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OU housing developer sues university, state

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Cross Neighborhood residence hall is shown at the University of Oklahoma on Thursday, Aug. 9, 2018. [Steve Sisney/The Oklahoman file]
Cross Neighborhood residence hall is shown at the University of Oklahoma on Thursday, Aug. 9, 2018. [Steve Sisney/The Oklahoman file]

The developer of a financially floundering luxury housing complex at the University of Oklahoma has filed a lawsuit against the state and university's board of regents, claiming university officials used "false promises and misrepresentations" to persuade the developer to build the 1,230-bed Cross Neighborhood student housing project.

OU issued a statement Monday denying wrongdoing.

"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," OU 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."

Provident Oklahoma Education Resources Inc. is asking for more than $250 million in damages, but those damages could approach $800 million, depending on how they are calculated, a source familiar with the lawsuit told The Oklahoman.

In the lawsuit, Provident contends that OU officials insisted that the company build an expensive multi-deck indoor structured parking facility, as well as costly commercial space on the first floor of the four-story student housing project.

OU officials "falsely promised" to rent those facilities from the developer to help pay off the construction bonds, but halted rent payments after the first year, Provident alleges in its lawsuit filed in Cleveland County District Court.

"This left Provident owning an economically troubled Project while being obligated to repay $250 million in Bond debt," Provident complained in the lawsuit. "It also left Bond holders uncertain of recouping their investment."

"High-ranking University officials, including its Associate Vice President and Chief Financial Officer, made these promises directly to Provident," the company claims. "The University repeatedly promised to be the source of that revenue stream, only to break those promises later. ... Had the University not made empty promises to rent those costly Project features, Provident and the Bond investors would not have agreed to construct and fund them."

Provident also claims that through malfeasance, the University greatly overstated the demand for on-campus upperclassmen housing without kitchens, which was the type of housing Provident was instructed to build.

The consultant that the University hired, Kennedy Consulting Team LLC, was paid based on the total construction cost of the project, which provided an incentive for it to recommend as many units as possible, Provident said.

The university also commissioned and actively participated in preparation of a market study that "included at least two material misrepresentations about the demand it projected (for upperclassmen housing)," the lawsuit claims.

In calculating existing housing, the market study failed to count about 1,000 beds of fraternity and sorority housing and about 900 beds at the Callaway House, all of which have traditionally been occupied by upperclassmen, the lawsuit says.

Provident also contends that the market study was "manipulated" to make it appear there was an existing 1,200- to 1,300-bed demand for suites without kitchens, which were the type the developer built, when most upperclassmen wanted kitchens.

Provident said that OU could have eased some of the housing project's financial woes by agreeing to let freshmen live there, but refused to do so.

"Project parties have in the past offered the Project as a solution to the severe mold issues that plague the University's Adams, Couch, and Walker freshman dorms," the lawsuit states. "Specifically, the Project parties suggested that freshmen seeking to escape the mold contamination be permitted to reside at the Project. The University refused, even though the University permitted freshmen to live in University-owned upperclassmen housing in order to boost occupancy there. Meanwhile, a significant number of freshmen remain trapped in mold-infested housing."

Provident contends the University has taken other actions that have hurt the company financially, including shuttering Cross Neighborhood's dining facility about a month before the non-renewal of the university's lease agreements.

"This made the Project, which at the University's insistence lacks in-unit kitchens, even less desirable among upperclassmen," Provident complained.

Randy Ellis

For the past 30 years, staff writer Randy Ellis has exposed public corruption and government mismanagement in news articles. Ellis has investigated problems in Oklahoma's higher education institutions and wrote stories that ultimately led to two... Read more ›

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