Saint Augustine’s U faces ticking clock to repair funds
Approaching a vital vote on its accreditation standing subsequent month, Saint Augustine’s College has made controversial strikes in latest months to stabilize its shaky monetary place, however to this point none have paid off, placing the beleaguered establishment in a extra precarious place.
First, the traditionally Black college in North Carolina took out a $7 million mortgage final fall that many critics have described as predatory given its 24 % rate of interest and a pair of % administration charge. The college additionally put actual property up as collateral in case of a mortgage default.
Then, in November, SAU officers additionally struck a $70 million take care of 50 Plus 1 Sports activities, a fledgling Florida firm, to lease its campus and develop college property for 99 years. The deal would have offered a much-needed monetary lifeline for the cash-strapped college that should urgently repair its funds earlier than the accreditation evaluate. (The faculty was beforehand stripped of accreditation as a consequence of college monetary and governance points however appealed.)
However that lifeline is in authorized limbo after the North Carolina legal professional common declined to log off on the deal Monday.
The North Carolina legal professional common’s workplace, which reviewed the deal as a consequence of state regulation on the switch of belongings from a nonprofit, introduced it could not approve the association with 50 Plus 1 Sports activities as written as a consequence of a scarcity of “enough documentation to assist the proposal” and considerations that the payout “is simply too low to justify switch of the lease rights” for SAU’s campus, which is appraised at $198 million. The legal professional common’s Workplace additionally expressed considerations about SAU’s “means to proceed to function.”
Ongoing Monetary Struggles
Saint Augustine’s has confronted rising pressures since December 2023 when it fired then-president Christine McPhail, who subsequently lodged a gender-based discrimination grievance in opposition to the board. That very same week the Southern Affiliation of Schools and Colleges Fee on Schools introduced it had voted to strip SAU’s accreditation as a consequence of board and finance points.
(SAU misplaced an attraction to that call however gained a reprieve in court docket in July earlier than SACSCOC voted once more in December to strip accreditation. The accreditor will vote on SAU’s attraction subsequent month.)
Since early 2024—below the steering of interim president Marcus Burgess—SAU has navigated a sequence of challenges in a bid to remain afloat. In February, it was hit with a $7.9 million tax lien. That very same month, native officers inspired SAU to discover a merger with close by Shaw College, one other HBCU. Months later, SAU board chair Brian Boulware forged the proposal as an aggressive effort to ramrod a partnership. (Native officers have denied his account.) In Might, a bunch known as the Save SAU Coalition sued Boulware and different trustees, alleging malfeasance and self-dealing by the board.
That case was later dismissed as a consequence of a scarcity of standing.
Enrollment has additionally plummeted, falling from greater than 1,100 college students in fall 2022 to a head rely of round 200 college students final fall, in response to latest estimates. SAU has additionally introduced main workers reductions.
As its monetary pressures added up, Saint Augustine’s borrowed $7 million from Gothic Ventures, an funding agency, and secured a $30 million line of credit score. The deal, which got here with a 24 % rate of interest and a 2 % mortgage administration charge, sparked alumni protests within the fall.
Mark DeFusco, a senior advisor with Larger Ed Consolidation Options and sector finance knowledgeable, advised Inside Larger Ed the phrases of the Gothic Ventures mortgage have been “loopy” and “irresponsible.” DeFusco agreed with the outline of the mortgage as “predatory.”
SAU officers have defended the settlement, writing that the deal is “essential for sustaining instructional companies” and securing the mortgage contradicted “claims of irresponsibility in monetary dealings” leveled by critics. SAU has forged criticism of the deal as a “smear marketing campaign.”
Earlier this month, two native publications, INDY Week and The Meeting, reported that final fall SAU turned down a extra favorable mortgage provide of $19.5 million with a 9 % rate of interest. That supply, from Self-Assist Credit score Union, stipulated that two board members, together with Boulware, resign, and would have included buying the prevailing Gothic Ventures mortgage. The college balked on the connected situations.
To DeFusco, the board resignations as a part of the mortgage situations have been an inexpensive request.
“There are provisions in management for all types of lending. And with all due respect, it was a clever provision, as a result of you’ve a board that’s allowed [financial issues] to go on for a number of years now. This isn’t one thing new,” DeFusco mentioned. “They haven’t damaged even for at the very least 5 years from what I may see of their information, and their accrediting physique was going to shut them down, aside from that arbitration. And now they’re about to shut them down once more.”
