The company that purchased a former juvenile detention campus near Custer from state government is more than three months behind on a payment and could suffer repossession if it does not pay nearly $116,000 by 5 p.m. today.
SLIC-e Holdings LLC was the only bidder and submitted the minimum bid of $2.34 million for the former STAR Academy campus during a January 2018 auction in Custer.
The company’s contract with the state required a series of payments totaling $351,000 by May 1, 2018, and it took the company until that day to fulfill those payments. The money went into a state trust fund, where it generates interest for the Department of Corrections, which formerly managed the property.
The contract then required annual payments of $115,801.21 each May 1, beginning this year. The company missed the first annual payment this past May, which triggered a three-month grace period dictated by state law, according to Ryan Brunner, commissioner of the state’s Office of School and Public Lands.
After the three-month period ended last month, the next legal step was the state’s issuance of a default notice, which triggered another 30-day grace period that ends today.
If the company’s payment does not arrive by 5 p.m. today, Brunner said, he will file repossession paperwork Friday at the Custer County Courthouse and the state will take possession of the property.
Jared Carson, of Custer, is president of SLIC-e Holdings and has spoken publicly for it in the past, but he said Wednesday that he and the company have parted ways, and his further involvement is only on paper until the company appoints a replacement for him.
Regarding today’s deadline and payment, Carson said, “I am not entirely sure if they’re going to be able to make it or not. I don’t know.”
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Carson said a non-disclosure agreement prevents him from publicly identifying any of the investors.
When the company purchased the property, it announced plans for an “ecologically minded, clean-air, light industrial project” and “a place for economic development” for the Custer community. The company's name, "SLIC-e," stands for "Sustainable Light Industrial Complex and energy."
Carson said Wednesday that there are tenants on the property, including about a dozen artists who have studios and a joint gallery, a barbecue restaurant, a woodworking business, and a digital marketing and media company. Nothing would happen immediately to those tenants in the event of a repossession, according to Brunner, who said he would defer to the governor's office for guidance on what to do with the property in the future.
A spokeswoman for Gov. Kristi Noem said Wednesday that the governor is aware of the situation, but the spokeswoman added nothing further when asked for a comment.
The campus of the former STAR Academy is about 5 miles south of Custer. It dates to 1911, when it was the site of a sanatorium for tuberculosis patients. It was later converted to a state hospital for severely disabled people and was converted to the State Training and Rehabilitation (STAR) Academy in 1996.
The academy was closed by state government in 2016 following juvenile-justice reforms that resulted in a dwindling number of children at the facility.
In 2017, the Legislature and then-Gov. Dennis Daugaard passed legislation authorizing a sale of the property. The sale was opposed by some legislators and members of the public who said state-run juvenile detention facilities were still needed, because the state’s criminal-justice reforms had passed the burden of juvenile behavioral problems on to schools and local governments.
The campus measures 173 acres and has a collection of buildings totaling 168,880 square feet. A first auction of the property in October 2017 drew no bidders, and the second auction drew an overflow crowd of about 75 people to the Custer County Courthouse but produced only the one bid from SLIC-e Holdings.