OneUnited Bank slams brakes on Charles Street AME Church sale
Yawu Miller | 5/7/2014, 11:34 a.m.
The Charles St. AME Church was back in court Monday seeking court approval to sell the Renaissance Center building, but a series of objections filed with U.S. Bankruptcy Court Judge Frank J. Bailey may bring a halt to those plans.
Making his first appearance in the case, the U.S. Trustee appointed to the case filed a lengthy objection, stating that the church did not properly market the Renaissance Center; that OneUnited Bank to which the church owes millions has a right to block the sale; and that the appearance of conflicts of interest between the law firm representing the church and potential buyers for the property must be clarified.
In further testimony, U.S. Trustee Trial Attorney Eric Bradford noted that Charles Street has maintained a negative cash flow over the last two years, questioning the church’s continuing financial viability.
Displaying overhead projections of the church’s balance sheets, Bradford showed that the church has spent more money than it has taken in over the last two years. Despite the fact that the church has not paid any debtors since March 2012, it took in an average of $14,128 less than it spent each month through March 2014, according to the church’s records.
“The debtor is cash flow-negative and is currently administratively insolvent,” Bradford testified.
Bradford’s testimony could have serious implications for Charles Street’s bankruptcy. Under Chapter 11 bankruptcy, the church is permitted to retain assets essential to its survival. But if the church is unable to demonstrate its ability to reorganize and become fiscally solvent, the church could be compelled to file for Chapter 7 bankruptcy and liquidate its assets.
The church owes creditors nearly $6 million, including more than $5 million in loans, interest and penalties owed to OneUnited. The church borrowed $3.6 million in construction loans to redevelop the Renaissance Center and $1.1 million for renovations to the adjacent church building. Charles Street’s parent organization, African Methodist Episcopal First District, guaranteed the loan but has refused to repay.
Further complicating the sale is the appearance of conflicts of interest between the bidders for the property, Action for Boston Community Development and Horizons for the Homeless, and Ropes & Gray, the law firm representing the church. Partners from Ropes & Gray have served on the boards of ABCD and Horizons.
Filing yet another objection to the planned sale was Horizons for the Homeless, whose attorney argued that the church’s plan to sell the building unfairly favored ABCD’s bid for the building.
Judge Bailey did not rule on Charles Street’s motion on the bidding procedures to sell the Renaissance Center.
Attorneys for Charles Street are seeking Bailey’s approval to sell the Renaissance Center — formerly the Skycap Lounge — a building the church was seeking to develop as a function hall. ABCD is seeking to buy the building at auction, and has offered the church $2 million for the property.
But the attorney for OneUnited argued that the church did not seek to maximize the sale price for the Renaissance Center by properly marketing the building. Charles Street did not hire a commercial real estate broker or properly advertise the property, asserted the bank’s attorney, Douglas Gooding.
“The focus, your honor, should be on maximizing value and marketing assets,” he said.
Bradford, appointed by the Bankruptcy Court to safeguard the Church’s assets, agreed with OneUnited’s attorney in his testimony, arguing that Charles St. should do more to attract bidders for the sale. Bradford noted that the property was marketed as being for lease, not for sale and was not listed by a commercial broker.
Bradford also argued that the bank should retain its right to credit bid — to outbid the highest offer at auction if the selling price is below what the bank is owed.