Lexington church has vast space, athletic courts — and could lose it all

Imani Missionary Baptist Church on Georgetown Road is a beautiful space, with soaring ceilings, premium finishes and a college-sized basketball court.

But the church and its associated nonprofit life center also has an unfinished sanctuary and 30,000 square feet of unfinished commercial space. Its congregation worships in the fellowship hall.

The unfinished commercial space is a problem: Imani was counting on the space — part originally designated for a day care center, part for a charter school — to help pay the mortgage. Neither materialized, in part, Rev. Willis Polk said, because Imani ran out of money to finish the spaces to be rented.

Central Bank has moved against the church and its associated nonprofit Imani Family Life Center twice — once in a foreclosure action, the second time as an effort to enforce an agreement to resolve the more than $10 million debt Imani owes.

A hearing on the second dispute is scheduled on Dec. 13 before Circuit Judge Ernesto Scorsone.

Polk still holds the keys to the church, and he has brought in new lawyers who say that Central Bank is trying to get control of a valuable property after loaning the church an inappropriate amount of money. The church sits on 22 acres close to New Circle Road, and has extensive parking, exercise and aerobics rooms and a cafe.

“This deal was set up to fail,” said Ken Lewis of CH Advisory Group, which has offices in Northern California and Dallas and helps churches fighting foreclosure. “Central Bank knew full well when you look at the income stream and expenses that there is no way” that Imani would be able to service that amount of debt.

Lewis called the mortgage “extremely flawed.”

The church has about $700,000 in income through collections each year. It leases out two offices in the Imani building and has an after-school program in addition to summer camps and is constantly busy from leagues that use its basketball courts. On a recent afternoon, a Sayre School basketball team was running drills on the court.

In its filings, Central Bank contends that it is merely trying to put an end to a lengthy effort to help the church work through its financial issues. It also says Imani representatives are stalling with repeated efforts to prolong the time before Central Bank assumes control of the property, and says that Imani had already agreed to the validity of the mortgage and that it was in default.

The Central Bank attorney, Tyler Powell of Frost Brown Todd, also said in a filing that Imani “gave a full and complete release, waiver, and discharge of any and all claims that it had or might have had against Lender.”

In a Friday night filing, Central Bank said Imani in May agreed to a deal for giving up the deed to the property in lieu of foreclosure and then leasing the property from the bank as a tenant.

The bank contends that Imani had delivered documents to Central to expedite the process but that there were several technicalities in them, including a missing notary stamp, that needed to be fixed before the bank took possession.

Powell would not comment on Imani, saying that it’s pending litigation. Neither would Steve Kelly, executive vice president for marketing and sales at Central Bank.

In addition to the money owed to Central Bank, Imani also owes the Lexington-Fayette Urban County Goverment a $146,282 unpaid fee for putting the property on the sanitary sewer system. Imani also owes $27,445 for unpaid fees to LEXserv, the city’s sanitary sewer, landfill and water quality billing organization.

City spokesman Susan Straub said that, while individual residential customers with overdue bills may receive notices that their water could be shut off for non-payment, “We don’t see water cut-offs to community facilities such as churches, schools and community centers. We try to work with them.”

Scott White, a Lexington attorney who recently joined Imani Family Life Center’s legal team, says the matter is hardly as cut and dried as Central Bank and its attorney contends.

White said that many African-American churches “have gotten into unfavorable arrangements with lenders.”

In 2013, Michael Grant, president of the National Bankers Association, a group of black bankers, said that churches that pursued aggressive expansion were making many similar mistakes: using financial plans not constructed by those who could give sound financial advice, implementing plans that lacked accountability and not contacting their banks early enough when they find themselves in trouble.

White said that Central Bank should have brought technical assistance to the deal to help Imani succeed, but did not. White also said that Central Bank had the ability to help Imani lease the building’s empty spaces and that the bank knew about the church’s resources not being able to service the debt load.

“We don’t know what the decision was by the lenders until we file a lender liability claim,” White said. “By any standard, it looks like the Imani entities were allowed too much money.”

White said the bonds associated with the loan, issued through the city of Midway, were considered a “bank-qualified investment” — meaning that all parties involved in the deal were investment professionals, which Imani was not.

The bonds secured the backing of Kentucky state government, which guaranteed tax-exempt returns to Central Bank, White said. The city of Midway was not required to pledge any credit, revenues or assets as security for the $8.5 million in bonds.

Phil Moloney of Sturgill, Turner, Barker & Moloney, the Midway city attorney, said that it’s not unusual for non-profit organizations to seek bonding assistance from towns. Although he was city attorney in 2008, Moloney said he did not recall who set up the bond issue, which would have been brought to the city council for consideration.

Imani started in 1997 with 210 members who met at House of God International on Georgetown Street. When it moved into the new building, it had about 400 members, and now has between 600-900, Polk said.

When Imani opened its new church complex in 2008, Polk said the building was designed for use by businesses and organizations that would pay rental fees. The 800-person capacity fellowship hall was to be rented to corporations for conferences and dinners. The child care area was also to be rented out, bringing in perhaps as much as $1.7 million a year; it would cost about $400,000 to finish the uncompleted space, Polk said last week.

He said he’s mystified why the building has not drawn more business: “Lexington has plenty going on. It just doesn’t have the venues.”

James Brown, the council member for Lexington’s 1st district, said that if Imani had to move out, “The church and the positive presence it has in the community would be missed. It still has a lot of potential for providing activities for families and young people who live in the Georgetown Street corridor.”

Fayette County public school spokeswoman Lisa Deffendall said that the district had looked at Imani as a possibility for its STEAM academy, but added that “there are several locations we have looked at that are probably more suitable.”

One criterion is that the school must be close to the University of Kentucky, Deffendall said, which Imani is not.

During a tour of Imani last week, Polk stood in the middle of what was to be the pulpit in the sanctuary. The sanctuary was designed to accommodate 1,700 worshippers on the floor and 400 more in the balcony. It would require about $800,000 to finish, he said.

“At a time when we need Central to stand with us, they’re not,” Polk said.

This story was originally published December 10, 2016 at 5:03 PM with the headline "Lexington church has vast space, athletic courts — and could lose it all."