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Cross Village partner files lawsuit against OU alleging breach of contract, 'false promises'

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Cross Residence Hall (copy)

Cross Village pictured Sept. 6.

The nonprofit corporation that funded and constructed Cross Village filed a lawsuit Monday against the university seeking more than $750 million in damages.

The lawsuit, which was filed in Cleveland County by attorneys representing Provident Oklahoma Education Resources Group, Inc., alleges the university made “false promises and misrepresentations” to induce Provident Oklahoma to fund and construct the project on OU’s campus.

Cross Village is a luxury upperclassman housing facility that opened in 2018. The facility was created through a public-private partnership between the university, Provident Oklahoma and an on-site property manager. The project’s bondholder trustee and the university exchanged accusatory letters in September threatening legal action regarding Cross Village.

Two bond ratings experts told The Daily in October that the disagreement is unprecedented in the public-private student housing sector, and that they expected the dispute to reach legal proceedings.

The lawsuit alleges the university committed to “rent (the commercial and parking spaces) in their entirety every year during the life of the bonds” that financed the project and amounted to $250 million. The university announced in July that it would not renew the commercial and parking leases, effectively shutting down restaurants and commercial elements of the facility.

The lawsuit alleges these promises were made “repeatedly” by high-ranking university officials, and they were made in a bond investor presentation the university gave. 

According to the lawsuit, the university said state law prohibited it from signing parking and commercial leases for more than one year, renewable annually, but the university “provided repeated assurances” that it would renew the leases.

In a statement Monday, a university spokesperson denied the allegations made in the lawsuit.

“In an apparent attempt to gain leverage in an ongoing dispute, Provident today filed a lawsuit against the university, which parrots the same baseless claims it has previously put forth,” the statement said. “The university will respond to the lawsuit as appropriate. OU’s obligation remains to its students and the taxpayers of Oklahoma, not to Provident or its debt.”

The lawsuit states that roughly one-third of project revenues should have come from the canceled parking and commercial leases and that the remaining two-thirds of project revenues should have come from rents paid by students living in Cross Village. But the lawsuit alleges the university misrepresented data related to student demand as well.

“The university had a flawed vision of the demand for on-campus upperclassman housing and the type of units upperclassmen would rent,” the petition states. “In order to induce the construction of student housing that fits that misguided view, the university misrepresented the core facts.”

The university provided misrepresentations indicating that more upperclassman demand would exist than actually did, the lawsuit alleges, and indicating that upperclassman student demand for Cross Village suites would desire units without kitchens, despite student surveys included in a university-solicited market study that indicated upperclassmen prioritize kitchens when selecting housing.

Cross Village has experienced low occupancy since opening in 2018. In August 2018, the housing complex had a 28 percent occupancy rate. As of Aug. 23, 2019, 34.7 percent of Cross’ roughly 1,200 beds were occupied.

The lawsuit also alleges that by refusing to house freshman students in Cross Village, the university violated provisions of the Cross Village ground lease requiring the university to place students in Cross Village on an equal basis with university-owned housing.

“(Cross Village) is a housing facility suited for freshman students; however, the university has refused to allow freshman students to live at (Cross) even as it amended its policies to place freshmen into university-owned housing,” the lawsuit states.

The lawsuit also alleges the university refused to allow freshmen to live in Cross “to the detriment of its own students.” 

According to the lawsuit, Cross Village has been offered to the university as a solution to “the severe mold issues that plague the university’s Adams, Couch, and Walker freshman dorms,” but the university did not allow freshmen who wanted to escape the alleged mold to live in Cross.

According to the lawsuit, Provident Oklahoma is seeking damages in excess of $250 million for breach of the ground lease, in excess of $250 million for breach of contract, in excess of $250 million for promissory estoppel, $20 million for unjust enrichment from an upfront payment the university requested from Provident Oklahoma, a constructive trust over the $20 million of bond proceeds, and payment of legal fees.

Scott Kirker is a letters and Spanish senior and assistant news managing editor for The Daily. Previously he worked as summer editor-in-chief and as a news reporter covering research and administrative searches.

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