The State of Tennessee took a bath when it sold the former University of Tennessee Health Science Center chancellor’s home to a shell company set up by Apple, Inc. founder and CEO Steve Jobs, losing $475,000 in the sale.
Further from Marc Perrusquia:
The loss had little to do with Jobs, however, and more to do with a decision to liquidate chancellor housing across the UT system – just as the biggest recession in 70 years was dawning.
“No corners were cut. No special deals were done,” said Chloe Shafer, real estate compliance director for the Tennessee Department of General Services, which sold the home at 36 Morningside Place on behalf of UT.
“I don’t know why they picked the worst time in the real estate market.”
More precisely, the decision came in 2007, shortly before the housing bubble burst. The UT Board of Trustees decided that providing homes to campus chancellors had become too expensive.
“There’s a better use for those dollars. That was the general feeling,” said Charles M. “Butch” Peccolo, UT chief financial officer.
In the process of trying to sell the chancellor’s home in Memphis, the market crashed. Yet the state stuck with the decision to liquidate the home even as bids failed to materialize and a series of appraisals showed its value plummeting, according to records maintained by the Department of General Services in Nashville.
The state bought the home for $1,325,000 in 2005 when Alice Owen, wife of then-chancellor Bill Owen, complained about a previous house that served as the chancellor’s residence.
After the Owens moved into 36 Morningside, they used more than $28,000 in tax dollars on improvements including $4,500 for an interior decorator consultation, $4,500 for a plasma TV, and $11,854 in shelving, lighting and rewiring. Much of the spending didn’t follow UT’s protocols, and Owen subsequently reimbursed the school.
An appraisal in October 2007 valued the home at $1.3 million. The home’s estimated value fell to $1.1 million in a subsequent appraisal in October 2008.
Over time, offers came in for hundreds of thousands less than the state wanted. Deals fell apart. And the market continued to plummet.
Then in early 2009 the state was contacted by George Riley, a Los Angeles attorney who represents Apple. In a span of eight days that March, Riley signed a sale contract with the state and helped set up a shell company, LCHG, LLC, that would protect Jobs’ privacy. On March 26, 2009, the firm closed the deal, buying the home for $850,000 “as is.”
“We always knew it was a law firm and they were buying the property for someone else. But we didn’t know who they were buying it for,” Shafer said.
Peccolo, the UT financial officer, said the decision to liquidate chancellors’ residences affected only the Memphis and Knoxville campuses. The home at UT-Martin was on campus and was converted to an alumni house, and the one at UT-Chattanooga is owned by a foundation, he said.
The state still is trying to sell the UT president’s home in Knoxville, an 11,000-square-foot home with a tennis court on 3.4 acres. Appraisals on the property have fallen from as much as $3.75 million in 2009 to $2.15 million this year.