A Henderson church filed for bankruptcy protection Friday after a bank tried to foreclose on its property.
The bankruptcy filing was made in U.S. Bankruptcy Court for Nevada in Las Vegas by The Church at South Las Vegas, 3051 Horizon Ridge Parkway.
The Chapter 11 filing indicates the church is headed by President Benjamin Perez and that its assets and liabilities each range from $1 million to $10 million.
Its largest creditor is First Bank of St. Louis, owed nearly $7.7 million.
First Bank filed suit against the church on June 17, charging it defaulted on its mortgage and seeking to foreclose on the property as well as appointment of a receiver to supervise the church's finances.
The bank attorneys with the Las Vegas law firm Jolley Urga Wirth Woodbury & Standish said in a court filing that appointment of a receiver for the church is allowed under the mortgage contract in the event of a default.
"Defendant has not made debt service payments for the months of May or June of 2011. Accordingly, as the value of the property and the personal property combined are insufficient to satisfy defendant’s obligations to First Bank, and as the financial position of defendant is questionable, given defendant’s failure to make payments to First Bank, the appointment of a receiver is warranted under federal law," the attorneys said in their filing last month in U.S. District Court for Nevada.
In a June 21 response, attorneys for the church indicated the church had strategically defaulted on the mortgage after learning its real estate – a 23,635-square-foot office building housing the church – is worth only $2.375 million vs. the $7.653 million owed to the bank.
This strategic default involved an analysis of whether it made sense to use church members’ donations to pay the underwater mortgage while also trying to save money for expansion needs.
An appraisal of the building was ordered "to determine whether it (the church) would be able to raise through donations the funds needed to build additional facilities on the (church’s) real property in the current economic climate and whether continuing to service the loan given the disparity between the outstanding balance of the loan and the fair market value of the property was in the best interests of its congregants as an appropriate use of their donations," a court filing says.
"Given the vast difference between the outstanding principal balance of the note and the present value of the real property and the source of funding as voluntary donations of church members, it is simply impossible for the church to continue to sustain the monthly note payments of $51,929 and at the same time raise building donations for necessary expansion," said the filing by church attorneys with the law firm Gordon Silver.
The attorneys said the church attempted to negotiate solutions with the bank involving principal reductions to $2.5 million, but these efforts failed.
The church attorneys said the church had $909,000 in the bank as of June 21, and they argued this money shouldn’t be subject to control of a receiver as it’s needed for operations or is earmarked for specific projects such as the expansion project and an Easter 2012 event planned at the Thomas & Mack Center.
The church attorneys said the Church at South Las Vegas, a Christian faith church, has more than 4,000 members with more than 3,500 attending services weekly.