Taking a Hard Look at the Santikos Enterprises/San Antonio Area Foundation Relationship

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The Cibolo Santikos Theater will also feature an arcade, bowling, and laser tag.

Scott Ball / Rivard Report

Santikos is building a new entertainment complex in Cibolo, across from a similar facility built by EVO Entertainment Group.

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.

Marjie French

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.

The San Antonio Area Foundation is in the Pearl.

Bonnie Arbittier / Rivard Report

SAAF is the essential center to San Antonio’s community philanthropy and support of its social safety net.

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.

15 thoughts on “Taking a Hard Look at the Santikos Enterprises/San Antonio Area Foundation Relationship

  1. When the news was released of Mr. Santikos’ plan for the theater chain to be dedicated to supporting SAAF, I thought it was going to be like the Carlsberg Foundation in Denmark. Carlsberg is a brewer. The corporation has also bought out Tuborg, the second largest brewer in Denmark. The profits of all the sales of all their products go to charity. It’s as simple as that. The company operates as it did before, but the profits go to the foundation which then distributes them to benefit good causes. I have believed that going to a film at a Santikos theater was participating in such a plan which I think is even better than one where SAAF takes ownership, sells the assets, and then invests the profits. But there needs to be a clear plan of action based on the intentions of Mr. Santikos rather than a concern that possibly greed and corruption are spoiling what he intended.

  2. Thank you for a clear and detailed reporting on this important community asset. Please keep us all informed as steps are made in, hopefully, the right direction for San Antonio in the generous name of Mr. Santikos.

  3. The first question is what exactly did his will and estate planning documents say?

    Any business has to plan for four things when they make Net Profit:
    1. Pay debt – we don’t know how much debt there is on any of the assets, but obviously that has to be serviced
    2. Pay taxes – the entity structuring will determine the taxation arrangement
    3. Invest for growth – any business that is not growing, is shrinking. So it’s completely appropriate to assume (unless liquidation was really Santikos’ goal), would be to continue to develop the Santikos’ brand across the country.
    4. Pay dividends to shareholders. That would include some bonus structure to the leadership team for proper stewardship of the resources and then also some payment to SAAF.

    Most large endowments like this are not designed to be a one-time cash infusion by liquidating assets. Instead, run the business and kick off a share of profits on an annual basis.

    The analogy most often used is:

    Should we simply milk the cow and enjoy the milk forever or should we barbecue the cow and enjoy it once?

  4. This is such a great article. I work for a nonprofit and there has been so much speculation about what’s been going on. I know I’m glad to hear a CEO has finally been named. What an intriguing problem for our community to have: how to keep dollars flowing from a for profit business for the purpose of strengthening the efforts of the donor dependent social service nonprofit sector. I hope that going forward both entities will be more transparent and inclusive about what happens. There is a wealth of knowledge in the nonprofit sector to tap into as Santikos and SAAF continue to grapple with these challenges.

  5. Of course, all news organizations are not only supposed to report the news released by whom they report upon, but what is not. It, also, reports on the official news of the police and the courts, the seamier side of our society.

    But what about private entiies that do not do anything illegal and want their activities to remain private? I do not know where the Santikos estate falls in this, but much of the complaining is from non and not-for profits who did not receive what the we’re seeking, but other than a plan and no promises, just recipients suppositions, wishes and applications are the source of the consternation.

    Many of the “wantabes”, as time goes on, fail or are found to be self serving or have nefarious reasons for existence that are not very morale or legal.

    I think that is were the emphasis needs to be!

    We only give to those charities we have volunteered with or otherwise have delt, plus do not with big concentrators like the United Way or the Big Give (they over charged us $10,000 a year or so ago, but did refund it within a week, but no apology or explanation). Also, there is another one in the Fall of each year that is aimed at attracting those that do not regularly give, like the Big Give, that we now avoid and give only directly and specifically.

    I think the emphasis in this situation is in the wrong area: let’s scrutinize those that are facilitators and middle men and get others out of the “business of charity”, like government .

    Helping those less fortunate is a personal responsibility and works better when it is a one to one relationship. Also, we need to seriously look at those who are taking advantage of welfare!

  6. A strange selection to become the foundations CEO in my opinion. However, I know nothing of the other applicants and the scope of what Ms. French did at UTSA or what she is supposed to do for SAAF. Somehow SAAF needs to instill transparency and avoid politics in their future awards. Good luck!

  7. This is a very interesting article but now I’m more confused. If Santikos is a charity, why are they asking the citizens of Cibolo to donate millions of dollars to them to finish the 38 million dollar movie theater? The argument I heard was give us millions and we will give it back to you from the SAAF.

    • The Santikos Cibolo economic development incentive is terrible. Why would a charity take from a city just to give it back. Who gives an incentive when the sign is already up! This is worse than Anaziby

  8. This is a timely and important article. And courageous coming from a news organization that is a recipient of SAAF funding! The points made by several commenters are also helpful. In the non-profit sector there is a lot of overlap in mission. When organizations with similar missions have paid staff and infrastructure and compete for the same donors, it dilutes the dollars for actual mission. SAAF could have an important place and Santikos could have a transfosrmative impact. Many small organizations have committed volunteers, but not savvy in administration and fundraising – here is another way SAAF could help. What about sharing infrastructure? Does every small organization need a staff and office? But, for SAAF and Santikos it takes leadership and boards that are more committed to mission than big salaries and nice offices and having all of the local non-profit bowing at their feet. I also like to donate directly to organizations I know. But, there may be many good organizations that I just don’t know about. This is where SAAF can play a role. Santikos could transform many organizations with large gifts (Symphony?).

    One source of information that many people are not aware of is the website for “990 Finder.” If you are a nerd and like to view details of non-profit organizations (including salaries, where they give, expenses, etc), this is the place to find annual IRS filings. I have found it helpful in my giving decisions.

    Keep up the good work.

  9. Thank you for this article. Many in the philanthropic community see the Area Foundation as a squandered opportunity. Part of the major issue is that they’ve lost all of their corporate knowledge on what a community foundation needs to be in 2019. Why would I, as a donor, choose to invest my dollars there when I know my assets can be managed better somewhere else? Beyond funding, the Area Foundation exists to support the NGO community. Why in the world, then, have the eliminated their capacity building efforts, become more stiff with presenters, and offer less support to their fund holders.

    The Area Foundation needs to right the ship, figure out what its role in the community needs to be, and mend relationships. As it sits right now, ALL of their fund holders should take a hard look at whether their resources would be better managed elsewhere. The Area Foundation has developed the unfortunate reputation for being a place local nonprofit execs and senior officers just go to retire. As a play where the job is cushy and they pay is nice and there is little hard work to be done. If the Foundation were SERIOUS about transforming the community, it should be seen as the exact opposite. Hard working, dedicated, and innovative. Until changes are made, the Foundation could be practically ignored and there wouldn’t be a difference. That’s the saddest part of this whole thing.

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