RALEIGH -- Several concerned alumni and community advocates are calling on lenders to change the terms of Saint Augustine’s University’s $7 million loan. The school initially borrowed $7 million from Gothic Ventures, who also said there’s a possibility to borrow up to $30 million.
Local clergy, ONE Wake, Durham CAN, Center for Responsible Lending, Save SAU and the NC Congress of Latino Organization publicly voiced concerns about the school’s loan deal with Gothic Ventures.
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“Kip Johnson and Gothic Ventures, to claim that they want to help the university, who do they think they're fooling?” said Derrick Sauls, former SAU professor and current Save SAU member.
The public outcry from these organizations comes nearly two weeks after WRAL Investigates reported the loan terms, including a 24 percent interest rate, a 2% loan management fee, a hefty pre-payment fee and the school’s property as collateral.
“Unfortunately, this [loan] comes with terms that place a crushing burden on the university's future, a burden that is simply unsustainable,” said Jaylon Herbin with the Center for Responsible Lending.
The groups are calling on Gothic Ventures to either reduce the high interest rate of their loan to SAU from 24% to 9%, or to waive the pre-payment penalty included with the loan so that another lender can assume the debt with more favorable terms to the University.
“The ability of Black Americans to own land and to fully utilize its resource is an ongoing challenge, and racial dynamics are deeply embedded in the landscape of the southeastern United States,” said Bishop Clarence Laney Jr. “I have personally witnessed developers come to our community without any knowledge of our history or sacredness of the land, with plans to buy it and change it to reflect their vision, opposed to the vision of those who live in the community. Here, we call attention to this concern that extends beyond land loss but also contributes to the fragmentation and fracturing of African American communities and landscape.”
WRAL News took the community’s concerns directly to Gothic Ventures founder Kip Johnson, asking if the company would be willing to meet their demands.
“We negotiated the terms of our loan with the university. The university had external counsel involved in those negotiations. We, at this point, do not intend to renegotiate the terms of our loan,” Johnson told WRAL. “Quite honestly, it's unfair to ask us to change the terms of our loan, when the risk of making a loan to the university today … is significantly lower than the risk that we faced when we made our loan.”
He pointed out the improvements the university has made since securing the loan, including paying employees, opening its door for the fall semester and completing the missing FY2022 and FY2023 financial audits.
“It's because the university has used the proceeds of our loan to overcome so many of their challenges, that the risk profile of making a loan today is so much lower than it was when we made our original loan,” Johnson explained.
Financial lending expert Martin Eakes’ calls the loan “onerous” and “predatory.” Eakes is also the CEO and co-founder of Self-Help Credit Union and the Center for Responsible Lending.
Johnson said his company stepped up to help the school when no one else would and calls the terms “standard” given the risk.
Given its proximity to downtown, Saint Augustine’s University sits on prime real estate. One SAU alumnus called the loan a “land grab.”
However, Johnson denies that claim, specifically noting the nearly $10 million IRS liens against the school.
“We don't have a first priority lien on the university's property … We are junior to those other liens. There's no way we could simply take the land,” Johnson said.
WRAL News requested an interview with university leadership and then, asked the university if it had plans to take out any more money from that line of credit and whether leadership was exploring other avenues for financing. We did not hear back.
Johnson would not comment on whether university leadership has borrowed more money beyond the initial $7 million.