Historic Abyssinian Development Corporation Struggles with Financial Mess

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November 22, 2015; Crain’s New York

The Abyssinian Development Corp. owned by the Abyssinian Baptist Church and led by Reverend Carl Butts is a legend in Harlem, but over time, the organization has seen its financial position erode to the point that its very survival may be in question. This newswire will stick to the facts as presented in the source article but we would also suggest that readers interested in the condition of this large, historic community development corporation also look at the fate of the famed and influential 126-year-old Germantown Settlement, about which we wrote in 2010. It is also worth remembering that affordable housing in Harlem, which Abyssinian provides and which the City has been active in trying to preserve, is being threatened by gentrification.

As many readers know, Abyssinian is credited with helping to revitalize Harlem when that was a labor of love and will. “There’s no question that Abyssinian was really important to the revitalization of Harlem and New York,” said Kenneth Jackson, a historian at Columbia. “You almost never see an abandoned plot in Harlem anymore, and when you do, someone is fixing it up. That’s Abyssinian’s legacy.”

But since the recession, this enormous endeavor has become overwhelmed by debt and has fallen years behind in its financial reporting. These problems have led to losing city contracts, arguing with financial partners, and slowly selling away its prized real estate portfolio. Even its flagship supermarket on 125th Street is scheduled to close. What happened? According to this article:

The aftermath of the 2008 financial crisis left Abyssinian overexposed, running affordable-housing programs whose costs it couldn’t cover and slowly losing ground as contracts to deliver social services shrank while their expenses rose.

The depth of Abyssinian’s financial problems is hard to gauge because, according to this report, until last week, the group had not submitted audited financial statements nor done its tax filings since 2011. Butts has accepted responsibility for this, saying that they did not have the money to pay for the work and have been missing payrolls and laying off staff. As a result, not only has the de Blasio administration cut $3.1 million in its contracts, but New York State Attorney General Eric Schneiderman is also reported to be looking into the institution’s finances.

Still, some indicators are available, and the picture looks fairly grim. Abyssinian is reportedly the largest provider of affordable housing in Harlem, but at least some of its housing has fallen into disrepair, with one building at West 135th Street accumulating 170 building violations along with fines and back taxes. It has also sold off two of its most well known buildings in Pathmark and the Renaissance Ballroom. The selling of the supermarket for $39 million to a developer of luxury housing has, according to this report, reestablished a “food desert” in East Harlem and resulted in the layoff of 236 workers, Crain’s reports that:

To cover mortgage payments and keep the social services running, Butts is raising cash by selling properties. In the past year, he has unloaded the Pathmark and Renaissance Ballroom sites and about a quarter of his group’s affordable housing. He has also let go of virtually all his nonprofit’s staff and is dialing back his ambitions for what the organization can do to shape the future of the neighborhood it did so much to rescue.

This article describes enormous growth over the past ten years, under the tenure of Sheena Wright as president, but the organization was steadily borrowing to fund that expansion even while the costs of its programs were reportedly not being fully funded. Meanwhile, program-service costs rose to $30 million between 2002 and 2013 (from about $3.6 million annually) and annual debt-service costs grew from $48,000 to more than $3 million over the same period. Its unrestricted net assets slipped badly to $5 million by 2011, even while liabilities had grown to $160 million.

On a more positive note, because of rising property values, the value of its real estate holdings—estimated to be $155 million in 2011—is still approximately the same even though one-third of the organization’s property has been sold.

The article eventually gets around to revealing that the board of the organization may not have the expertise needed to turn the situation around, and Butts has never claimed to be a manager. It is unclear whether sufficient time remains to save the organization and in what form.—Ruth McCambridge