Clark Atlanta Objects to Morris Brown College Land Sale (UPDATE 1)
(APN) ATLANTA — Clark Atlanta University (CAU) is objecting to a proposed sale of a large portion of Morris Brown College’s campus–a proposed sale of all but three buildings–in bankruptcy proceedings, to the Atlanta Development Authority (nicknamed Invest Atlanta) and Friendship Baptist Church.
The University points to documents, obtained by Atlanta Progressive News, that show that when the University donated much of that land to Morris Brown College, it included a condition that the land could only be used for undergraduate and some graduate education. Should the College cease using the land for educational purposes, the land reverts back to Clark Atlanta, according to the terms of the respective deeds.
UPDATE: A copy of the Objection, with the various deeds attached as Exhibits, have been posted online by APN, per reader request: bit.ly/1kZe2x0
The ADA and Friendship Baptist have offered 14.6 million dollars to buy the property.
It is not immediately clear what the entities will do with the land, but if the ADA’s history is to be any guide, it would likely become some kind of mixed-use development featuring luxury high-end housing that no one living in the community could afford.
Morris Brown is a historically Black college, the first college started by Blacks, some or all of whom were the children of slaves, in Georgia, in 1881.
Morris Brown College is one of four historically Black colleges and universities that make of the Atlanta University Center, along with Morehouse College, Spelman College, and Clark Atlanta University. Graduates of Morris Brown include the late Hosea Williams, the Rev. C.T. Vivian, and State Sen. Donzella James (D-Atlanta).
The College was organized by the African Methodist Episcopal Church (AME) and was granted a charter by the State of Georgia in 1885.
Morris Brown has been having financial problems for some time and barely avoided closing, as Atlanta Progressive News reported in 2009:
Many of their problems have stemmed from a financial aid director who, in 2002, was discovered to have engaged in fraudulent billing of financial aid funds for students who were either not enrolled or who had dropped out.
The college filed bankruptcy in 2012, according to documents reviewed by APN. 81 parties filed claims in the bankruptcy proceeding, amounting to over 12.4 million dollars at the time. The college’s current total debt is around 30 million dollars.
On March 05, 2014, Morris Brown proposed to put the majority of its campus up for sale, through a request for bids, in an effort to satisfy its various creditors.
U.S. Bankruptcy Judge Barbara Ellis-Monro of the U.S. Bankruptcy Court of the Northern District of Georgia, Atlanta Division, approved the bidding process for the sale in an Order dated April 01, 2014.
Out of seven bids received, the ADA/Friendship Baptist offer was the “highest and best offer” received, Morris Brown’s attorney Anne Aaronson, of Dilworth Paxson law firm, told the Saporta Report online news service.
If approved, the ADA is to contribute nine million dollars, and Friendship Baptist is to contribute 3.625 million dollars, to the bid, according to a press release sent to APN.
“The bid by Invest Atlanta and Friendship Baptist Church for some of the Morris Brown College campus creates a unique opportunity for these parties to hold a critical stake in the future development of this important corridor and secure a stronger, healthier future for this historic educational institution,” Atlanta Mayor Kasim Reed said in a statement dated May 01, 2014.
“Our partnership with Friendship Baptist Church also ensures that a respected and historic institution is actively engaged in bringing positive community development and neighborhood revitalization to the West Side and the MLK corridor. If we succeed in this bid, it will bring much-needed stability and cohesiveness to these communities as we embark on a determined effort to spur job creation, civic engagement, and business investment to the historic neighborhoods of Vine City and English Avenue,” Reed said.
In a letter dated May 16, 2014, Roy Hadley, Jr., of Thompson Hine LLP, on behalf of the ADA, wrote to Aaronson, “[P]lease be advised that the Atlanta Development Authority is ready to proceed with the purchase and sale of the subject properties as set forth in our revised bid, dated May 5, 2014, notwithstanding the claims of Clark Atlanta University on certain of the parcels.”
Clark Atlanta University (CAU) filed its objection on May 28, 2014.
“Between 1940 and 1991, in various deeds… CAU granted the Debtor certain rights in parcels of real property that belonged to CAU (the “Reversionary Property”). Importantly, CAU did not convey absolute or unconditional ownership of the Reversionary Property to the Debtor,” CAU wrote.
“Instead, as set forth in the Deeds, CAU’s conveyance was conditioned on the Debtor using the Reversionary Property for specified educational purposes… Accordingly, if the Debtor were to cease using the Reversionary Property for educational purposes, title would revert back to CAU,” CAU wrote.
“Initially, because the Debtor had sought to reorganize and continue pursuing its educational purposes, CAU look little action in the bankruptcy case other than to ensure that all parties were aware of the CAU reversionary interest,” CAU wrote.
“Moreover, although CAU has acknowledged… that it would be willing to consider consenting to a transaction that would fall outside the scope of the CAU Reversionary Interest limitations, CAU’s consent is provided solely at CAU’s sole and absolute discretion,” CAU wrote.
“[B]y seeking to sell the Reversionary Property without CAU’s consent, the Debtor is impermissibly seeking to sell property that the Debtor lacks the authority to sell. Said differently, the Debtor is requesting authority to sell an interest in property that is not property of the Debtor’s bankruptcy estate. Such an outcome is not authorized under the bankruptcy code and this Court lacks authority to effectuate the relief,” CAU wrote.
“Here, if the Court were to enter an order granting the Motion to Sell, CAU’s interests in the Reversionary Property would be directly and irreparably injured,” CAU wrote.
The AME Church, Morris Brown’s primary creditor–who, over time since the filing of the bankruptcy petition, has acquired debt that had been owned by other parties, in order to offer repayment on more favorable terms–is objecting to the 14.6 million dollar sale because it would not satisfy the College’s debt to AME alone, which is in the amount of 18.6 million.
AME Church also objects that it is not clear how the proceeds of the sale, if approved, would be distributed.
A Continued Sale Hearing will be held on June 12, 2014, at 10am, in Courtroom 1402. It appears unlikely that the sale will go forward, particularly because of CAU’s claims.