Date: Fri, 09 Oct 1998 09:49:54 -0400 From: Darrell Todd Maurina <Darrell128@aol.com> Reply-To: Darrell128@aol.com Organization: Christian Renewal/United Reformed News Service Subject: NR 98103: CRC Home Missions May Receive Partial Payment on $1.1 Million of $7.925 Million Invested in IRM October 8, 1998 * Contents: NR #1998-103: A Glimmer of Good News: Home Missions May Receive Partial Payment on $1.1 Million of $7.925 Million Invested in IRM California Real Estate Corporation There hasn't been much good news out of the California-based IRM real estate corporation since it suspended payments last October on $228 million invested by three Christian Reformed agencies, the CRC-related Barnabas Foundation, and approximately 1500 individual investors, mostly but not entirely members of the 279,000-member denomination. That may change soon due to the sale of one IRM corporate entity which provided loans to a property otherwise unrelated to IRM. South Valley Secured Investors, part of the IRM network, provided $1.3 million in loans to Hanford Farms, a 1440-acre cotton, alfalfa, apple, and grape farm in the Central Valley of California between Bakersfield and Fresno. The property, originally purchased in 1981 for investment purposes by David Buurma, IRM senior vice president for client services, IRM founder John O. Van Hofwegen, and Hanford resident Bill Blanken, was in the process of being sold when IRM suspended payments. According to Buurma, the property sale will pay off most or all of the South Valley Secured Investors loan. Unlike many of the IRM entities, South Valley Secured Investors has one primary investor: CRC Home Missions, which invested $1.1 million of the $1.3 million total; the remaining $200,000 is held by a number of smaller investors. CRC Home Missions has a total investment portfolio of $13 million, $7.925 of which is in IRM-related entities. NR #1998-103: For Immediate Release: A Glimmer of Good News: Home Missions May Receive Partial Payment on $1.1 Million of $7.925 Million Invested in IRM California Real Estate Corporation by Darrell Todd Maurina, Press Officer United Reformed News Service GRAND RAPIDS, MICH. (October 8, 1998) URNS - There hasn't been much good news out of the California-based IRM real estate corporation since it suspended payments last October on $228 million invested by three Christian Reformed agencies, the CRC-related Barnabas Foundation, and approximately 1500 individual investors, mostly but not entirely members of the 279,000-member denomination. That may change soon. While normally referred to as IRM Corporation, IRM is actually a network of 130 loan groups, limited partnerships, and general partnership entities connected in various ways to 59 separate properties. Most are apartment complexes and a few are commercial properties. However, at least one IRM corporate entity provided loans to a property otherwise unrelated to IRM. South Valley Secured Investors, part of the IRM network, provided $1.3 million in loans to Hanford Farms, a 1440-acre cotton, alfalfa, apple, and grape farm in the Central Valley of California between Bakersfield and Fresno. The property, originally purchased in 1981 for investment purposes by David Buurma, IRM senior vice president for client services, IRM founder John O. Van Hofwegen, and Hanford resident Bill Blanken, was in the process of being sold when IRM suspended payments. According to Buurma, the property sale will pay off most or all of the South Valley Secured Investors loan. Unlike many of the IRM entities, South Valley Secured Investors has one primary investor: CRC Home Missions, which invested $1.1 million of the $1.3 million total. The remaining $200,000 is held by a number of smaller investors. "The largest part should close in November of this year," said Buurma. "The balance, which is 320 acres, has an option on it and it could close anytime in the next four years, probably sooner rather than later." That's good news to Rev. John Rozeboom, CRC Home Missions executive director, which placed $7.925 million of its $13 million total investment portfolio in IRM. "I'm not thrilled that we invested in the first place, but since we did, it would be great if the sale were consummated," said Rozeboom. "What Home Missions will receive is yet to be seen." Questions exist about the total amount to be received by the South Valley investors, when it will be distributed, and whether a Christian Reformed agency should receive money from IRM before individual investors, some of whom face serious financial hardship. Rozeboom said he expected the amount received by South Valley Secured Investors to be $800,000 of the $1.3 million total, which means the CRC would receive 62 cents on the dollar or approximately $677,000 of its $1.1 million initial investment. Buurma said the final amount received would depend on the price paid by the purchaser who has an option to buy during the next four years, and could pay the entire $1.3 million investment as well bank loans, a crop loan, and outstanding vendor debts. "We're not in the farming business; we had a farm management company that was running it on our behalf," said Buurma. "Once it was optioned to be sold we found out that the farming company that was managing it for us had incurred some substantial vendor debts on the property. If it were all sold today there would be a loss to the vendors." Buurma said part of the reason the property has taken a long time to sell is because of the decline of California property values since the initial 1981 purchase. "It was not a good investment," said Buurma. "We bought it when land prices were at an all time high in the