Continued monetary struggles in the end led SAU to a take care of 50 Plus 1 Sports activities, which describes itself on its web site as a financing and improvement agency. That settlement, in response to a college assertion, would “generate a $70 million upfront funding” from the corporate.
However the North Carolina legal professional common’s workplace shut down that proposed deal.
Past the shortage of documentation on the proposal and the low payout, Assistant Legal professional Common Kunal Choksi additionally raised questions concerning the college’s due diligence of the deal.
“SAU’s board and trustees have been obligated to carry out due diligence on whether or not 50+ can meet its obligations below the transaction and has the expertise to develop revenue-generating property on the leased land,” Choksi wrote in a letter shared with Inside Larger Ed.
Choksi added that the legal professional common’s workplace had requested “enough proof that fifty+ has the monetary means to adjust to its obligations to SAU and keep away from default with its financiers” and “particulars about comparable offers 50+ has developed, together with offers with different universities, or the corporate’s audited monetary statements.” Choksi indicated in his letter that SAU had not but offered these particulars on the proposal.
In a Tuesday assertion, SAU officers mentioned little concerning the considerations raised by the legal professional common concerning the 50 Plus 1 Sports activities deal or its means to function. As a substitute, college officers took intention at Self-Assist Credit score Union.
SAU famous considerations “concerning the course of that led to the latest rejection” of the settlement. Particularly, they pointed to a gathering between Marin Eakes of Self-Assist Credit score Union and alleged that the legal professional common’s letter mirrored feedback made by Eakes in unspecified media protection and alleged the 50 Plus 1 Sports activities proposal was shared with out SAU’s consent.
SAU officers wrote within the assertion that they “suspect that the Legal professional Common’s Workplace used Mr. Eakes’ counsel and enter to subsequently affect their resolution. Such interference by Self-Assist raises important considerations about equity. It suggests their try and weaponize the NC Legal professional Common’s Workplace to hinder the approval course of for the 50 Plus 1 Sports activities deal.”
An Unknown Companion
With the North Carolina legal professional common’s workplace shutting down the 50 Plus 1 deal, SAU has little time to repair its funds forward of a looming vote on its accreditation standing in late February.
And questions on each the deal and the corporate linger.
Data on 50 Plus 1 Sports activities is sparse and it’s unclear, as famous by the legal professional common’s workplace, whether or not the nascent firm has the assets to again the deal. Little is thought about 50 Plus 1 Sports activities, which unsuccessfully huge on a $800 million stadium improvement deal in St. Petersburg, Fla., in early 2023. The agency was not chosen for the undertaking amid questions from native officers about how it could finance the deal and a scarcity of expertise as a lead developer.
In its St. Petersburg proposal, 50 Plus Sports activities listed a $1.4 billion deal to develop a sports activities and leisure district for the College of New Orleans amongst its reference initiatives. Nevertheless, a UNO spokesperson advised Inside Larger Ed by e mail it isn’t “shifting ahead with the undertaking.”
Monti Valrie, founder and CEO of fifty Plus 1 Sports activities, didn’t reply to a request for remark.
What’s Subsequent for SAU?
The legal professional common’s workplace did depart the door open to rethink the deal. However the college must present extra particulars to the workplace, together with proof that SAU performed due diligence on 50 Plus 1 Sports activities and its funds.
SAU officers famous of their assertion that “regardless of these challenges, SAU stays dedicated to working collaboratively with the Legal professional Common’s Workplace. We consider transparency and open dialogue are important in securing the funding for our college’s sustainability and development.”
However SAU is going through a ticking clock to get that info to the legal professional common or rework the deal. College officers have mentioned that the deal wanted to shut by Jan. 31. In any other case, “SAU dangers failing to exhibit monetary sustainability” earlier than its attraction listening to subsequent month, in response to a college assertion.
However DeFusco wonders if SAU’s funds are too far gone to repair.
“Their funds are so unhealthy they could be felony,” he mentioned, pointing to payroll and tax points. (The college additionally allegedly failed to take care of employee’s compensation for workers just lately.)
As strain mounts, DeFusco believes the board wants extra scrutiny for SAU’s monetary issues, arguing “they missed it for years” because the college slipped deeper into the purple.
“Now the query is, is the board performing as a fiduciary?” DeFusco mentioned.