Lease could put St. Augustine’s at risk of losing access to its own campus, documents show
As St. Augustine’s University continues to fight for its accreditation, university leaders have expressed hope that a deal to lease the school’s land to a Florida-based real-estate investment company — a plan that would have the firm pay the university $70 million upfront — would signal that the university’s finances and future are secure.
But onlookers, including alumni of the historically Black university, have been more wary of the proposed deal, which the university first announced in late November.
“This is a terrible deal,” alumnus Steven Williams told The News & Observer. “This deal is not for the university.”
Now, alumni aren’t the only ones concerned about the proposed deal. The state Attorney General’s Office — which holds the authority under state law to review deals in which charitable and religious organizations seek to sell, lease or dispose of a majority of their land — last week expressed “serious concerns” about the proposal in a letter to lawyers for St. Augustine’s.
Among the concerns from the Attorney General’s Office are that the deal, as it stands based on the information the university has provided thus far, could hinder St. Augustine’s “ability to continue to operate and fulfill its mission.”
Those concerns may be warranted.
According to the proposal, obtained by The N&O, St. Augustine’s could lose access to all of its land for the full 99-year term of the lease if it defaults on an additional agreement included in the deal, which would have the university sublease part of its own campus back from 50 Plus 1 Sports, the Florida-based real-estate investment firm.
The lease would also allow 50 Plus 1 to borrow against the campus, including by taking out a mortgage, to fund the $70 million it intends to pay St. Augustine’s. And the university would have little, if any, say over what 50 Plus 1 develops on the campus.
The documents obtained by The N&O are those that St. Augustine’s submitted to the Attorney General’s Office for its review, which means they are public records. The agency’s review remains ongoing, and a final decision on whether it will object to the proposed deal has not been made.
“The chief goal of this review is to ensure that, to the greatest extent possible, assets allocated for a charitable purpose remain permanently dedicated to a charitable purpose that closely reflects the corporation’s initial purpose,” Senior Deputy Attorney General Kunal Choksi wrote in his letter to university leaders on Jan. 27.
The increasing concerns over the deal come as St. Augustine’s is set to appeal the latest decision by the Southern Association of Colleges and Schools Commission on Colleges (SACSCOC) to strip the university of its accreditation and membership with the organization. That decision, issued in December, marked the third time in 12 months that the accreditor’s board or one of its committees had voted to deny accreditation to the university, citing ongoing financial and governance issues.
A spokesperson for St. Augustine’s did not respond to a request for comment from The N&O about the lease agreements and their terms.
In a previous statement addressing the letter from Choksi, St. Augustine’s thanked the Attorney General’s Office “for assisting the university in demonstrating financial sustainability,” but raised sweeping concerns about how the office had handled the review thus far.
At least one of those concerns — that Martin Eakes, CEO of Durham’s Self-Help Credit Union, advised the office on the proposal — appears to be unfounded. Eakes confirmed to The N&O that he requested and reviewed the public documents the university submitted, but he did not speak to the office about the deal.
“I didn’t need to,” Eakes said. “They don’t need me to do their job.”
Proposed terms of deals concerning to some
The proposed lease between St. Augustine’s and 50 Plus 1 is one of two key deals the university has sought as it attempts to shore up its finances and regain its accreditation — the other being a multi-million-dollar loan that reportedly carries an interest rate of about 25%, and that alumni and clergy have called “predatory.”
Alumni have been frustrated with the lack of details from university officials on both deals, Williams told The N&O, underscoring a growing distrust in the Board of Trustees and leadership of their alma mater.
“They haven’t been transparent to alumni, so nobody trusts them,” said Williams, a founder of Falcons Unite, a group of alumni that works to support current students.
The 50 Plus 1 deal, specifically, is raising red flags among alumni because of the risks it could pose to the university and its historic campus.
Under the agreement, St. Augustine’s would lease all 100-plus acres of its land to 50 Plus 1 for 99 years, leaving the university with little say over how the campus might be used or developed. The university is not seeking to sell its land, so it would technically remain the owner of the property even as it is developed.
St. Augustine’s would retain access to at least part of its land for educational purposes, likely to continue housing classes and other functions of the university, under a sublease agreement with 50 Plus 1. The university would pay $1 per year to sublease its land from 50 Plus 1, for the duration of the 99-year lease, according to the lease documents reviewed by The N&O.
The proposed sublease outlines several scenarios in which the university would be considered as defaulting on the agreement, including: failing to pay rent, failing to comply with other terms of the agreement, or being declared bankrupt or otherwise insolvent and turning over its property as a result of such a ruling.
