A new document obtained by WRAL News details how Saint Augustine’s University plans to use a $7 million loan, so classes could begin for the fall semester.

Saint Augustine’s University gained immediate access to the funds after signing the loan agreement on May 7 with Durham-based Gothic Ventures.

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The loan also grants the Raleigh-based historically Black university the possibility of getting up to $30 million total.

But like any loan, it comes with specific terms.

The document outlines a 24% interest rate on the $7 million loan, plus a 2% "loan management fee" and a $75,000 "due diligence and documentation fee."

Financial lending expert Martin Eakes’ calls the loan “onerous” and “predatory.” His issue with terms start with the interest rate.

“Yes, [the school] should have a little bit of a premium. That's why I say the loan should be no higher than 9%,” Eakes said. “The only thing this interest rate shows was that the Saint Augustine's leadership was desperate, and this group stepped in to take advantage of that…If it were just the interest rate, I'd be mad. But this loan has some extra things that make it extremely predatory.”

Gothic Ventures founder Kip Johnson said the capital venture firm got involved to help the university.

“While we hoped that the government or a foundation or a bank would provide the funds necessary to keep the University open, that did not happen,” Johnson wrote in an email.

Johnson said he reached out to the Saint Augustine’s University to see if the university would be interested in discussing a potential loan transaction.

“The interest rate was based on the financial challenges facing the University which included its most recent audit report indicating concerns about the University’s ability to continue operating as a going concern, the lack of audited financial statements for the last several years, historical losses because revenues exceeded expenses, significant outstanding debt, IRS liens on the University’s property, and the suspension of the University’s accreditation,” Johnson wrote via email.

The document also lists Lots 1, 2A, 3, 4, 5, and 6, referred to as the "Main Campus," along with 40 other pieces of property on more than 11 acres around Saint Augustine’s campus that have been put up as the collateral used to secure the loan. If the university were to default on the loan, all that property could be forfeited to the lenders.

“When Saint Augustine's was built, this property wasn't that valuable. But Raleigh is growing like crazy right now, and the property values have come up. So, this is a very valuable piece of real estate - not just for history - but for all kinds of purposes,” Eakes said.

The loan comes due on June 30, 2025, and the document states Saint Augustine’s University has the right to extend that maturity date until Dec. 31, 2025.

The letter of intent outlines how the university would use the $7 million:

  • The biggest chunk of money, $3 million, went to past due and future payroll and taxes
    • $1.8 million was payment to the U.S. Department of Education
      • $650,000 is earmarked for the 2022 and 2023 audits
        • $600,000 for student refunds
          • $545,000 for property insurance
            • $375,000 for fees, title insurance and expenses
              • $30,000 for appraisals

                “Initially, I was very pleased [with the loan]; that sounded good. But later, I was able to see the actual terms of that loan. And I've got to say it really, really troubled me,” Eakes said.

                Given its proximity to downtown, Saint Augustine’s University sits on prime real estate. That’s something the Raleigh’s city council is now trying to tap into in their efforts to build affordable housing.

                “The money that comes from selling land would have to first go to the IRS, which has a lien, and then to Gothic which has a lien 100%. You'd have to have a huge amount of land purchased by the city of Raleigh before it would do any benefit to Saint Augustine's,” Eakes explained.

                In March 2024, Saint Augustine’s transitioned to remote learning as the school faced significant financial challenges.

                The loan allowed Saint Augustine’s to begin classes for the fall semester.

                Enrollment is down significantly compared to previous years at the university. A look at enrollment numbers from recent years shows a dramatic decrease in Saint Augustine’s students:

                • 2002-2003: 1,552 students
                  • 2012-2013: 1,142 students
                    • 2022-2023: 1,108 students
                      • 2024-2025: 200 students

                        The IRS has filed three liens against the financially troubled university this year – totaling nearly $10 million.

                        Covenants listed in the agreement include the university not defaulting on any bank debt, not taking on any new debt and pursuing their appeal on their accreditation being revoked. St. Aug is currently on a probationary status.

                        Johnson said Gothic Venture’s default terms are standard for loans of this size and type.

                        WRAL called and emailed the Saint Augustine’s University spokesperson, who did not respond.