An In-Depth Investigative Look At ‘The Dixie Cream Sweetheart Of A Deal’

Becerra had told him he was to pay Union Pacific Railroad his entire lease payment, and UPRR would in turn pay the city what they were owed…

by, Terra Rivers, Managing Editor

All the PDF documents below are copies acquired by Corridor News.

The San Marcos City Council is under heat since council members voted 5 to 2 to waive three years of unpaid rent for a local business owner and Hays County Judge candidate, Ruben Becerra.

On May 1, city council approved a settlement of $2,063.21 for the unpaid rent of 2017 and waived the rent of $11,054.78 for 2013-2016 for Dixie Cream Donuts. Their decision was made after three hours of deliberation in executive session.

According to council, the basis for the settlement was that city had no contract or lease agreement with Becerra regarding the city property on which the donut shop was located.

In an interview with KXAN on May 3, councilmember Melissa Derrick stated that the city hadn’t made a formal lease agreement with Daniel Anderson, former owner of Dixie Cream Donuts, and that once purchased Becerra just had to mow property and the right of way.

Additionally, councilmember Derrick stated that this type of agreement was normal for the city to conduct business in such a manner.

Upon further investigation, Corridor News verified the sales agreement between Union Pacific and San Marcos transferred UPRR “rights and obligations” directly to the city on all leases, which included 68.6 percent of the land Anderson was leasing.

 [Item 2] The purchase agreement between UPRR and the city included an “Assignment and Assumption Agreement” for the current and active leases that would then be held by the city.

Anderson’s 2011 UPRR lease states he was agreeing to a lease of “14,317 sq. ft.”; his annual rent due, in 2011, was $5,500 with an agreed annual rent rate increase of 3 percent.

The purchase transferred 9,817 sq. ft. of the land under Anderson’s lease to the City of San Marcos, which left UPRR with the remaining 4,500 sq. ft.

  • The City of San Marcos assumed all leases and lease terms that were held by UPRR for the purchased property
  • UPRR lease agreement states Anderson’s rent was to be paid yearly and in advance and due on February 1

[Item 2] In October 2013, UPRR informed as many as seven tenants of the upcoming sales agreement with the City of San Marcos for said land. The property in question would include land currently under lease with UPRR in “full or in part.”

Originally, it was stated on the council’s agenda on May 1, that the rent for 201 S. LBJ Dr. had not been paid for years 2013, 2014, 2015, 2016 and 2017.

That would mean…

  • Anderson owed for 2013 and 2014
  • Becerra purchased in 2015 and owed for 2015, 2016, 2017 and 2018 (due on Feb 1, 2018)

[Item 6] In an email the Assistant City Manager and Chief Financial Officer, Steve Parker sent to Becerra, he stated, “[City staff] showed Anderson paid $6,010 in 2014.”

[Page 3 & Item 1] Based on Anderson’s original lease with UPRR, and given the city’s rights of assumptions on the land lease for their 68.6 percent ownership of said land, the payment made by Anderson in 2014 would have included the rent due to the City of San Marcos.

[Page 3 Item 10] While Becerra had a lease assignment with UPRR, he did not have the lease agreement with the City of San Marcos amended to reflect his purchase of business at 201 S. LBJ Dr.

[Page 8, Item 2] However, the city received full Assignment and Assumption from UPRR in December 2013.

[Page 26, Item 4] After Becerra purchased said property in May of 2015, he did not notify the city of his ownership, and the city did not notify Becerra for 19 months (November 2016) when it came to the attention of city staff that there had been no rent payments received for 201 S. LBJ Dr.

Corridor News acquired copies of the emails below

ITEM 6: 02/16/2017 – Assistant City Manager and Chief Financial Officer, Steve Parker, emails Becerra a copy of the city’s lease with Anderson through the assignment and assumption agreement and states how much Anderson paid in 2014. Email also outlines the accounting of amounts owed for 2015, 2016 and 2017

ITEM 9: 09/28/2017 – City Manager, Bert Lumbreras requests staff push to set up a payment plan for Becerra.

ITEM 10: 09/29/2017 –Lumbreras sends first letter of notice regarding unpaid rent for the lease for Dixie Cream Donuts.

ITEM 13: 10/12/2017 – Becerra responds to notice with letter to Lumbreras. “When I purchased Dixie Cream from Dan Anderson there were two entities that had control of the land where the building, currently occupied by Dixie Cream Artisan Donuts, is located. Those two entities are Union Pacific and the City of San Marcos,” said Becerra. “This arrangement was in effect for many years.”