If the university defaults on the sublease, 50 Plus 1 could “take possession” of the sites the university was using, or the university could “surrender” the sites, according to the sublease document.
Losing access to the property outlined in the sublease, even while remaining the owner of the land, “would have obvious implications,” according to Andrew Atkins, a Raleigh-based construction attorney who reviewed the documents for The N&O. Atkins acknowledged that the low rent payment of $1 per year could mean that the default clauses “may not be a significant issue practically.”
Still, the possibility of the university losing access to its land is concerning to alumni like Williams.
Adding to those concerns is 50 Plus 1’s short track record and relative inexperience in development. The firm, which was founded in 2022, made a bid in 2023 for the redevelopment of Florida’s Tropicana Field, where the Tampa Bay Rays play baseball. But St. Petersburg city staff who evaluated the bid said the company “lacked experience as a lead developer” and that its plan lacked detail, The Tampa Bay Times reported.
“Why would you lease back land that was rightfully yours in the beginning?” Williams said. “You’re putting the entire campus up to a company that doesn’t have any financial wherewithal.”
According to Atkins, the provision of the lease agreement that would allow 50 Plus 1 to take out a mortgage on the university’s land to fund the initial $70 million investment is not necessarily out of the ordinary.
“Developers often seek to use long-term ground leases as collateral, so this is not unusual in a lease arrangement such as this,” Atkins said.
But the university could run into issues when, or if, 50 Plus 1 begins developing the campus property. The proposed agreement includes a list of more than 20 “prohibited uses” for the land, including dollar stores, bowling alleys, massage parlors and gun ranges, among others. Still, 50 Plus 1 has “pretty broad discretion in what it chooses to develop” and the university would not hold the authority to approve or deny those projects, Atkins said.
The agreement requires that 50 Plus 1 “consult” with St. Augustine’s “prior to making decisions regarding what will be built” on the portion of the land that is expected to house a mixed-use development. But St. Augustine’s would not be permitted to officially approve the developer’s decision — giving the university little power or say over the matter.
“Ultimately, the duty to consult is a lesser right than a right to approve each development,” Atkins said.
Attorney General’s letter outlines ‘serious concerns’
Like alumni, the Attorney General’s Office also has concerns about the proposed deal — including whether 50 Plus 1 “can meet its obligations under the transaction and has the experience to develop revenue-generating property on the leased land.”
Among other additional documentation, the office is seeking information from St. Augustine’s that would prove the firm “has the financial ability to comply with its obligations to SAU and avoid default with its financiers.”
The office is also concerned that the upfront payment to the university of $70 million, if 50 Plus 1 is able to secure it, is “too low to justify” leasing the university’s land, given that the property has been appraised at a value of more than $198 million.
“That large of a gap raises red flags about the defensibility of the deal,” Choksi’s letter stated before suggesting that the deal be “renegotiated to, among other things, reflect the true value of the property being transferred.”
The Attorney General’s Office is also seeking information from the university about whether it could continue to hold tax-exempt status and operate as an educational institution if its land is used for development.
To date, St. Augustine’s has not provided the additional information the Attorney General’s Office is seeking, posing a roadblock to the office’s ability to render a decision on the deal. Under state law, the North Carolina attorney general holds the authority to review deals in which a charitable or religious organization, like St. Augustine’s, seeks to sell, lease or dispose “of all, or a majority of, its property.”
The university announced the deal with 50 Plus 1 on Nov. 28, a date that was apparently weeks before leaders informed the Attorney General’s Office of its intent to pursue the deal on Dec. 13, according to the letter from the office to university counsel sent Jan. 27. Since December, the letter stated, the office has been requesting necessary documents from the university that would allow the office to “accurately assess the proposed transaction.”
It is unclear when the Attorney General’s Office will render its decision on whether it will formally object to the proposed deal. In the letter, Senior Deputy Attorney General Kunal Choksi indicated the decision would come when the university submits the necessary documentation, but did not state how long St. Augustine’s will be afforded to do so.
Meanwhile, the university is expected this month to appeal SACSCOC’s decision to deny the university of its accreditation — likely without the lease deal finalized. St. Augustine’s had publicly urged the office to issue its decision by the end of January, saying the deal was “vital for securing the necessary funding to demonstrate financial stability” to the accreditor.
In his letter, Choksi indicated the Attorney General’s Office would be willing to encourage SACSCOC to grant the university necessary extensions on its appeal so that the review, as required by law, could take place first.
“We take the responsibility of this statutory review authority seriously and recognize SAU’s importance to the community and the state. 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,” the letter stated. “We, like you, want to ensure that SAU can continue to operate in the short term and succeed in the long term.”
This story was originally published February 6, 2025 at 6:00 AM.
