Saint Augustine’s University and the development firm 50 Plus 1 Sports will restructure their controversial land lease deal to encompass less than half of the university’s assets, according to the NC attorney general’s office.
SAU originally planned to lease its entire 105-acre property to the Florida-based developer for an up-front fee of $70 million, INDY previously reported. 50 Plus 1 said it would build a mixed-use development on about half the land, leaving the main campus mostly undisturbed, and share some of the revenue from the project with SAU.
Since the deal involved all or a majority of the nonprofit institution’s assets, it triggered a legally-required review by the NC Department of Justice before any money could change hands. During its review of the contract, the DOJ found numerous “red flags”—namely that the deal under-valued SAU’s property by tens of millions of dollars and placed the university at risk of losing its nonprofit status. In a January letter to the university, the director of the DOJ’s consumer protection division, Kunal Choksi, suggested the DOJ was unlikely to approve the agreement.
By restructuring their lease agreement to cover less than half of SAU’s property, the university and the developer are eliminating the legal requirement for approval by the DOJ.
On Thursday, special deputy attorney general Phillip K. Woods emailed the university’s lawyer, Ted Edwards, to confirm that the AG’s Office would no longer be reviewing the original contract between SAU and 50 Plus 1, “based on SAU’s representation that it is restructuring the deal with [50 Plus 1] to involve a lease of less than 50 percent of SAU’s assets.”
It is unclear how much property SAU now plans to lease to 50 Plus 1, or how much money the developer will now pay the university upfront.
SAU and 50 Plus 1 Sports did not respond to requests for comment.
Later this month SAU, which has been plagued by debt and declining enrollment for over a year, has an appeal hearing with the Southern Association of Colleges and Schools Commission on Colleges (SACSCOC) which will determine whether the 158-year-old HBCU remains accredited. At the hearing, SAU will need to present new evidence that it has taken steps to regain financial stability, among other requirements. The accreditation battle has created a heightened sense of urgency around finalizing the deal with 50 Plus 1, which could provide a short-term financial lifeline to the embattled university.
It’s unclear whether SAU and 50 Plus 1 have finalized the terms of their new land lease deal yet, or if they will be able to do so in time for the SACSCOC hearing. Even if the parties sign a modified contract this month, several questions raised in Choksi’s letter will remain relevant, including whether 50 Plus 1 has the experience and financial backing to follow through on this deal, and how much revenue the deal would generate for SAU in the long term.
In his January letter, Choksi noted that the university failed to provide evidence of due diligence on 50 Plus 1 to the DOJ despite multiple requests.
“SAU…has not provided any such diligence to this office including any documentation of financing [50 Plus 1] has secured to meet its payment obligations, details about similar deals [50 Plus 1] has developed, including deals with other universities, or the company’s audited financial statements,” Choksi wrote.
SAU also never provided a breakdown of 50 Plus 1’s revenue projections for the mixed-use development it plans to build on university property, according to Choksi’s letter. The original contract between SAU and 50 Plus 1 contained a revenue-sharing clause that 50 Plus 1 estimated could generate $1 billion for SAU down the line. But Choksi pointed out that SAU never explained where that projection came from.
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Chloe Courtney Bohl is a corps member for Report for America. Reach her at chloe@indyweek.com. Comment on this story at backtalk@indyweek.com.