Reversing a previous ruling, a U.S. Bankruptcy Court judge has refused to approve the sale of the federally subsidized Concord senior citizens apartment development in Pasadena.
Judge William J. Lasarow said after a four-hour hearing this week that he lacks the authority and jurisdiction to order the Department of Housing and Urban Development to accept a $5.5-million offer made by the prospective buyer, SHB Financial Corp., a North Hollywood-based real estate investment firm. HUD holds a $2.6-million mortgage on the property.
At a hearing last month, Lasarow had tentatively approved the sale, provided that all parties involved agreed on terms. But no agreement was reached and HUD officials, the City of Pasadena, Concord tenants and about 50 creditors of the Concord filed arguments with the court opposing the sale.
The 150-unit building at 275 Cordova St. is owned by the Concord Senior Housing Foundation, an organization established to buy the property in 1979 by the Rev. William Steuart McBirnie, a Glendale minister who has since become embroiled in legal and financial problems. Foundation attorneys say that profits from the sale of the Concord would have been used to reimburse creditors, many of whom are elderly Glendale residents.
Part of McBirnie's Church-Related Network
The housing foundation is part of a multimillion-dollar network of church-related organizations McBirnie built in Glendale since 1961, based on his charismatic presence and a nationally syndicated radio show on which he preached anti-communist sermons. In recent years, however, McBirnie ran into trouble when former parishioners began suing him and his organizations, claiming he had failed to repay loans. McBirnie blamed his financial problems on bad investments and poor financial advice.
Within the last year, the housing foundation and three other groups with ties to McBirnie--Community Churches of America, California Graduate School of Theology and United Community Church in Glendale--have filed for reorganization under Chapter 11 of the U.S. Bankruptcy Code.
McBirnie has stepped down from most of his posts. In late April, citing ill health, McBirnie relinquished the pulpit he had held for 25 years at United Community Church.
Lawyer Mark Young, who represents SHB, said his client probably will not appeal Monday's ruling. "This is not the only building in town that's available," Young said.
Foundation Must Now Seek Another Buyer
The court decision will force the foundation to search for another buyer, delaying indefinitely any payment to those creditors. But, according to lawyer Ben Harrison Logan III, who represents the Concord tenants, it will ensure that HUD maintains control over the housing project and continues to guarantee federal subsidies.
The housing agency has established the fair market monthly rent at the Concord as $316 to $386. Tenants pay about 30% of their income on a sliding scale and HUD subsidizes the balance if necessary.
HUD had opposed the sale to SHB Financial Corp. because it said federal housing laws call for the Concord to remain under nonprofit ownership.
HUD attorney Samuel Rothman also expressed concern about selling the building to SHB because he said its secretary-treasurer, Seymour Braverman, is a convicted felon who spent six months in prison in 1976 for engaging in a kickback scheme that involved HUD contracts to rehabilitate four low-income housing projects.
Rothman said Braverman has since been "rehabilitated" and allowed to resume doing business with HUD. However, court documents filed by HUD this month stated: "Mr. Braverman's own personal background also leaves room for substantial doubt regarding the reliability of his covenants." Lasarow did not address the issue of Braverman's background on Monday.
Braverman was one of a group that tried to buy the Concord in 1982, but failed when Concord tenants filed a successful class-action lawsuit to stop the foundation from paying off the HUD mortgage, doubling rents and executing the sale.
'A Win-Win Situation'
Braverman's attorney said Lasarow's ruling ensures that creditors will get nothing. "It was a win-win situation, and now everyone loses," Young said.
Under the proposal rejected this week, Braverman was to have made a $3.8-million down payment on the Concord that would have been used to repay immediately creditors of the foundation and Community Churches of America. The rest was to have been repaid to creditors over 15 years. Creditors wanted full payment immediately.
Concord residents, fearing that new owners might raise their rents or evict them, expressed relief that the sale did not go through.
Delighted by Decision
Clements Gordon, 77, a Concord resident who led opposition to an attempt to sell the building in 1982, said she is delighted with the decision.
"So many people are now protected because the judge didn't let it get into the hands of a for-profit group," Gordon said. "The building is still for sale, but they will have to abide by HUD rules," she said, referring to future owners.