STAR Academy sells for $1.325 million

Jason Ferguson

The fourth time—and a significantly lower price—was the charm for selling the former State Treatment and Rehabilitation (STAR) Academy.
The former academy, long a corrections facility for the state’s youth, was sold at auction for $1,325,000 last Friday at the Custer County Courthouse.
The winning bid was placed by Faith Lewis of Lewis Realty/Keller Williams Black Hills Realty, who was placing bids on behalf of local bidders. The indentity of the  purchasers of the property was not revealed initially, but has since been revealed as Paul and Haylee Vershure and Mark and Kim Nielsen of Custer.
“We’ve been trying to do something good out there for a long time, wanting to get it back on the tax rolls, wanting to get it back into some productive uses,” said  Ryan Brunner, the state’s School and Public Lands commissioner. “It feels good to be able to move foward.”
The auction started about a half hour later than it was supposed to due to the weather. Brunner laid out the ground rules for the auction, which was conducted by Mike Cornelison, land agent for School and Public Lands.
The minimum bid for the auction was $1 million, $680,000 less than the previously listed price after $320,00 was subtracted from the property value following the sale of 40 acres of the property at the previous auction in September.
Three bidders placed bids, with Lewis’ successful bid being the 10th one received. The bidding included breaks for those bidding for them to consult with the person for whom they were bidding.
The successful bidders paid 10 percent of the purchase price immediately following the auction and also presented a letter of credit from a lending institution for the remainder of the money. Closing will take place over the next 60 to 120 days, although Brunner said the state would be willing to work with the new owners to get onto the property before the 60-day window if they wish to do so.
The portion of the campus purchased at last week’s auction includes the main building, administration building, Brady Academy, the gymnasium and eight houses on 133 acres.
The campus has been auctioned three times before, with the first auction garnering no bids, while the second resulted in the ill-fated purchase by SLIC-e, which went belly up after SLIC-e Holdings bounced a $116,588 check to the state for an annual payment that was more than four months overdue. When the check bounced, the state repossessed the facility which SLIC-e holdings bought at auction and was purchasing on a contract for deed. The September auction resulted in the 40-acre parcel being sold, but not the main campus and buildings.
Brunner said previously the proposed state budget for next year included a recommendation from the Department of Corrections for up to $1.7 million in funding to tear down the buildings and return the entire campus to bare land so it could be easily sold. That legislation will now be withdrawn. An estimate of $674,935 was given by RCS Construction of Rapid City concerning the cost to demolish buildings on the site, which also brought down the appraisal/minimum bid. The recent vandalism was not taken into account, and the campus was offered as-is in one parcel.
There is one well on the campus that pumps 75 gallons per minute and another one around a half-mile away that STAR Academy utilized that pumps 50 gallons per minute. That well crosses Forest Service property, for which the state has an easement. The state intends to transfer that easement to the purchaser of the campus, but the Forest Service will have to be involved in that process. The on-site well will automatically be a part of the sale. The wastewater treatment plant on the campus can handle 50 gallons per minute.
The state will retain property rights to the land, per the state constitution, but the owner will be reimbursed for any damages if the state disturbs the land to pull any minerals from it. The state also maintains ownership of the cemetery on the campus, with Brunner saying the state would likely offer the buyer money to maintain the cemetery.
In order to comply with county ordinances, the state is in the process of surveying a 66-foot right-of-way to access the 40 acres of property the state sold during the September auction. The property is being surveyed with the intention the road could be developed into a public right-of-way by the owner in conjuction with the purchaser of the 133 acres for future development. The state will not build the road, but reserved the right-of-way. The state will also maintain and heat the campus until closing.
Brunner said after the auction the money received from the sale, along with the $32,000 form the previously-sold 40 acres and the $351,000 collected from SLIC-e prior to repossession will go into a trust fund, the interest and dividends from which will benefit the state’s Department of Corrections.
Brunner also said after the auction he anticipated the property would sell at the auction, as there had been more interest due to the lower minimum bid.
“We lowered the price, sold off some land and lowered the price again,” he said. “It’s important when we are talking about public land that we follow that process, even if it takes four times to sell it. We need to follow that process for due diligence for the taxpayers of South Dakota.”
Brunner said he is pleased with the sale results and is excited to see what the local purchasers do with the property.
“It will be a nice project to turn that from a closed institution into a developed property,” he said. “It’s got a lot of potential and I think it will be something nice for the local community.”

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