Memphis Ministry Plans to Sell Its Low-Income Apartments as SEC Probes Bond Saleby and
A ministry that owns 10,500 low-income apartments around the U.S. plans to sell properties after dilapidated conditions at two Memphis complexes led the federal government to cut off subsidies, leading it to default on municipal bonds.
Global Ministries Foundation is negotiating with housing-development companies to sell some units “to make sure these properties are modernized and renovated,” the foundation said in disclosure to bondholders dated Aug. 30. It said “a portion” of its older apartments backed by aid from the U.S. Department of Housing and Urban Development would see conditions improve with new investment.
“This strategy is in the best interest of our current stakeholders,” the notice said. “We will work feverishly for positive outcomes which are in the best interests of our residents and bondholders.”
The foundation, run by Richard Hamlet, a Baptist minister, has built a low-rent real estate empire with money raised in the $3.7 trillion municipal-bond market.
In 2011, the ministry issued $12 million in bonds through the Memphis Health, Educational and Housing Facility Board to finance the purchase of Warren and Tulane apartments in an impoverished section of Memphis. The bonds tumbled after HUD decided to stop providing rental subsidies that were used to repay the debt, causing the securities to default.
The SEC’s Atlanta office is conducting an inquiry into the foundation and the 2011 debt sale, according to a letter filed in U.S. court in a case brought by the bondholders’ trustee. The trustee, Bank of New York Mellon Corp., sued the ministry in May and won the appointment of a receiver.
The ministry, a Cordova, Tennessee non-profit founded in 2003, has raised $400 million in the municipal-bond market and owns and operates complexes in 8 states. It was able to access the market through local-government agencies, which lend out their name for a fee and aren’t on the hook if borrowers default.
Audrey Young, spokeswoman for the foundation, said the non-profit plans to unload its entire portfolio of properties that are reliant on low-income housing subsidies from HUD.