities contributed nearly $3 million.
Revenues topped expenses by $4.2 million.
The bonds will be available in $5,000 increments through J.P. Morgan and Bank of Texas. There are $12.67 million in tax-exempt bonds series 2010A, and $47.77 million in taxable bonds series 2010B.
Series A bonds will mature in 2039, series B in 2034.