Note: The city purchased the property in December 2013; it had only held or owned the land for 17 months when Becerra bought Dixie Cream in April 2015.

 [PAGE 23] In the original Bill of Sale between Anderson and Becerra for Dixie Cream Donuts, the last paragraph states the following disclaimer:

“Buyer has not relied on any information other than Buyer’s inspection and the representations and warranties expressly contained in the purchase agreement and in this bill of sale…

Buyer agrees that Buyer is accepting the property based solely on the Buyer’s own independent investigations and findings and not in reliance on any information provided by the Seller.”

During our investigation, a local business leader told us that Becerra told them that Anderson had told him he was to pay Union Pacific Railroad his entire lease payment, and UPRR would in turn pay the city what they were owed.

[Item 15:]  On Oct. 26, 2017, Lumbreras requested two documents from Becerra in the intent of resolving the “outstanding issues with lease payments.”

  • Copy of Becerra’s agreement with UPRR or bill to see if payments to UPRR included the city’s lease payment.
  • Copy of the property’s layout with UPRR or agreement with Mr. Anderson to verify calculations on rent payments that were previously discussed.

[Item 15.2] According to email records of correspondences regarding Dixie Cream Donuts, Lumbreras received only a copy of the Assignment Agreement and txt file from Becerra.

[Item 17] Lumbreras presented his final position on the rent delinquency on November 21, 2017, stating the city would waive the rent for 2015 and 2016 leaving a balance of $4,503.11 for 2017.

It is safe to say the City did not properly bill you for the previous three years,” Lumbreras said in the email. “As a result, it is our responsibility to insure we are properly billing, and I can assure you we will do that from now.”

However, in the notice of unpaid rent sent to Becerra in September 2017, Lumbreras stated the following:

“Mr. Anderson should have disclosed this information to you at the time you purchased the Dixie Cream Donuts business from him; but even if he failed to do so, you would still be responsible to honor the terms of the lease.”

Records show Becerra was sent an invoice on December 4, 2017 for Dixie Cream Donuts’ unpaid rent for 2017.

  • [Item 17] 01/17/2018 – Lumbreras sends 2nd letter of notice of unpaid rent for 2017 to Becerra explaining “Because we could not prove that you were appropriately notified until November 2016 of lease amounts due to the city for previous years, which correspond to the 68.6 percent of the property where the Dixie Cream building is located, the city will forgive these payments.” Letter also states that the city is well below fair market value pricing.

 

  • [Item 18] 1/19/2018 – 2nd invoice sent to Becerra

 

  • [Item 20] 02/01/2018 – Karen Smith, Management Assistant to City Manager, notifies CFO and Assistant City Manager, Parker, “Per Bert, you and he are supposed to get together on site at Dixie Cream to determine square footage.”

 

  • [Item 22] 02/05/2018 – Parker notifies Becerra that the city has reduced the square footage of Dixie Cream Donuts’ rental square footage from 9,817 to 4,495 SQ FT. Rent is reduced from $4,503.11 to $2,061.88. Projected rent for 2018 established as $2,123.74.

 

  • [Item 23] 02/09/2018 – Keme’s BBQ & Soul Food LLC applies for Certificate of Occupancy to place a food truck at 201 S LBJ Dr.

 

  • [ITEM 25] 03/22/2018 – Kevin Burke, Economic Development, City of San Marcos, requests ANY permit applications submitted for the former Dixie Cream site be placed on hold.

 

  • [Item 27] 03/28/2018 – According to the HaysCAD, the building at 201 S LBJ Dr. is still under Daniel Anderson’s name.

 

  • In March, Yogurt in Love announced on their Facebook page that they would be opening in the “original Dixie Cream Donuts location.” Their ribbon cutting was held this morning.

 

  • [Item 28] Parker informed Becerra on April 10 that the city would need proof of ownership of the building located at 201 S. LBJ, a copy of the lease agreement with the proposed tenant who will occupy the building at S LBJ and the deposit amount of $2,063.21, which represents last year’s rent pain in full from him before city staff would take the proposed lease to city council.

 

  • [Item 29] 04/12/2018 — Parker states in an email to Becerra, “We are not of the opinion that it is the City’s fault that Mr. Anderson didn’t notify you about the existing lease with the city.”

 

  • [Item 31, Page 6] In an email dated April 24, 2018, Parker thanked Ruth Molina, owner of Yogurt in Love, for “bringing Mr. Becerra’s check for 2017. He states that the city has granted her a temporary certificate of occupancy allowing her to open Yogurt in Love at its new location; however, he cannot guarantee city council will approve her lease during May 1st city council meeting.

