Church fund buys Concordia Portland campus at auction for $3 million
On June 29, the Lutheran Church Extension Fund–Missouri Synod (LCEF) purchased the campus of Concordia University in Northeast Portland with a $3 million credit bid, meaning it won’t have to pay any cash to take control of the 24-acre property.
Teresa Pearson, an attorney for the LCEF, conducted the foreclosure auction outside the Multnomah County Courthouse on SW 1st & Madison. The LCEF submitted the only bid. In about 10 minutes, the campus was purchased at a bargain-basement price by a federally uninsured, religiously co-affiliated lender whose financial situation may be more precarious than Concordia Portland’s ever was.
After the sale, attendees–most residents of the Concordia neighborhood–stuck around to ask about the future of the 24-acre campus. Pearson, whose firm Miller Nash LLP represents the LCEF in a court battle over Concordia’s assets–namely, its land–did not have any specific information about the Fund’s plans, but assured those assembled it had the community’s interests in mind as it thought about what to do with the property.
What is the LCEF?
The LCEF serves as an investment fund and lender for members and institutions of the Lutheran Church–Missouri Synod. It raises money by issuing what it calls “Notes” to church members and organizations, which they can purchase and redeem for cash after a fixed period. The LCEF lends the money raised to subentities in the church, like congregations, schools, and rostered church workers, at interest. As borrowers pay back their loans and the Notes mature, money flows back to the investors who wish to redeem their Notes.
The LCEF sold or acquired the assets of three other Concordia institutions in recent years.
In 2018, Concordia College Alabama closed, sold its campus to International Mission Jesus, Inc, for $572,501, and transferred proceeds from its sale to the LCEF. Later this summer, Concordia College New York will close and sell its Bronxville campus to neighboring Iona College with the help of a $20 million gift from NewYork-Presbyterian Hospital. Internal documents show Concordia New York owes the LCEF $23 million.
On the day before the foreclosure sale in Portland, the University of Idaho College of Law announced it would lease Concordia Portland’s former law school campus in Boise. The deal pays the LCEF $600,000 annually–going up every five years–with the option to buy. The LCEF acquired the Boise campus from Concordia Portland with a $4.1 million credit bid in March of 2021.
In its latest appraisal from 2021, the Ada County (Idaho) Assessor’s Office valued the Boise property at $7.5 million–meaning the LCEF could realize a 100% return on investment through sectarian debt swapping.
Concordia Portland announced its closing on February 10, 2020, and finally shut down last summer, officially due to enrollment and financial challenges. Then-interim president Tom Ries said the university had negative cash flow, was in debt, and couldn’t find anyone to lend it any more money.
From 2010 to 2015 the LCEF directly lent Concordia Portland $29 million. In 2017, it purchased another $21 million in bond payments Concordia owed to the state of Oregon. The LCEF is the only creditor with a secured interest in the campus property, which court documents say Concordia posted as collateral to get those loans.
Directives coming from St. Louis
Concordia’s debt financing got final approval from the board of directors of the Lutheran Church–Missouri Synod (LCMS), which is the controlling parent organization of the LCEF and Concordia Portland. The LCMS board met over a dozen times between 2017 and 2020 to discuss the Concordias, often in executive session–meaning the details of those sessions are left out of meeting minutes.
Minutes from a November 2019 meeting do show the board approved the LCEF’s purchase of another $5 million in Concordia Portland debt from KeyBank; at the same meeting, it resolved to never again “approve any financial action to the benefit of [Concordia Portland]“ until the school “addressed the issues regarding the Gender and Sexuality Resource Center” which opened on campus earlier that year.
LCMS president Matthew Harrison was obsessed with what he considered Concordia Portland’s light-handed approach to the student-run Queer Straight Alliance on campus. He sent letters and envoys demanding the school shut down the club, but students fought to keep it open. In 2018, bemoaning the activism and “very pro-gay” environment in Portland, Harrison told an LCMS assembly in Indiana that “it finally may be the case that we simply cannot operate a Christian Lutheran university in that context.”
In January of 2020, another top church official told another LCMS assembly in Indiana that “things are being done to deal with the one case in Portland and it’s really the leadership of our president [Harrison]…he could exert that force because he’s in charge of all the doctrine and practice of our church body.”
What’s next for the campus in Portland?
CUS Facts was not able to locate any other parties who seriously considered a bid for the former Portland campus. A spokesperson for City Commissioner Jo Ann Hardesty said, “When Concordia was first closed, Commissioner Hardesty was interested in purchasing it so that the City would have a permanent structure to use for low-income housing…Commissioner Hardesty is still interested in [the property].”
Concordia Portland’s property is zoned Campus Institutional 1 (CI1), which allows the land to be used for educational and medical facilities, but recent changes in city and state law could open it up to short-term shelter or permanent housing opportunities.
In April of 2021, Portland City Council adopted a significant package of zoning code amendments, called the Shelter to Housing Continuum Project, which among other things increases the number of short-term shelter beds allowed in CI1 zones to 30.
In July, Governor Kate Brown signed Oregon Senate Bill 8 into law, making it easier for religious nonprofit organizations to push affordable housing development through local zoning restrictions. The LCEF is a registered 501(c)(3) religious nonprofit organization.
Under the old land use rules, any rezoning of the Concordia Portland property would have to go through a lengthy public review process, such as one proposal approved by Portland City Council in June to rezone five lots next to campus along NE 27th Avenue.
An informal poll of residents, business owners, and others who frequent the Concordia neighborhood found that about half want to see the property remain a school. About 20% said they would like to see it become a community center.
Lawsuit may force a resolution
After the sale, the question foremost on the minds of many was, It only took $3 million? A single-family home in this part of Portland can easily sell for $500,000.
A few factors around Concordia’s closure and sale always made it likely the LCEF would prevail with a low credit bid. In addition to its secured interest in the campus property, the LCEF holds the deed to the land, granted by Concordia the same day its board of regents voted to permanently close the school.
The LCMS also claims a “right of reentry” in the Portland campus. Finally, the land is part of a $300 million lawsuit scheduled to go to trial in Multnomah County in October*. Lawyers for the plaintiff in that case, Hotchalk LLC–a former business partner of Concordia Portland–have indicated they are now looking beyond a claim to campus property and have their eyes on the assets of the LCEF–which in effect are owned by LCMS members.
According to financial statements released in October of 2020, the LCEF has over $2 billion in assets, most in the form of loans receivable–money the LCEF expects to get back from borrowers it lent to. About half of this amount, over $1 billion, is owed by LCMS congregations. In 2020, the LCEF downgraded $225 million in congregational debt from its highest “Pass” category to “Special Mention”, which it assigns to “loans where the borrower exhibits trends that, if left uncorrected, may threaten their capacity to perform.”
LCEF financial statements say Concordia Portland carried $37 million in loans graded “Impaired” in October 2020; one year before, these loans received the highest “Pass” grade, meaning they “reflect[ed] acceptable risk.” The LCEF now claims it owns $42 million in Concordia Portland debt.
*Lawyers for Hotchalk have since said they will not be ready for trial until Spring 2023.