Six months into his tenure as CEO of Santikos Enterprises, Tim Handren takes serious issue with my recently-published supposition that his company’s eight movie theaters and entertainment centers in San Antonio are threatened by the booming growth industry of streaming in-home entertainment.
“The theater business is not dying, it was an $11.9 billion industry nationwide last year, and Santikos had its most profitable year ever in 2018,” Handren said. “Are we afraid of the future? Absolutely not. I’m excited about the future.”
Handren cited, in particular, the growing “experience economy” in which millennials seek out new and authentic ways of connecting, and demonstrate a willingness to spend substantially more of their disposable income than previous generations on such events. That’s why traditional movie theaters have given way to plush seating, hi-tech sound and projection, and lobbies that offer everything from bistro dining and cocktail lounges to bowling and gaming centers.
Who is right about the future of the entertainment industry is important to everyone who lives in the San Antonio metro area. John L. Santikos, who turned his immigrant father’s small cinema business into an entertainment and real estate empire, died at age 87 in 2014. He left his businesses with a reported book value of $605 million to the John L. Santikos Charitable Foundation housed in the San Antonio Area Foundation (SAAF). According to Santikos’ will, the annual profits from Santikos Entertainment and Santikos Real Estate flow into the charitable foundation to benefit his four areas of interest in eight counties.
Santikos’ will directed executives to operate the theaters in perpetuity for the benefit of the foundation unless it one day becomes financially unfeasible to do so, Handren noted Friday. He said Santikos Entertainment now controls 52 percent of the market in San Antonio, up significantly from 44 percent at the time of Mr. Santikos’ death more than four years ago.
“That number ($605 million), however, is not correct. It didn’t account for debt,” Handren said Friday.
Still, the Santikos bequest remains the largest single charitable gift in San Antonio history, even if initial reports of its value and its projected annual grants were overstated, Handren and Area Foundation President and COO Rebecca Brune acknowledged in a Friday interview with the Rivard Report.
My column last Sunday echoed what many in philanthropic and foundation circles have been quietly asking for some time: Would it make more sense to seek independent valuations and consider liquidation of Santikos’ market-dominant theater chain and its vast commercial real estate holdings rather than continue to operate the for-profit company?
Which strategy would be of the greatest benefit to the charitable foundation and its targeted recipients?
That depends in part on how much Santikos Enterprises is worth today and how it fares in future years. A realistic book value will be presented to the Santikos and SAAF boards of directors in May when Handren unveils his five-year strategic plan. It will be up to foundation directors to decide how much information is shared with the media and the public, he said.
Given what I heard Friday from Handren, Brune, and U.S. Army Gen. (ret.) James “Tom” Hill, the Area Foundation board’s treasurer, there is a commitment to greater transparency as new SAAF CEO Marjie French takes the helm.
A more open approach with the public makes sense for several reasons: Handren is bullish on growing Santikos Entertainment and obtaining the capital to do so via strategic real estate sales. He needs to make the case for such capital investment to a broader audience given his mandate to generate profits for charitable use. I was unable to find a web posting identifying the Santikos board of directors, whose decisions in the coming years will be of significant public interest.
Two, exaggerated promises of grants to area nonprofits that were made by former Santikos and SAAF executives when the Santikos Charitable Foundation was first announced can give way to a new a narrative about how much is being distributed, and equally important, its community impact.
“We’ve led with the money, and that’s the wrong message,” Brune said. “We need to lead with the impact we are having, including the ways we are leveraging our grants with other giving.”
Transparent reporting of grant-making to recipient organizations can only serve to benefit both organizations and grow public confidence, even if it leads, in some cases, to challenges to how the foundation is determining which nonprofits receive grants and which ones do not. While such grants are now announced via social media, online searchable databases and timely media releases would be of greater public service.
A SAAF website makeover, that foundation executives say is on the drawing board, will go a long way in allowing people to see how much money is flowing into the SAAF from Santikos, and how much is flowing out in total.
The Area Foundation, of course, had substantial assets under management before the Santikos bequest, with 518 donor-assisted funds now housed there. It may come as a surprise to many to learn that as of Friday, the foundation reported $462.6 million under management, excluding the Santikos bequest. Many assumed that figure was closer to $300 million.
Still, the $900 million figure now on the Area Foundation’s home page will soon give way to a more nuanced breakdown of assets that distinguish invested funds from the Santikos assets.
Stability at the top levels of the Area Foundation also has been a concern, so it will be welcome news in the foundation and nonprofit world that Brune, who is highly respected but was passed over for the CEO position, is committed to the organization and its mission.
“After a week and half of soul-searching, I’ve decided this is where I belong, and I am excited about our future and our mission,” Brune said Friday.
“We are all excited about her decision, and the 1-2 power of Marjie and Becca as the foundation’s leadership,” Hill said.
I have been asking SAAF executives for more detailed financial data to share with readers to measure the totality of the Santikos charitable giving since 2015, as well as the recipients. It is widely known that the early predictions of $30 million a year in grants were overstated. The data I received Friday requires more parsing to arrive at correct numbers.
The Rivard Report is sharing that documentation with readers today, even as we look for independent accounting support for further clarification. The Area Foundation reported $52,965,019.23 in Santikos grants and conditional grants between 2015 and 2019, but that is not an accurate picture of Santikos profits distributed in San Antonio and the eight-county area.
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For starters, millions of dollars in 2015 grants, including a $20,000 grant to the Rivard Report, came from personal funds Santikos designated for charitable distribution upon his death. More than $5 million in conditional grants have not yet been distributed. More than $8.5 million of the total has gone to two international charities Santikos designated in his will: Doctors Without Borders and a Greek Orthodox organization.
Editors here consider philanthropic and charitable foundation activity to be important news worth reporting. Thousands of area nonprofits that together form the community’s social safety net are highly reliant on such grants to bolster individual and corporate giving. There also is the belief that stories documenting how charitable giving transforms lives can motivate others with wealth to become philanthropic.
That, Brune said, is one of the Area Foundation’s major goals: finding the next John L. Santikos, the next major bequest.