“They could terminate the old lease and not do a new lease with anyone or they could adjust the terms they are willing to accept for the new lease,” Parker said. “We are willing to allow you to proceed with the permitting and renovation process and are willing to allow temporary certificate of occupancy as long as you understand the risk that approval of the lease can’t be guaranteed. Hopefully, we can resolve this by next Tuesday and move forward…”

Corridor News’ investigation into the rent delinquencies produced a lot of information and could not find any written documentation of the City of San Marcos altering the lease terms established by the UPRR lease agreement for 201 S LBJ Dr.

However, according to the Union Pacific agreement signed in 2011 by Anderson and included in the assignment documentation, Section 18, Paragraph A, states that the “leasee shall not sublease the premises, in whole or in part, or assign, encumber or transfer (by operation of law or otherwise) this lease, without the prior consent of Lessor, which consent may be denied at Lessor’s sole and absolute discretion.”

While it is true that there is no direct contract signed by a representative of the City of San Marcos and Daniel Anderson for the lease of 9,817 sq. ft of property at 201 S LBJ Dr., however, the assignment and assumption agreement signed by the City of San Marcos and Union Pacific Railroad holds the city to the obligations of the lessor identified the lease and grants them the right, title and interest to collect rent on those leases as is.

While city staff states, as referenced in Item 6, that Anderson is shown to have paid $6,010 in 2014, it has not been stated or confirmed whether the city received its portion of the payment.

According to city clerk, Jamie Case, “Mr. Anderson did not submit payments to the City of San Marcos.”

Yogurt in Love held their ribbon cutting for their new location at the former home of Dixie Cream Donuts the morning of May 10; doors are scheduled to be officially open Friday, May 11, under a temporary certificate of occupancy.

During the city council meeting on May 1, city council postponed the approval a lease with Ruth Molina, owner of Yogurt in Love, indefinitely.

The full May 1, motion can be read below

“I move on item 18 A that the city council waive all rent due from current and former leasee’s on 201 S. LBJ Drive for the years of 2013 through 2016, accept the sum $2,063.21 in payment of rent under the lease for 2017 and direct staff to bring back on a future agenda a lease with Ruben Becerra for rental of 201 S. LBJ Drive at the lease rate for 2018 in the total sum of $3,446.68 with rent to be paid as follows:

A payment of $861.67 within 10 days of the execution of the new lease and 3 equal payments of the same amount, each due on the first of the month of each month thereafter. For any extension beyond the initial 1-year term, the annual rent shall be paid in full on February 1st of the year subject to 3 percent annual rent increase and subject to city’s right to re-determine the annual rent upon notice to leasee.

Prior to the city’s execution of the lease, Mr. Becerra shall provide a signed acknowledgment from the leasee of the building of the provisions of the Becerra lease regarding the disposition of the building upon termination of the ground lease.

All other lease terms shall be substantially the same as the terms of the lease at 201 S. LBJ Drive partially assigned to the city by Union Pacific Railroad in December 2013.”

In other news, the Final Amended City Council Agenda for Tuesday, May 15 states the city council will consider the following under agenda item 22:

“Consider the approval of resolution 2018-78R, approving a lease agreement with Becerra Corp. for the year to year lease of approximately 9,817 square feet of space at 201 South LBJ (the site of the former Dixie Cream Donut Shop); authorizing the City Manager to execute said lease; and declaring an effective date.”

It is unknown whether the city will alter Section 18, Paragraph A, which requires “consent of the lessor” for the leasee to sublease the property or if Becerra has received consent from UPRR to sublease the property as the building at 201 S LBJ Dr. partially occupies land under the UPRR lease agreement.

Overwhelmed with information? Here is a breakdown and refresher of what we know

  • Page 1: Union Pacific Railroad notified Daniel Anderson of the sale agreement with the City of San Marcos for roughly 68.6 percent of the land currently under his UPRR lease.

 

  • Page 10: Anderson notified UPRR with an Assignment of Lease that he had sold the business and was transferring all obligations of the lease to Ruben Becerra. Becerra should have received a copy of the original UPRR lease agreement for the full terms and a copy of the supplement agreement signed after COSM purchased a portion of the property.

 

  • Page 24: Becerra and Anderson signed a Bill of Sale for Dixie Cream Donuts at 201 S. LBJ, which includes the following disclaimer, “Buyer is accepting the property based solely on Buyer’s own independent investigations and findings and not in reliance on any information provided by the seller.”

