Despite objections by federal housing officials, a U.S. Bankruptcy Court judge has approved the sale of the Concord senior citizens apartment complex in Pasadena for $5.5 million to pay off creditors.
The 150-unit building at 275 Cordova St. is owned by the Concord Senior Housing Foundation, which is selling the property to satisfy hundreds of creditors, including the U.S. Department of Housing and Urban Development (HUD). The agency holds a $2.6-million mortgage on the building.
At a four-hour hearing last Friday in the U.S. Bankruptcy Court in Los Angeles, Judge William J. Lasarow approved the foundation's request to sell the Concord to SHB Financial Corp., a North Hollywood-based real estate investment firm.
Tenants Filed Class Action Suit
The foundation, which was established in 1979 by the Rev. William Steuart McBirnie to purchase the Concord, filed last summer for protection from creditors under Chapter 11 of the U.S. Bankruptcy Code.
Concord tenants made national headlines in 1982 when they filed a successful class action lawsuit to stop a previous attempt by the foundation to sell the building.
The housing foundation is part of a multimillion-dollar network of church-related organizations McBirnie built, based on his charismatic presence and nationally syndicated radio program on which he preached anti-communist sermons. But in recent years, his empire has run into legal and financial trouble.
The housing foundation is one of four McBirnie-affiliated organizations to file for protection with the bankruptcy court in the past year. The others are Community Churches of America, California Graduate School of Theology and United Community Church in Glendale.
In opposing the Concord sale, HUD attorneys insisted that the agency should have been allowed to audit the foundation's books before the sale was approved. Joseph Gelletich claimed that the complex is "throwing off a $125,000 annual surplus," or profit, which the foundation is not entitled to as a nonprofit corporation.
HUD officials alleged that the Concord has been mismanaged and that they have been denied permission to conduct a financial audit as required by law. "There are indications that assets have been diverted, and that is one reason we'd like an audit," Gelletich said.
Phillip McNutt, a Maryland attorney representing the foundation, acknowledged that the Concord has generated a $200,000 surplus, but said that is because debts to two other McBirnie-founded organizations, Community Churches of America and California Graduate School of Theology, have not been paid during the bankruptcy proceedings.
McNutt said the foundation's books have been made available for inspection on numerous occasions. "As far as I know there have been no assets diverted . . . . HUD is on a witch hunt because of the adverse publicity," he said. McNutt added that because no other buyers have come forward, SHB's offer is the only way to pay creditors.
HUD has established the fair market monthly rent at the Concord as between $316 and $386. Tenants pay about 30% of their income on a sliding scale and the housing agency subsidizes the balance. HUD attorneys argued that the profits should be used to reduce rent subsidies.
Five-Year Freeze on Rent Hikes
"We're not happy," HUD lawyer Samuel Rothman said in an interview. "The project is carrying too much subsidy, too much for a nonprofit operator. We're concerned that the sale would mean higher subsidies."
Addressing concerns expressed by HUD, Judge Lasarow ruled that SHB cannot ask for increases in rent or HUD subsidies for five years to "make sure the U.S. government won't be financing this plan (to repay creditors)."
The sale of the Concord to SHB is ironic because Seymour Braverman, secretary-treasurer of the company, was one of the prospective buyers in 1982, when the foundation tried to pay off the HUD mortgage, doubled rents and attempted to sell the building. Concord tenants went to court to block the sale and obtained an agreement guaranteeing a federal rent subsidy to allow them to remain in the building.
Moreover, Braverman has had difficulties in the past with HUD. In 1976, he and two partners of Subsidized Housing Corp. of America were convicted of engaging in a kickback scheme involving contracts with HUD to rehabilitate four low-income housing projects, according to HUD officials. Braverman spent six months in federal prison.
Rothman said that Braverman has since been "rehabilitated" and has been allowed to resume doing business with HUD. Braverman said SHB owns and operates buildings in Boyle Heights, East Los Angeles and South Gate that are occupied mostly by seniors citizens on federal rent subsidy programs.
Lasarow said he did not know of Braverman's criminal record when he ruled to permit the sale. "If it had been brought up to me it might have made a difference," Lasarow said, adding, "I don't really think it's proper to even get into some of these things."
Silent on Criminal Record