By Patrice K. Muhammad
Posted online June 4, 2016 12:30 p.m.
At a time when home foreclosure rates are declining, church foreclosure rates have increased steadily for many years and are now a common occurrence around the country.
According to a 2012 Reuters article, “In 2011, 138 churches were sold by banks, an annual record, with no sign that these religious foreclosures are abating, according to CoStar. That compares to just 24 sales in 2008 and only a handful in the decade before.”
The Reuters article continues, saying that churches are among the final institutions to get foreclosed upon because banks did not want to appear unkind or unforgiving to churches.
Lexington congregations had been spared of the stress, pain and embarrassment of foreclosure until now.
Pastor Willis Polk and the church he pastors, Imani Baptist, are in a fight with Central Bank to hold onto their expansive property on the outer edge of the Lexington’s west end.
Their 22-acre property is not in foreclosure at this time, however Rev. Polk says that their lender Central Bank has offered few options so far to satisfy their $10.2 million debt on the 2012 refinanced project.
“They’ve offered a ‘deed in lieu of foreclosure’ deal or come up with a plan to catch up.’’ Polk said.
‘Deed in lieu of foreclosure’, would transfer ownership of the Georgetown St. property to Central Bank to pay off their loan and avoid the foreclosure process.
“Why now?’’, the Pastor wants to know. Rev. Polk has considered the notion that someone with more means has shown interest in the property and the bank wants possession of the church so it can be sold to satisfy the loan.
Rev. Polk has enlisted the help of Kenneth Lewis, a California based church finance consultant and strategist.
Lewis says that he is working with Imani to restructure their deal so that they can remain in the building.
He also says Imani was loaned far too much to begin with.
“Because the loan did not meet the national lending guidelines which are federally regulated to minimize risk, I am led to believe that there is something going on. This was a loan that was meant to fail so from that perspective [the loan was predatory],’’ Lewis said.
Lewis provided this breakdown: “[The church] qualifies and qualified based on the same consistent income for a mortgage loan in the amount of $2,100,000; but was issued a commercial construction loan for $10,282,000.
The rate was 5% Interest only fixed beginning 4/1/2012 through 9/1/2012 or $42,841/month; starting October 1, 2012 payment increased to $55,196 which included principal reduction. There is a balloon payment due on the maturity date for the full amount March 1, 2017.’’
According to previously published articles, no other Black church in Lexington had a building project which cost more than $6 million before this deal.
The church purchased the 59-acre tract of land on Georgetown St. for $3.1 million dollars then made a $2 million sale of 37 acres to a developer who created the Konner Woods subdivision on the edge of the property that meets Sandersville Rd.
Construction on the Family Life Center and church began in Jan. 2007. The 120,000 sq. ft. building houses a gymnasium, fitness center, classrooms, fellowship hall, computer lab and offices. Outside there are two soccer fields and three t-ball fields already developed.
Imani has three running programs. An afterschool program for 70 children each week. Annual summer camps and an early childhood – preschool program, Jump Start, which is in its 15th year. “Our work has proven to be invaluable. The success of our Jump Start program was measured by Fayette County Public Schools. We had more than 700 children through the years,’’ says Rev. Polk.
But the building has tens of thousands of feet of unfinished and unusable space.
“There are two areas that are deal makers or deal breakers,’’ Rev. Polk said. “There is a 10,000 square foot area designated for child care. There are 180 child care providers in Lexington and we tried to get one or more of them to partner together to rent the space,’’ Polk explains. But that never happened and the space is still unfinished and vacant.
There is also an empty second floor. The 20,000 sq. ft. area was also expected to generate revenue as a commercial rental space.
The church is currently worshiping in the fellowship hall; the sanctuary is also incomplete.
Rev. Polk blames the recession for the church’s inability to finish key aspects of the building which would have made full payment of the loan much easier.
“We moved in June 2008 and the economy went straight to hell in October of that year and no one was interested in investment in anything except their children,’’ said the Pastor.
“We have about 17 contractual partners who run soccer, track and field or some form of youth sports and all of them have grown. I’ve noticed that none of them decreased during the economic downturn,’’ he said.
Polk said the planned child care facility would have room for 210 children and generate $1.7 million dollars annually. One obstacle to potential renters is the unfinished space. A renter would have to spend an estimated $450,000 to make the space usable and pass an inspection.
Imani ran out of money before the “make or break’’ day care section of the building was finished.
Rev. Polk says that the structure was built at a rate of about $87 per square foot which ate up the $10.2 million starting capital.
Imani struggled to make payments on their original loan with US Bank but before they slid into foreclosure, the loan was purchased by local Central Bank.
“A tenant would help address or deal with the debt,” he said. “We knew the offering plates could not carry this.’’
From local businesses like The Big Ass Fan company to the local school district, Rev. Polk has shown the two spaces to “at least 50 people and nothing has developed’’.
He even contracted the Gibson Company, a brokerage and management company, to find tenants for the two large spaces. But no one has been in the market for unfished commercial space in that area.
“What we provide to the community is effective and invaluable, the economic side is a struggle,’’ Polk says.
More of the same will not keep Imani out of a foreclosure. Something drastic has to happen.
Rev. Polk is quite aware of their tremendous debt. “I have not run from them or avoided them. We have missed some payments, but we have made more than we’ve missed.’’
Polk was almost out of hope. “The day I planned to turn in the deed, I met Kenneth Lewis and he has pledged to help us.’’
Mr. Lewis, who has helped many churches save their buildings from foreclosure, said every option is on the table, from seeking more money for Imani to finish the day care which would generate funds to asking for some level of debt forgiveness.
If the property goes into foreclosure, Polk says that bank will probably take a loss. “Why can’t you take a loss with us? We have worked extremely hard to rent it out and we’re working to finish the rest of the interior.’’
Lewis said, “There are banks around the country who have written off debt to save churches. It is shameful and despicable [to foreclose on a church]. If it happens to Imani, who is next?’’.
Since revealing their dire financial situation to the Imani Church congregation, Sunday collection plate revenue has increased. The have doubled their efforts to rent the usable space in the building and Polk reports that usage and rentals have increased. “We have contracts into 2017 to rent space,’’ he said.
Polk said he’s been called by other Pastors. “They know what we’re up against. They’ve been encouraging, holding us up in prayer.’’
With renewed hope and a team of national consultants, Rev. Polk is back on the battlefield and hopes Mr. Lewis and his team can use their collective experience to come up with a plan for Imani that will be accepted by the bank.
There is a planned meeting next week with Central Bank to continue negotiations and deliver a clear plan forward.
Anyone seeking a large commercial space for daycare or other business, call Rev. Polk at 859-231-1555.