Friday, June 18, 2010
An article in today's New York Times questions the sale of a 300-unit seniors apartment complex by its owner, Greater Allen African Methodist Episcopal Cathedral of New York, to a partnership comprised of the church's pastor, Rev. Floyd Flake, a former church CFO, and two real estate developers. In acquiring ownership of the complex, the Rev. Flake and his partners allegedly purchased the property for approximately $3 million less than the church's board-approved selling price. The partnership made no cash investment in the purchase, but rather financed the deal, including proposed renovations, with $21.3 million in loans and cash incentives from government programs, specifically a federal program that makes it expedient to refinance old HUD loans used to build low-income senior apartment complexes. Although described as refinancings, these transactions typically involve a sale that not is not listed for open bids in the market. Despite the relatedness of the parties in the transaction, the sale was approved by the New York state attorney general's office and State Supreme Court. The article postulates that Rev. Flake and his partners stand to retain millions of dollars in the deal and raises questions as to whether the proposed renovations ever materialized. The general contractor on the improvements was a construction company owned by the two real estate developers that are partners in Rev. Flake's partnership.