HCC's first appraisal for the building: $5.3 million. Taxpayer bill: millions more. What changed?

HOUSTON (KTRK) -- The Houston Community College System paid $8.5 million in tax dollars this year for a vacant retail building, with the pricetag based on a lease between HCC and the car company Tesla that never materialized, records obtained by Ted Oberg Investigates show.

The college has no immediate plans for the South Loop property except to find a new tenant. And documents obtained by ABC-13 show the building was appraised for $5.3 million by the college's appraisers just three months before the sale.

At least two sitting HCC trustees, along with a former board member, say that the college overpaid for the building, a 25,000 square-foot former Conns that is valued on the Harris County tax rolls at $2.5 million.

HCC Chancellor Cesar Maldonado defended the purchase, saying that the college system looks at long-term horizons when buying buildings and land and the former Conn's building is a long-term gain,.

"It's part of a long term expansion plan to build out a campus," said Maldonado, pointing out the former Conn's is located close to an existing HCC campus on the West Loop.

"It would make for quick access to instructional space to service the students needs," he said. "It allows us to capture the entire block in order for future development of a college campus with green space and other student support features that we don't have today."

But Maldonado also said to ABC-13, "There is no immediate need for all of that space today."

The retail building, which sits on an acre-and-a-half parcel, was purchased as part of the $425 million bond voters agreed to in 2012 for a system-wide college expansion plan.

But none of those potential future buildouts in connection with the former Conn's are part of the $425 million bond.

Some of building will be used for classrooms, but "I don't know how far out that is," Maldonado said.

HCC based its $8.5 million purchase price on a lease with Tesla Motors, the cutting-edge, Silicon Valley electric car company, records obtained by ABC-13 show.

On an appraisal by a company hired by HCC dated January 15, appraisers said the 25,000 square foot building was worth $8.5 million -- more than three times its value on the Harris County tax rolls.

"We assume the property is leased to Tesla Motors at $23.00 a square foot on a 5 year term with a 4-year, 11-month option," the document reads.

And trustees told ABC-13 that's what they were told, too.

"The understanding was there were going to be benefits to purchasing the Conn's property and that included a lease with Tesla," said Carroll Robinson, who stepped down from the HCC Board of Trustees this month, saying he wanted to concentrate on a run for Houston Controller.

"There were going to be training opportunities for our students to learn how to repair their vehicles and there would be job placement opportunities and we'd still have additional classroom space," Robinson said.

That is trustee Dave Wilson's recollection, too.

"In the executive session they told us that they had a lease with Tesla," Wilson said. "There was no lease. There never was a lease."

Wilson didn't vote for the deal, saying he was never given enough information.

Maldonado said he never told the trustees that a lease with Tesla was a done deal.

"That was never delivered to the board as a feat that was already accomplished," he said. "It was in negotiation."

Maldonado added: "What I told the trustees was that we were in the process of negotiating with Tesla. Our hope was to include in that negotiation the ability to use their technology, their equipment and their resources to help us start up a program in our automotive and our transportation area."

HCC provided ABC-13 with an unsigned letter of intent with Tesla Motors. There is no mention of training or job placement opportunities.

Representatives with Tesla Motors did not respond to questions from ABC-13 sent to their corporate office in California. Nor did company officials respond to a request for comment sent through a Tesla lobbyist based in Texas.

Appraisers were not shown letters of intent, records show, even though they asked for them. Indeed, appraisers called a lease with Tesla "an extraordinary assumption."

"The owner presented to us they were in the process of closing a lease agreement with Tesla," said Maldonado, who also said he was not personally involved in the negotiations.

Further, Ted Oberg Investigates uncovered an appraisal of the former Conn's dated Nov. 3, 2014 conducted by Valbridge Property Advisors that valued the property at $5.3 million.

That's the same company hired by HCC to evaluate the building for the January appraisal that came out at $8.5 million.

Robinson, who voted for the Conn's purchase in January, said he never would have cast his vote for the deal if he knew the college had another appraisal for the property for $3.2 million less dated just three months earlier.

He said the trustees were never told of a second appraisal.

"I don't want to say they lied, because people say I'm too direct sometimes, so I'm going to go with 'misrepresented,'" Robinson said. "The only question for me going forward now is, 'Chancellor, how are you going to get our money back?'"

Maldonado said the trustees were aware of both appraisals.

