Nonprofit's bankruptcy filing blocks HUD auction

Foreclosure sale of apartments is halted minutes before start

February 16, 2005|By Eric Siegel | Eric Siegel,SUN STAFF

A nonprofit corporation headed by an East Baltimore bishop filed a bankruptcy petition yesterday, halting the scheduled foreclosure sale of a low-income apartment building it owns moments before the auction was to begin.

The auction of the 102-unit Berea Apostolic Apartments in Berea, sought by the U.S. Department of Housing and Urban Development because of the owner's failure to maintain adequate funds to make needed repairs on the federally subsidized property, had drawn 18 bidders to the steps of the Clarence M. Mitchell Jr. Courthouse downtown, 11 of them from out of state.

The apartment building at 1401 N. Lakewood Ave. is owned by the Pentecostal Housing Corp., whose director is Franklin C. Showell, head of the First Apostolic Institutional Faith Church.

Six weeks ago, three blighted rowhouses in Washington Hill owned by another church-affiliated corporation controlled by Showell were sold at a court-ordered auction after a 2 1/2 -year court battle between the Apostolic Development Corp. on one side and the city and community leaders on the other.

Showell has also been in personal bankruptcy since May of 2002 and in April was sentenced to probation before judgment and put on a year's probation for failing to turn over to the state more than $30,000 in withholding taxes from employees of a West Baltimore funeral home that he operated.

John C. Talbott, the attorney who was handling the auction for HUD, was informed by cell phone that a bankruptcy petition had been filed after $150,000 deposits had been accepted from interested bidders and about 10 minutes before the scheduled 11 a.m. auction was to begin.

He said it was unusual in his experience to have a bankruptcy petition filed so close to the start of an auction of a HUD-foreclosed property.

"This is the first one like this I've had, and I've done 15 of these," he said.

If HUD still wants to auction the property off, the federal housing agency will have to ask the bankruptcy court to release the property for foreclosure, Talbott said, and then would have to re-advertise the sale.

HUD officials at the site of the auction and in the Baltimore office declined to comment, noting pending legal proceedings.

In its bid package for the property, a solid brick structure built in 1950 and renovated 35 years later, HUD estimated that $1.5 million in repairs were needed to bring the building up to federal standards, including $257,000 for the air conditioning system, $160,000 for the elevators and $117,000 for the roof.

HUD said the apartments, which have a Section 8 housing assistance payment contract, generate annual income of about $831,000, compared to estimated expenses of about $461,000, and were 95 percent occupied. The apartments would have to be maintained as low-income units.

Marc R. Kivitz, the attorney who filed Pentecostal Housing Corp.'s bankruptcy petition and who is also handling Showell's personal bankruptcy, was said by his office to be in court in Greenbelt and unavailable for comment.

Efforts to reach Showell at his church, which has been a fixture in East Baltimore for decades and boasts a congregation of some 3,500 members, or on his cell phone were unsuccessful.

Some of the registered bidders expressed disappointment in the cancellation of the auction.

"I spent a lot of time studying this. I spent two weeks on this," said Slavik Pachovski, who came from New York for the auction.

"It's a nice property. The income is stable," he said. "It is strange to go bankrupt when you have a contract with the government."

Several residents contacted yesterday by phone or outside the apartments either declined to comment or had few complaints.

"They're well kept-up," said Geneva Moody, 79, who has lived at Berea Apostolic for three years.

"Mine's doing all right," added Robert Williams, 76, who has lived there for eight years.

Yesterday's bankruptcy filing in federal court in Baltimore followed the denial last Friday by a federal judge in Atlanta of a motion by Pentecostal Housing Corp. for a temporary restraining order to prevent HUD's foreclosure. The motion was filed in Atlanta because that is where HUD's multifamily housing division is headquartered.

Ernest N. Tate, the attorney for the housing corporation in the case, declined to comment.

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