SC leases net mega millions for connected developer. Now others want similar deals.

The former Dominion Energy campus pictured on Sept. 6, 2024. (Jessica Holdman/SC Daily Gazette)

COLUMBIA — A politically-connected South Carolina real estate developer paid $35 million for a sprawling Lexington County office campus. Now he’s leasing it to the state in a deal worth 11 times that over the next 20 years.

Columbia developer Bill Stern chairs the state Ports Authority’s governing board and has a history of regular donations to political campaigns — mostly Republicans but also some Democratic incumbents.

On July 10, he closed on the purchase of the 100-acre property that previously housed utility company Dominion Energy’s South Carolina offices, according to records updated this week by the Lexington County Recorder of Deeds.

The sale went through one week after lawmakers finalized the state budget, which included money for the lease.

Thanks to an agreement Stern inked in late 2023, with the blessing of lawmakers, he’s likely to recuperate his cost in less than four years.

Under that agreement, the headquarters, which Dominion inherited when it took over SCANA Corp. in a 2019 buyout, will be the new home of the state agencies that provide services for people with disabilities, mental health issues, and alcohol and drug addictions, as well as the state public health department.

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The deal came about as legislators broke up the state’s massive public health and environmental agency.

With the split underway, they decided the time also was right to seek new offices for the agencies, as well as others located along Columbia’s redeveloping Bull Street corridor, House Ways and Means Chairman Bruce Bannister previously told the SC Daily Gazette.

The state Cabinet agency that serves as a clearinghouse for all state property was charged with finding buildings to rent. What it recommended was two locations: A campus for four of the state’s health agencies and a separate space for environmental regulators.

The deal was estimated to cost the state $496 million over two decades — $335 million more than it would have spent in operations and maintenance over 20 years for the agencies to simply stay put, according to the state Department of Administration.

A $104 million portion of that deal was to move the new environmental agency to the Columbia-area headquarters of the Colonial Life insurance company. However, that part ultimately fell through.

Stern is the beneficiary of what remains of the bargain, which came under scrutiny from some at the Statehouse due to its more generous terms.

In a departure from agreements the state had historically signed, the deal with Stern was for a so-called triple-net lease, leaving the state responsible for utilities, taxes and maintenance costs.

The entire deal depended on the Legislature funding it in the latest state budget — which it did — setting aside $30 million for the first year’s worth of expenses:

• $11 million in lease payments (a rate which will go up 3% annually)
• $5.5 million to renovate the space to fit agency needs
• roughly $3 million for estimated annual property tax and utility payments
• $10.5 million on moving costs and the rent and utility bills to maintain agencies’ current offices while the new one is renovated. There is also money for potential future repairs to the space. (The contract calls for the state to cover all repairs under $100,000.)

When Dominion finalized its buyout of SCANA — a transaction valued at $13.4 billion — and moved in to the space that will soon become the state’s public health campus, county records show $126 million went to the purchase of the office park.

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The health campus is not the only such deal Stern has done with the state.

He also has a contract, signed in 2022, worth $133 million over 20 years to lease buildings he constructed at the State Farmers Market to the state education and natural resources departments.

More deals

While members of the fiscal oversight board signed off on the health campus deal with Stern, the panel recently stopped short of  approving leases with similar, triple-net terms sought by the Medical University of South Carolina and the University of South Carolina.

“I’m concerned we’re getting into a situation where it’s not to the taxpayers’ advantage to lease,” Senate Finance Chairman Harvey Peeler, R-Gaffney, said during a meeting of the board last month before pulling the leases off the agenda for reconsideration at a later date.

MUSC wanted approval to lease space on two floors within the WestEdge development on the Charleston Peninsula for a physical and occupational therapy center. The building’s owners wanted the medical university to pay for a portion of taxes, insurance premiums and utility costs for common space.

That lease is expected to cost $12 million over 11 years, according to a summary provided to legislators.

In a smaller deal, USC wanted to lease space on Huger Street in Columbia for its parking office. In addition to lease payments, the landlord wanted the university to cover the cost of taxes and insurance, estimated to be over $60,000 annually over the seven-year term of the agreement. The school would also be responsible for utilities, custodial services, groundskeeping, security and maintenance, estimated at $37,000 annually.

Legislative staff said the state usually favors leases because costs, such as taxes, maintenance and repairs, are then the burden of the owner, not the government.

But the terms of these latest deals have taxpayers — and/or student tuition in the universities’ requests — footing those expenses too.

“These leases are coming fast and furious,” said Rep. Gilda Cobb-Hunter.

The Orangeburg Democrat had been the only legislator on the oversight panel to raise concerns about the previous deal with Stern when it came before the group. She said she’d like to see the state consider leases that come with a purchase option.