The Houston Community College Board of Trustees authorized the chancellor to execute a lease agreement on Feb. 25 for the Conn’s property.

The property has been the center of controversy since HCC Trustee Dave Wilson filed a complaint with the Harris County District Attorney’s office against Chancellor Cesar Maldonado and Chief Facilities Officer Chuck Smith in August 2015 for alleged “Fraud/Misappropriation of Bond Funds” due to “misstatements [that] resulted in excess money being paid for the property.”

Trustee Wilson alleges that among other things, the trustees were told only a portion of the
property would be leased, but the appraised value is based off the entire property being leased.

When asked if there was any discrepancies between what the trustees were told and what was told to the professional appraisers, Chancellor Maldonado responded with a dismissive, “No.”

Chancellor Maldonado stated in an interview that he does not believe that the complaint is justified, and he refused to respond to the trustee.

Harris County District Attorney’s Public Integrity Unit would not comment on the status of Wilson’s case against the chancellor. Public Relations Officer Jeff McShan stated that the unit, “will never confirm nor deny it is investigating anything.”

Trustee Wilson previously stated that he has only been told that the case has been assigned.

McShan added that, “if a grand jury decides to indict on any public integrity case…then that info would be released to the public.”

The plan is to lease the building at 5505 West Loop South as a business location for service to the general public. With the board’s approval, the agreement received the green light to be sent back to the prospective tenant to finalize.

It’s been almost a year since HCC acquired the property. Leasing the building is intended to defray the long-term cost of acquisition. According to meeting minutes, the board previously approved a lease agreement on May 27. Currently, there is a “For Lease” sign on the building and no rental income has been generated.

The former Conn’s Appliance store was acquired by the College in March 2015 for $8.5 million, even though it was appraised for just $5.3 million just a few months before.

The college hired appraisers to assess the property’s value in November 2014 and again in January 2015. The November appraisal of $5.3 million did not satisfy the seller, so the same appraisers were directed to reassess the property in January, which is when the value jumped to about $8.5 million.

The Jan. 15, 2015 appraisal document lists an “Extraordinary Assumption” that “We assume the property is leased to Tesla Motors at $23.00 per square foot on a 5 year term with a 4 year, 11 month option.” They used the income method to justify the price increase, and estimated that  the first year rental income would generate $575 thousand, but the college has yet to see such income from the property.

“The value of a property is based on several different factors, we had a professional appraiser give us a report on that,” said Chancellor Maldonado, “I relied on the advice of experienced professionals to set the value of that property. It followed, what I understand and in my experience to be accepted principles for appraising properties.”

“Mr. Smith and I did not talk directly to the people who were going to be leasing to,” said Chancellor Maldonado. He said that HCC attorneys and the facilities department handles that.

It was also stated in the January appraisal that “we were provided with potential letters of intent, given by the current property owner [HCC]…We requested actual LOI [Letters of Intent] documents, but were not provided them.”

The Texas Appraiser Licensing & Certification Board “found that the report contained minor deficiencies” and issued a non-disciplinary warning letter to the appraisers to advise that they provide “documentation and analyses to support adjustments” and to acknowledge any prior work on a property.

Besides Tesla Motors, the appraisal indicated other possible leases with Goodwill Industries, a Tile Shop and Party City—none of which materialized.

When asked if he thought the Conn’s Property was a good deal for the college, Chancellor Maldonado stated that, “In my opinion, it is, or I would not have taken it to the board…The recommendation that I took forward to the board for its action was sound, and I stand behind it.”

The West Loop campus falls in Trustee Robert Glaser’s district. While Glaser admitted he has reservations about the deal, he said, “In the long run, I think that property will be an excellent fit for that campus.”

With the campus so close to Bellaire and the Galleria area, purchasing property to expand the campus would likely only become more expensive in the future.

Glaser explained that picking up the property while it was on the market is preferable because it prevents the college from having to possibly go through the unpopular process of eminent domain and ultimately condemnation of adjacent property in order to expand the campus at a future date.

Glaser said that it’s “a piece of property that ultimately may have become a piece of that campus…whether we needed to buy it at this time or not is a serious question.”

The details of this new prospective lease will not be made public until finalized. The trustees deliberate real estate matters in closed session, as allowed by the open meetings act since a public discussion could have a detrimental effect on the college’ position in negotiations.