Scott Ball / Rivard Report
Long-simmering concern among some of San Antonio’s most prominent philanthropists, foundation leaders, and nonprofit organizations is intensifying over the relationship between the San Antonio Area Foundation (SAAF) and Santikos Enterprises, and control and management of the John L. Santikos Charitable Foundation funds.
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. One year later, when his bequeathed gift to the area foundation was publicly confirmed, the total book value of his businesses was set at $605 million. There also was the promise of future Santikos profits flowing into the charitable foundation under management of the SAAF.
Santikos’ contribution was described as the largest charitable gift in the city’s history, even larger than the Kronkosky family’s bequeathed gift of $295 million in 1997. On paper, it tripled the Area Foundation’s assets from less than $300 million to $900 million. The infusion of Santikos funds, those involved in its handling said, would benefit countless area nonprofits in the years ahead.
Moviegoers who enter a Santikos theater are quickly made aware of the Santikos bequest with big screen messaging that precedes the feature film. Entertainment executives aggressively market that differentiating factor.
The early promises, however, are now being challenged, as is the governance of the Area Foundation board amid questions about whether Santikos exists as a for-profit business to benefit the Area Foundation and area charities, or if its executives hold control with the primary intent of managing the entertainment and real estate assets rather than considering the value of their sale.
Critics say Santikos cash distributions to area nonprofits have never equaled the predictions made by Dennis Noll, then the SAAF CEO, and David Holmes, then the Santikos CEO. Both executives have since stepped down under pressure from their respective boards, according to sources with direct knowledge of their departures.
Tim Handren, a Santikos board member who had been serving as interim CEO, was given the official title earlier this month and, sources say, has improved communications between the two entities and elevated the sagging morale among Santikos workers.
Rebecca Brune, the SAAF’s president and chief operating officer, has been serving as the de facto chief executive since Noll’s announced departure in 2017. She is widely credited with improving the Area Foundation’s internal operations and systems and was respected by staff. She was not, however, named a finalist for the CEO position by the SAAF board, which surprised and even upset many in the philanthropic, foundation, and nonprofit community.
Last week, the Area Foundation’s board instead announced the hiring of CEO Marjie French, UTSA’s longtime vice president for external affairs and director of development. Her selection follows a prolonged search that has been widely criticized in San Antonio’s top business circles, although that criticism, like the philanthropic community’s concern over Santikos-SAAF governance, has gone unpublicized until now.
There is no indication that members of the for-profit Santikos board or the Area Foundation board believe there is anything amiss in the governance or the relationship. I’ve reached out to leadership on both sides and have been told I’ll finally get to interview Handren and the SAAF board Chair Theodore “Theo” Guidry, a Valero executive, next week. I’ll report their views then.
What is behind the tensions?
In the nonprofit space, where fundraising and making ends meet is a never-ending night and day task, many leaders say they were informally promised significant funding that has never come. Many complained about submitting complex grant applications that were eventually rejected in brief, unsigned emails without any other context.
Among those with their own considerable assets to distribute who work hand-in-hand with the Area Foundation, there is a belief that the Area Foundation’s board has ignored its fiduciary responsibility to retain third-party experts to gauge how best to manage the Santikos businesses to benefit those counties and areas of interest named by Santikos in his will.
“If Mr. Santikos had left behind $605 million in Exxon stock it would have been sold by now and the cash would have been invested to the greater benefit of the community,” one foundation leader told me. “Yet there never has been any serious consideration given to selling off the entertainment venues, the movie theaters, and all that real estate. There has been no independent assessment of the properties; we don’t really know what things are worth.”
Others worry that Santikos executives are diverting what should be profits flowing to the Area Foundation to instead expand the theater chain. A new Santikos complex said to cost $38 million is being constructed right now in Cibolo, even though one right across Wiederstein Road in neighboring Schertz is home to EVO Entertainment‘s multiscreen complex that likewise features a bar and bowling, in addition to in-theater dining and other kinds of expensive entertainment amenities that executives are turning to in an effort to maintain audience and revenue levels.
In defense of the executives working to grow the for-profit entertainment business, Santikos probably did not intend for his theaters to be sold, but he could not have known five years ago the disruptive impact that Netflix, Amazon, Hulu, and now, even Apple would have on Hollywood and, ultimately, the movie-going public. In a sense, Santikos is now competing with the individual family room for customers, where at-home binge-watching of quality, on-demand serial programming has become as popular or more than going out to watch a feature-length film.
Are Santikos theaters worth the same now as they were five years ago? What will they be worth five years from now? Some in the philanthropic community say two different prospective purchasers were turned away by Santikos executives, even though a brick and mortar movie theater chain, one San Antonio philanthropist said, “is probably a wasting asset.”
The market value of commercial office and retail developments under lease and undeveloped land held by for-profit Santikos Real Estate also is unknown to the public. It’s not known whether executives are actively engaged in marketing properties for sale with the intention of turning over the sales receipts to the Area Foundation.
No one on the Area Foundation board or executive staff has publicly asked for independent audits or evaluations, or consideration of liquidating the Santikos assets.
As this debate becomes more public, many in the philanthropic community intend to encourage French to take a hard look at board governance, adopt greater transparency on its relationship with Santikos, and agree to evaluate the Santikos assets for their highest and best use. That will not be easy for someone just stepping into the job who has never served as CEO.
I have asked for a complete tally of Santikos Charitable Foundation grants made during the past four years and will publish those when they become available. We know about a number of gifts from our own past coverage. In 2016, $9.3 million was handed out to eight nonprofits for capital projects that included Santikos naming rights – a harbinger of what was to come, with future Santikos grants for capital projects including naming rights coming every other year.
Other nonprofits need not apply in those years, which has disappointed many small organizations whose leaders complain that Santikos branding and legacy recognition has trumped doing social good.
A number of gifts were made from Santikos’ personal estate in December 2017. The Rivard Report received $20,000 as one of 25 nonprofits that received a “surprise year-end grant,” which totaled $500,000. SA2020 was awarded a two-year, $400,000 grant in early 2018.
Later last year, $3 million in Santikos grants were made to six area nonprofits for capital projects with naming rights, after Area Foundation executives pored over 122 applications totaling $96 million in requests. That $3 million was more than matched when San Antonio philanthropist Harvey Najim added $3.5 million in grants to seven of the semifinalist nonprofits. Valero Corp. added $2 million to another semifinalist to support the construction of a new child development center at the Healy-Murphy Center, an organization that serves youth in crisis.
The San Antonio Area Foundation, all sides agree, is the essential center to San Antonio’s community philanthropy and support of its social safety net. Assuring that it performs at the highest possible level for maximum social impact is critical to the well-being of the metro area’s nonprofit community. How to make the most of its assets, however, is yet to be determined or decided.