valley, but they have just rebounded recently. We've been trying to sell it even before now, but the market has come back to the point where we will be able to pay most of the debt off." Both Buurma and Rozeboom said they weren't yet sure if the money would actually be distributed to investors following the sale or if the US Bankruptcy Court would intervene. "My sense is that the court will just have the money accumulated in the account just like all the moneys right now, and be determined what to do with it in the future, but since this is an actual sale I don't know if the judge would look at that differently," said Buurma. CRC Executive Director of Ministries Dr. Peter Borgdorff said he was sensitive to concerns about CRC agencies receiving payments before individual investors. "As a matter of fact, that's a very difficult issue for us," said Borgdorff. "On the one hand I'm glad for any sale of property that returns a significant investment to anyone. It also places Home Missions in a dilemma." Borgdorff noted that the interlocking nature of the network of IRM investments created complications. While Hanford Farms is technically not an IRM property, two of its three owners are IRM principals and profits from its sale will go to pay off the loan from South Valley Secured Investors - and it therefore may not be perceived as a separate investment unrelated to IRM. "Technically it is separate, but both the board of Home Missions and John Rozeboom have approached me to discuss the morality of that," said Borgdorff. "Should Home Missions accept the repayment of that without placing it in a larger picture? At this point we don't have an answer to that." "Would Home Missions be perceived as doing something inappropriate if it accepted its money and limited its applicability?" continued Borgdorff. "That would be a real perception problem, but for me the problem goes beyond the perception problem. We have said from day one that the agencies will do nothing that will benefit them on the backs of the other investors. Is that commitment applicable to this transaction? We have not completed our discussion on that and we will be addressing that." Rozeboom shared the concern about perception but believed that Home Missions could legitimately accept money from the farm sale. "Our advice is that Hanford Farms is not affected by the IRM bankruptcy," said Rozeboom. "The sale was arranged last year, we haven't seen any money yet, we'll be happy when we do." Rozeboom emphasized that the IRM difficulties involve investment money, not the operating funds of CRC Home Missions. "Money has accumulated over the years, mostly from the sale of property, also money has accumulated that has nothing to do with property," said Rozeboom, noting that Home Missions manages $600,000 in a short term loan fund for churches wishing to build parking lots and other small improvements, $700,000 in a missionary training fund, and other funds in annuities, trusts, and a special fund for Classis Red Mesa, the CRC's regional unit ministering to the Navaho and Zuni Native American community. "We've been concerned that people understand that these are not operating funds that were gathered from ministry shares and churches," said Rozeboom. "The bulk of it was designated and restricted funds for the purposes I mentioned." According to Rozeboom, the size of the CRC's $13 million investment portfolio is substantially affected by an older policy, now discontinued, of helping mission churches obtain property for building purposes at an early date. The CRC now has to deal with property ownership in areas where CRC mission works have disbanded or for other reasons don't need the property owned by CRC Home Missions. "Land was purchased in the ministry area in the 1980's and early 1990's at a much earlier point than it is now," said Rozeboom. "We are now much more concerned that groups grow to a size where they can handle debt. We are not buying land now the way we did in the 1970's." Cross-References to Related Articles: #1998-006: Classis Chatham asks Top Christian Reformed Administrative Committee to Appoint Independent Investigators of $11.5 Million in Questionable Investments #1998-028: Classis Lake Erie Overtures Christian Reformed Synod to "Ensure the Editorial Freedom of the Banner" #1998-067: IRM Debate Extends Synodical Session #1998-068: Synod Responds to Possible Multimillion Dollar Fund Loss #1998-080: IRM Investment Debacle Leads to Litigation; Estimate of Funds at Risk Balloons from $11.4 to $228 Million #1998-083: IRM Declares Bankruptcy; CRC Files More Litigation Seeking Removal of IRM Management #1998-084: Bankruptcy Court Postpones Action on CRC Lawsuit to Remove IRM Management; "Concerned IRM Investors" Leader to Chair New Investors/Creditors Committee #1998-091: IRM Management Resigns as General Partners; John Barnard to Become CEO of Troubled California Real Estate Firm Contact List: Dr. Peter Borgdorff, Executive Director of Ministries, Christian Reformed Church 2850 Kalamazoo Ave. SE, Grand Rapids, MI 49560 O: (616) 246-0832 * H: (616) 957-3288 * E-Mail: borgdorp@crcna.org David Buurma, Senior Vice President for Client Services, IRM Corporation Office: 2151 Salvio St., Suite 325, Concord CA 94520 Mailing: PO Box 3000, Concord, CA 94522-3000 O: (925) 676-1966 * FAX: (925) 676-1744 Rev. John Rozeboom, Executive Director, Christian Reformed Home Missions 2850 Kalamazoo Ave. SE, Grand Rapids, MI 49560 O: (616) 224-0760 * H: (616) 940-0765 * FAX: (616) 224-5884 * E-Mail: rozebooj@crcna.org ---------------------------------------------------------- file: /pub/resources/text/reformed/archive98: nr98-103.txt .