The president of the nonprofit partner contracted by OU to help build Cross Village said the problems with the retail-residence complex can be linked to the university’s decision not to house freshmen there.
Steve Hicks, president of Provident Oklahoma Education Resources Group, Inc., told The Daily on Thursday that the company will continue to work with the university to make Cross successful, and he hopes the terms of the arrangement can change moving forward.
“We have this beautiful new student housing community,” Hicks said, “but freshmen are not allowed to live in it and we are not allowed to market the availability of the units to freshmen.”
The university announced Wednesday that it would not renew the commercial and parking lease for Cross Village, though the residential portion of the buildings will continue to be leased.
An OU official told The Daily in an email Thursday that students living in Cross who wish to cancel their meal plans as a result of this week’s changes can be reimbursed.
OU’s statement on Wednesday said the university could not continue the commercial and parking lease because it “would have cost the university nearly $7 million and led to subsidizing a private entity, which the university cannot do with student tuition and fees.”
The university began constructing Cross during the tenure of former OU President David Boren.
“This dynamic public-private partnership allowed the university to build these exciting new high-quality student facilities with great attention to cost reduction,” said Nick Hathaway, then-vice president for administration and finance, in a July 2017 press release.
Hicks said Provident Oklahoma was selected in August 2017 as part of a public-private partnership to finance Cross.
Provident Oklahoma, as an Oklahoma nonprofit, then applied for in excess of $200 million in government bonds to construct the Cross Village building and parking garage. Provident Resources Group, Inc. — a national nonprofit which works in development, ownership and operation of educational and housing facilities and services, according to its website — is the parent company of Provident Oklahoma.
When Cross Village opened in fall 2018, its full dining options and other amenities were not yet available. Cross also had low occupancy upon opening — The Oklahoman reported in August 2018 that Cross was at 28 percent occupancy.
Cross offers one-, two- and four-bedroom luxury suites, according to OU’s website, as well as amenities including a gym, rehearsal spaces, theater and performance venues, coffee shops, dining options and retail shops. Cross suites are among the highest-priced on-campus OU housing options.
On Thursday, Hicks gave The Daily a document written by UMB Bank, the financial services holding company that serves as the trustee for over $198 million in tax-exempt revenue bonds and over $53 million federally taxable bonds issued for, “among other things,” the construction of Cross Village. The document is called an Electronic Municipal Market Access, or EMMA, and is provided to bondholders involved in funding the construction of Cross Village.
The document includes the university’s termination notice for the commercial and parking lease, which was sent to Provident on July 26.
According to the termination notice, the university paid over $6.8 million to Provident Oklahoma for the commercial and parking spaces for the 2018-19 academic year. The notice also states that “demand for the commercial retail businesses was so low that the university obtained only approximately $40,000 in retail revenue,” and dining and parking spaces were not used enough to justify lease rates.
The $6.8 million amounts to more than double the market rate for commercial space, according to the notice, and almost 10 times the market rate for parking spaces. Former OU president James Gallogly said in September that the university was losing over $7.1 million per year on the Cross Village project.
Hicks said the reason the lease price was negotiated and agreed to was because OU received a $20 million upfront payment, and the lease amounts were necessary to secure adequate bond financing.
“The university knew that in effect, they were going to be subsidizing a rental space and parking space,” Hicks said. “They knew that when the transaction was put in place. But they did that to get an upfront payment to cover the ground lease. They got an upfront payment.”
According to the termination notice, the university “estimates the same limited demand” for the 2019-20 academic year, but would need to pay almost $7.1 million for the commercial and parking spaces under the terms if they were renewed.
In the document provided to The Daily, the bond trustee, UMB Bank, notes that the termination notice “does not assert that the university was unaware at the time it entered into (the commercial and parking lease) agreements as of Aug. 1, 2018 that the rents were above market (value).”
The document also says that the university’s termination of the agreement will likely result in revenue from the project not being sufficient to pay operating expenses and debt service on the bonds. Hicks said it is the responsibility of Provident Oklahoma, along with the bondholders, to address the operating expenses and debt service. The bondholders consist of a relatively large group of institutional investors, Hicks said.
“It is also the trustee’s view that, putting aside any legal obligations the university may have, this intentional act is a failure by the university to perform a ‘moral obligation,’” according to the document. “The trustee expresses no view as to any potential impact the university’s actions may have on other obligations backed by the university and on any obligations of the State of Oklahoma.”
As a result of the plan to terminate the commercial and parking lease, OU ended lease agreements with all restaurants and other commercial establishments operating out of Cross, a university official told The Daily on Wednesday, except for one hair salon. The university is working to get a lease transfer for the salon, an OU official wrote in the email Thursday.
Hicks said Provident Oklahoma has not identified potential replacement tenants for the space yet, but under its remaining agreement with the university, any tenant Provident Oklahoma might identify would have to be approved by OU.
“Our long-term goal is to attempt to continue to have discussions with the leadership of the university in an effort to have them recognize the value of the Cross Village community on campus,” Hicks said. “We built what the university requested be built, pursuant to the procurement process that we went through. So we did exactly what the university asked us to do.”
Hicks said as it exists, Cross Village would primarily appeal to freshmen and sophomores, but the university will not allow freshmen to live there.
The OU official wrote in the email that the university has no plans at this time to have freshmen live in Cross.
Residential units within Cross do not offer ovens or stoves, so residents must rely on communal kitchens if they wish to make their own food.
According to the OU Housing and Food website, a one-bed, one-bath suite in Cross costs $1,444 per month; a two-bed, one-bath suite costs $1,333 per month; and a four-bed, two-bath suite costs $833 per month. All prices are per person, and all OU academic year housing contracts last only for the academic year. Students can apply for separate summer contracts.
In Dunham or Headington College, a one-bed, one-bath residence costs $1,373 per month, according to the site. Callaway House Apartments, one of the closest off-campus housing options OU’s grounds, offers a one-bed, one-bath option costing $1,054 per installment, as well as other housing options.
“We’re just going to have to continue, as best we can, to try and address this matter with the university so that we can have a successful outcome,” Hicks said, “first for the students that might wish to reside there, as well as the university and Provident Oklahoma Education Resources, the owner of the building.”
OU’s termination of its commercial and parking agreement for Cross comes days after the university said Monday that Cate Restaurants would reopen.
Frank Henry, OU director of food services, told The Daily in April that the Cate was closed in May 2018 to encourage more students to eat at Cross’s dining options.
“(Cate) was (closed) to try to get people to go down to Cross,” Henry said at the time, “and we haven't seen that swell down there.”