The pressure is mounting for Saint Augustine's University to balance its finances. The private HBCU has $32 million in debt, an ongoing battle with the IRS, and an impending accreditation appeal hearing scheduled for the end of February.
Today marks a self-imposed deadline that university leaders said they needed to secure a deal that would be crucial to the school's survival. Under the agreement, the private HBCU planned to lease all 103 acres of its property to a developer called 50 Plus 1 Sports.
But the "lifeline" land deal can't go through unless the project is approved by the state. Since SAU is a nonprofit, the state Attorney General's Office has the power to ensure its "assets are properly managed and spent," according to the National Association of Attorneys General.
On Jan. 27., the Attorney General's Office rejected the deal, noting several concerns with the proposal in a letter to the university.
"We have a duty to ensure that nonprofit assets within North Carolina are protected, and that extends to helping our HBCUs thrive and give their students the education that will help them succeed," wrote Kunal Choksi, a Senior Deputy Attorney General. "We, like you, want to ensure that SAU can continue to operate in the short term and succeed in the long term."
According to press releases in which it partially outlined the deal, Saint Augustine's would lease its land to 50 Plus 1 Sports for 99 years.
In return, 50 Plus 1 Sports would pay the HBCU a $70 million "upfront investment" to develop on its land. The company describes itself as a sports stadium and mixed-use development firm. In a , 50 Plus 1 Sports Managing Partner Monti Valrie said the company hadn't finalized the project, but plans include "housing, food, and beverage."
The land agreement also includes a revenue-sharing component. Saint Augustine's University previously stated it will receive up to 40% of revenue generated from the project.
The school hasn't released other details about the partnership. When announcing the collaboration last year, the HBCU said it would be sharing development plans and project costs with the public in December. That public disclosure has not yet happened.
According to the Attorney General's Office, Saint Augustine's University has also been stingy sharing details with the state, which has been requesting additional information about the project since December.
"To provide assurance that SAU鈥檚 charitable assets do not end up in the hands of whomever finances 50+ (1 Sports)," Choksi wrote. "Our Office requires sufficient proof that 50+ (1 Sports) has the financial ability to comply with its obligations to SAU and avoid default with its financiers."
瓜神app obtained several legal documents related to SAU's deal with 50 Plus 1 Sports. The agreement indicates that 50 Plus 1 Sports will take out a mortgage against the land it leases from Saint Augustine's (the entire 103-acre campus). The company can then use those funds to cover the $70 million upfront payment.
The lease also grants 50 Plus 1 Sports a "" to "finance the purchase price." This means that if 50 Plus 1 Sports defaults on loans or mortgages it takes out to pay for the lease, Saint Augustine's land and properties can be sold off to pay for it.
In addition, 50 Plus 1 Sports plans to rent a portion of SAU's land back to the university. If Saint Augustine's defaults on this sublease, 50 Plus 1 Sports can take possession of "educational sites" to make up for the HBCU's missed rent. It's unclear how much land 50 Plus 1 Sports plans to sublease out to SAU.
The lease permits a wide range of development opportunities for 50 Plus 1 Sports 鈥� from hotels and residential apartments to retail, restaurant, and bar space. The company has the final say in what's developed on the land, although it is required to "consult" with Saint Augustine's.
In the Jan. 27 letter, Choksi said SAU didn't provide any documentation showing how the project will be financed, , or the company's financial audits.
The Attorney General's Office also has several other "chief areas of serious concern," according to the letter. This includes proof of the university's tax-exempt status and details on how the deal will serve SAU's educational mission.
Choksi also wrote the agreement is not a fair deal given SAU's appraised property value. He said the HBCU's property is valued at $198 million, but 50 Plus 1 Sports' proposed upfront payment ranges between $20 million to $70 million.
"That large of a gap raises red flags about the defensibility of the deal," Choksi wrote. "Absent further information or justification from the parties, to ensure that SAU鈥檚 assets remain dedicated to a charitable purpose, the deal should be renegotiated to, among other things, reflect the true value of the property being transferred."
In response to the letter, SAU released a statement condemning the Attorney General's decision. The HBCU said it requested a meeting to address the Office's concerns and accused it of meeting with a local lending advocate, Martin Eakes, instead.
"We are alarmed that the contents of the Attorney General鈥檚 letter to SAU mirror the comments in printed media spoken by Mr. Eakes from Self-Help Credit Union," SAU said in the press release. "Based on our correspondence with the Attorney General鈥檚 Office, our proposal was shared with Mr. Eakes without our consent before we received a response. Therefore, we suspect that the Attorney General鈥檚 Office used Mr. Eakes鈥� counsel and input to subsequently influence their decision."
In a statement to 瓜神app, media relations representative Jenny Shields said Self-Help did its own analysis of 50 Plus 1 Sports proposal, but did not share it with any staff at the state Attorney General's Office.
"We did not see nor know the results of the AG review prior to seeing news reports and the release of the AG letter," Shields wrote.
"Instead of creating fiction about anyone who disagrees, let鈥檚 find sensible solutions," Shields continued. "The fact remains the lease deal proposed is very unfavorable to SAU鈥檚 continued financial health. The risk of losing the entire campus under this proposal is very high. Anybody who reads and reviews the proposal would reach the same conclusion."
If the Attorney General's Office does not approve the 50 Plus 1 Sports deal, it could be a significant setback for Saint Augustine's. The HBCU is facing $32 million in debt, even after cutting half of its workforce and signing a multi-million dollar loan agreement. Some advocates have described the loan as "predatory" and worry it could lead to even more debt for the HBCU.
In the upcoming weeks, Saint Augustine's will continue its two-year accreditation fight. Last month, the HBCU's accreditation agency 鈥� The Southern Association of Colleges and Schools Commission on Colleges 鈥� voted to revoke its accreditation and remove the university from its membership.
The vote came after the HBCU repeatedly failed several of SACSCOC's standards, most having to do with being financially stable.
The university plans to appeal the decision at a hearing in late February. This would be the second time the university appealed a SACSCOC decision to remove its accreditation.
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