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 to pay off creditors, many of whom are elderly Glendale residents.
The 150-unit building at 275 Cordova St. is owned by the Concord Senior Housing Foundation, which is selling the property for $5.5 million to satisfy hundreds of creditors, including the U.S. Department of Housing and Urban Development. The agency holds a $2.6-million mortgage on the building. The foundation, established in 1979 by the Rev. William Steuart McBirnie of Glendale to purchase the Concord, filed last summer for protection from creditors under Chapter 11 of the U.S. Bankruptcy Code.
The housing foundation is part of a multimillion-dollar network of church-related organizations McBirnie built in Glendale based on his charismatic presence and nationally syndicated radio show on which he preached anti-communist sermons. But in recent years, the church's holdings have run into legal and financial trouble.
McBirnie's empire started to crumble several years ago when former Glendale parishioners began suing him and his organizations, claiming that he had failed to repay loans. McBirnie has said he was unable to repay the money because of bad investments, rising interest rates and poor financial advice.
He remains as president of Community Churches of America, but has stepped down from his positions with the other groups. In late April, citing ill health, the 66-year-old McBirnie relinquished the pulpit he had held for 25 years at United Community Church in Glendale.
Three other McBirnie-affiliated organizations filed for protection with the bankruptcy court in the past year. They are Community Churches of America, California Graduate School of Theology and United Community Church in Glendale.
At a four-hour hearing last Friday in 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.
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.
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. HUD attorney 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 Friday 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.
The housing agency 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 HUD subsidizes the balance if necessary. HUD attorneys argued that the profit should be used to reduce rent subsidies.
"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, 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 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 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."