 

  • Page(s) 27 and 31: The City of San Marcos notifies Becerra of the city’s Assignment and Assumption Agreement with UPRR for 1.813 acres including a portion of the property, which was under lease with UPRR in 2011. (Only 27) Becerra also receives a copy of the original lease agreement with Anderson and UPRR.

 

  • Page 28: Assistant City Manager Steve Parker states in an email to Becerra that Anderson is “showed to have paid $6,010 in 2014.”

 

  • Page(s) 28, 31, 42, 44, 47 and 50: Parker/Lumbreras notifies Becerra of unpaid rent due (includes notifications of adjusted amounts)

 

  • Page(s) 31 and 51: Lumbreras/Parker states Becerra is responsible for honoring the terms of the lease whether Anderson notified him or not. Parker states “the city is of the position that we have an existing valid lease in place…we are not of the opinion that it is the city’s fault Mr. Anderson didn’t notify you about the existing lease with the city.”

 

  • Page 34: Becerra tells Lumbreras Anderson did not notify me.

 

  • Page 34: Becerra acknowledges his knowledge that the property was under the control of two separate entities

 

  • Page(s) 36: Becerra provided Assignment Agreement between himself and Anderson from UPRR

 

  • Page(s) 40, 42 and 47: Rent owed for 2015 and 2016 waived, (Only page 47) 2017 rent payment reduced

 

  • Page(s) 40, 42: City states why it will waive rent for 2015 and 2016

 

  • Page(s) 47: The city reduces the leased square footage for Dixie Creme from the original 9,817 sq. ft. to 4,495 sq. ft., (Page45 & 52) sets rate per square footage at $.459 per sq. ft. and an annually rate increase of 3 percent.

 

  • Page(s) 50: City notifies Becerra of required documentation before a new lease can be signed with the city and states the city will need “the deposit amount of $2,063.21, which represents last year’s rent paid in full.” This amount was $1.33 more than what the rent payment would be for 2017 (SEE PAGE 52/Item22)

 

  • Page(s) 57: Ruth Molina delivers check for 2017 unpaid rent for Dixie Cream property on behalf of Becerra.

However, after all this mess you might say, the document that started this situation was the Bill of Sale between Anderson and Becerra, which both parties signed and had notarized…

“Buyer has not relied on any information other than Buyer’s inspection and the representations and warranties expressly contained in the purchase agreement and in this bill of sale…

Buyer agrees that Buyer is accepting the property based solely on the Buyer’s own independent investigations and findings and not in reliance on any information provided by the Seller.”

Informational links in date order

Copies of documents and emails acquired by Corridor News and referenced through-out story

[gview file=”https://smcorridornews.com/wp-content/uploads/2018/05/Becerra-Dixie-Cream-Donuts.pdf”]

 

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3 Comments

  1. Am I the only one who is wondering why the rent is so low? That is super cheap and far less than what a 1 bedroom apartment would cost and this is a commercial property!

    1. Fred,

      No you are not the only one. Last year the city dropped the sq. footage that they were charging Dixie Cream for. They dropped it pretty much in half and as of their May 1 meeting they were only charging Becerra for the land that the actual building sits on.

      Not sure how he was able to accomplish that, but that’s what they did. Additionally for the 2017 rent, they cut the sq. foot price to 0.459 cents per sq. ft.

      However, according to the the new lease in the May 15 agenda packet (link provided at bottom of story) that now has Yogurt in Love’s name on it, the city has adjusted the sq. ft. back up to the original amount.

      The last year that UPRR held the lease as the sole owner, the price per sq. ft. was around $1.38, however since then UPRR has adjusted their price to around 0.74 cents.

      Here’s a bit of info that was not included in either of our stories (but is available in the documents provided above), the city originally paid Union Pacific $5.25 per square foot for 1.851 acres for a total of $423,305 of taxpayer dollars.

      Thank you for reading!

  2. I looked into this transaction some time ago for other reasons.

    Indeed, you may find where grantor Anderson in his bill of sale, declared that

    “Buyer agrees that Buyer is accepting the property based solely on the Buyer’s own independent investigations and findings and not in reliance on any information provided by the Seller.”

    Where you find such language, it is simply another way of setting out a “Quit Claim Title”.
    In other words, the grantor makes nor warranty and simply quits all claim to right held in the property, and sells whatever extent he may or may not actually possess to the grantee. “Okay, Terra, I’m gonna sell you this piece of string, but don’t ask much of it you’re getting”

    Good work on the research, girl.

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