"Board members were aware of both of the appraisals," he said. "They were allowed access to both appraisals."

Maldonado also defended using the higher appraisal.

"There are different methods that are commonly used to appraise buildings," he said.

One way, for example, is to calculate the value of the property on an income stream, like a lease would generate. That's how the January appraisal was calculated, according to Maldonado. The November appraisal was based on a building without an income stream, he said.

Chris Oliver, the longest-serving trustee member, told ABC-13 that trustees that he, too, didn't see the appraisals before hand. He was not present for the Conn's vote, but was at the meetings in the run-up to the vote.

He also said had he known of the lower November appraisal, he would have pushed for a different price for the taxpayer.

"I think the first one should have done," Oliver said. "You showed me one for November. Then you showed me one for January. I think the first one would have sufficed for me. And I probably wouldn't have offered you the $5.3 million at that. It doesn't make sense to me."

Wilson said that HCC administrators would not provide him copies of either appraisal. He got copies long after the vote only because he filed a request with the college under state's public records act.

"To the defense of some of my board members, we did not have the appraisals in front of us," Wilson said. "They wouldn't give it to us."

Maldonado said that building will be leased soon. Just not to Tesla.

"We're in the tail end of negotiating with someone," he said. "We're very close to a deal, but no deal has been signed yet."

The issue may come up again, according to Oliver.

"We may end up revisiting this deal and some of my colleagues may want to as well, after seeing two diff appraisals we haven't seen before," he said. "I don't know. I'm just saying from a common sense standpoint that it doesn't sound too hot to me."

Certainly all three trustees have had a contentious relationship with the current HCC administration. And Robinson was investigated for trying to direct a $1.4 million contract to a friend. He was cleared by an HCC investigation.

But this sale is not the only questionable land deal that the Houston Community College System has entered into.

Ted Oberg Investigates has also found:
  • Nine acres of vacant property just off State Highway 288 along North MacGregor Way HCC purchased in 1990 for $800,000. They sold it 10 years later for $2 million and then repurchased it in 2013 for $13.6 million -- $12.8 million more than taxpayers paid for it the first time.

  • Twenty-three acres just north of Westheimer on the west side, purchased for $8 million by the college 2011. The then-HCC board chair saying there were no plans to ever use the land. FEMA describes the parcel as having a high flood risk.

  • A half-acre of land acquired in 1997 near the East Loop and I-10, located under power lines and partially in a floodway. Tax records describe it as worthless.

  • A vacant warehouse on the city's East Side, owned for seven years and described in HCC records as a parking option. It is a 46-minute walk to HCC's main campus on Main Street.

"The College does not have detailed plans for those properties," HCC Chief Facilities Officer Charles Smith said in a statement to ABC-13. "We are in the process of engaging a consultant to advise us on strategic land issues, including recommendations for potential acquisitions and divestitures."

And at an HCC trustee meeting this month, Smith assured the public that the college, with campuses stretching from Houston to Spring Branch to Alief to Missouri City, is not simply buying up property for no reason.

"We're not in the real estate business, we're in the college business," he said.

But as of April, HCC owns more than 150 separate pieces of property. And dozens of those parcels are unused or vacant.

"We have a real estate investment package that would make Donald Trump envious," said Wilson, who has long criticized HCC land purchases that he says make little sense. "We've bought property that's in the swampland."

These revelations come amid recent court records filed in ongoing lawsuit between HCC and former acting chancellor Renee Byas.

In those records, filed this month, Byas described how she told law enforcement authorities that three trustees attempted to orchestrate a deal in which the HCC would buy property, and they would receive 10 percent of the money the college paid to the seller.

The records did not mention specific trustees. An attorney for HCC said in press reports the claims are unfounded. And these events took place before Wilson was elected trustee.

Wilson is not the only trustee unhappy with the bevy of HCC land purchases.

Oliver told ABC-13 that trustees "have some of the same questions that you do" about the land deals.

Trustees want to ask questions about some of the deals, but get push-back from HCC administrators, Oliver said.

"If you ask the kinds of questions that you're asking me now, we're accused of micromanagement," he said. "We get questions like, 'Why are you asking so many questions?'"

And Robinson said it's an uphill battle to get "full and complete information" about land deals from the administration.

For example, Robinson said he asked several times for a map of HCC properties and how many of those held vacant buildings.

"I could never get it," he said.
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