Bankruptcy 101: Property Sales
It is very common in Diocese bankruptcies to see some church property sold, and the proceeds become part of a financial settlement for Survivors. At the same time, it’s also common for there to be concern that these sales are completed in a transparent way that will maximize the sale price. This FAQ is intended to explain the process and ease concerns. Survivors should always discuss questions related to their individual case with their attorney if represented. General questions about the bankruptcy process can be directed to the Official Committee of Survivors’ legal counsel Stinson LLP at santarosasurvivorteam@stinson.com All correspondence receives a reply and is treated confidentially.
Why would the Diocese want to sell its property?
Bankruptcy is an opportunity for the Diocese to reorganize its assets to produce a monetary settlement that Survivors will accept in a plan that they vote upon and the Court approves. If the Diocese has property that is not critical to its operation in the future it may choose to sell it to generate money that will be a part of a settlement.
Can the Diocese sell property without anyone knowing about it?
NO. Property sales must conform to bankruptcy rules of transparency and be publicly communicated.
Does the Official Committee have any say in the process?
YES. The Diocese will share publicly any properties it is selling. It will then solicit bids, accept one if possible, file a motion to have a sale finalized, and the sale does not occur without Court approval. The Official Committee may object to any sale that it believes does not maximize value for Survivors.
How does the Official Committee know what the value of a property is?
The Official Committee retains experts that focus on several areas of bankruptcy. Real Estate is one of those areas and the Official Committee has retained Stout Risius Ross, LLC to be its trusted Real Estate advisor in the Santa Rosa Diocese bankruptcy. This firm has a great deal of experience in diocese property valuation and will advise the Committee regarding whether Diocese property is valued and marketed appropriately, and if any bids are within acceptable fair market value.
I saw a property listed and the asking price seemed low. Why is that?
Valuation of Church property is often not as straightforward as valuing residential housing. Sometimes the structures on the property are very specialized and can’t easily be used for alternative purposes. There are also zoning issues and sometimes historic restrictions. Even when the land is valuable, valuation must take into account the cost of building removal, if possible, and the potentially limited number of buyers willing to engage in such a project.
What happens to the money after the Diocese sells the property?
If all or part of the proceeds are to go to Survivors as part of a financial settlement then the money is placed into escrow where it is held until the bankruptcy is completed.
Can I be sure that nothing illegal or inappropriate is going to happen with the sale of property?
Absolutely. Plans to sell property and any Transactions are constantly monitored by the Official Committee’s legal counsel Stinson LLP. Any transactions the Committee believes will be inappropriate or do not adequately maximize Survivor proceeds will see the Official Committee object in court where the Judge will hear the Committee’s arguments as to why a sale should be prohibited.