Resurrected Harlem, Rev. Calvin Butts Seeks Salvation

Crains New York reports that when the definitive history of New York’s resurgence is written, one of the pivotal players will be Harlem’s Abyssinian Development Corp., the church-based housing and social-services organization that the Rev. Calvin Butts led to resurrect a neighborhood that once symbolized urban collapse.

“We are responsible for big change,” Butts said from his office, a shrine to Harlem history, at Abyssinian Baptist Church on West 138th Street. In the center, a painting by Louis Delsarte depicts Butts in his roles as church leader, community advocate and president of Long Island’s SUNY Old Westbury. The painting was presented to Butts by Bill and Hillary Clinton, Mayor Michael Bloomberg, actress Cicely Tyson and American Express CEO Kenneth Chenault at a white-tie gala in November 2008 to celebrate the 200th anniversary of Abyssinian church.

Starting in the late 1980s, Abyssinian Development acquired and renovated so many apartments that it’s believed to be Harlem’s third-largest landlord, after the New York City Housing Authority and Columbia University. Yet housing was only part of Butts’ expansive vision. Abyssinian Development created public schools, ran after-school programs, trained Harlem residents for jobs, operated homeless shelters and assisted senior citizens. It brought a Pathmark supermarket to the neighborhood in 1997, setting in motion the renaissance of 125th Street.

“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 even with Harlem’s gentrifying and the city’s economy growing robustly, Abyssinian is faltering. It is mired in debt, losing city contracts to provide social services and has been forced to sell off a third of its prized real estate portfolio. Abyssinian is in a fight not just for its life but for its soul—struggling to stay afloat, fighting with partners over money and unsure how to serve a community that has changed drastically since Butts became pastor more than 25 years ago.

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. Butts began selling properties and mortgaging others to cover the group’s increased operating costs, but rather than dig the nonprofit out of a hole, it only increased the burden and the pressure. The Pathmark that set the renaissance in motion was expected to close this past weekend.

It’s hard to know exactly how much Abyssinian Development has suffered because the group hadn’t filed audited financial statements since 2011 until the middle of last week, when Butts said it submitted its 2012 statement with federal and state authorities. Butts, who serves as chairman of Abyssinian Development, said it couldn’t afford an accounting firm for a long time but assured that it would catch up on its remaining late statements by the end of the year.

The de Blasio administration got so fed up with Abyssinian’s chronic delinquency that it recently cut off $3 million worth of city contracts for the company to deliver social services. Last week, the Daily News reported that New York state Attorney General Eric Schneiderman had requested information from city officials about Abyssinian. “You’re never 100% sure what audits will find,” Butts said. “But I’m not running from it.”

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.

“How are we going to keep the peace?” he said. “We have to change, because we have a different Harlem that we’re responsible for.”

Asked if he takes any responsibility for what’s happened, he replied: “I take it all. When it rains, the head gets wet first.”

BUTTS, 66, was raised on the Lower East Side and in the Corona/East Elmhurst section of Queens. In 1972, he became a youth minister at Abyssinian, a black congregation that formed downtown in 1808 and moved to its existing uptown home in 1923. There, under pastor Adam Clayton Powell Jr., it became the nation’s leading black house of worship. Around the time Powell was elected to Congress in 1944, Abyssinian had some 14,000 members. It has about 4,000 today.

Butts became pastor in 1989 and the same year launched what became known as the Abyssinian Development Corp. The group’s mission was simple yet massive: Harlem’s salvation. Abyssinian began buying up properties seized by the city after owners had failed to pay real estate taxes. The nonprofit typically paid $1 for each building or lot, then used grants and borrowed funds to fix up the properties, which were rented to tenants and small-business owners.

Although Butts was the organization’s founder and guiding light, he initially declined to oversee its day-to-day affairs or even take a board seat. He deemed it wise to separate the community-development job, which required cultivating good relations with city and business leaders, from his role as an activist pastor who didn’t shy from publicly criticizing mayors, the Roman Catholic Archdiocese’s Cardinal John O’Connor and Manhattan District Attorney Robert Morgenthau.

He attracted a talented team to carry out Abyssinian Development’s mission. That includes Darren Walker, a former Wall Street bond salesman who became operations chief in the mid-1990s and who today serves as CEO of the Ford Foundation; Karen Phillips, a Harvard-trained urban planner and a Crain’s 40 Under 40 honoree in 1991, served as president until 2002. She was replaced by Sheena Wright, a Columbia-educated corporate lawyer and a Crain’s 40 Under 40 in 2006.

During Wright’s 10-year tenure, Abyssinian’s portfolio exploded to $172 million in properties and other assets, from $6 million. In 2004, she turned the site of the former Smalls Paradise jazz club into a new space for the Thurgood Marshall Academy for Learning and Social Change—Harlem’s first public high-school construction in 50 years. The Thurgood Marshall Academy Lower School, which serves kindergarten through fifth grade, opened in 2005.

Eventually, Abyssinian managed five educational institutions serving 2,100 children. It created retirement communities that served some 1,000 seniors, and it was responsible for more than $600 million worth of residential and commercial development in Harlem, Butts said, including more than 1,500 affordable apartments.

But the growth proved hard to sustain. Abyssinian borrowed heavily to fund its projects and struggled to come up with cash to pay for its expansive social mission. Between 2002 and 2011, annual debt-service costs grew from $48,000 to more than $3 million, while program-service expenditures increased ninefold. By 2008, its financial statement showed only $9 million of unrestricted assets—the money charities have to spend on their causes, payroll, insurance and other operating costs. That was a small sum for an organization carrying more than $130 million in liabilities. By 2011, unrestricted assets had slipped to less than $5 million, while liabilities had risen to more than $160 million.

“They were treading very thin,” said Odell Mays, an instructor at New York University’s George Heyman Center for Philanthropy and Fundraising. “Not much wiggle room at all.”

In its quest to grow and serve its community, Abyssinian Development struggled to plan ahead. “They were like, ‘Hey, let’s take the lump-sum payout here, but not look at sustainability in the long run,’ “ said Curtis Archer, president of the Harlem Community Development Corp., a state-chartered group that helps manage affordable-housing construction projects in the same area as Abyssinian.

Butts joined Abyssinian Development’s board in 2007 and became its chairman because he said fellow directors wanted to honor him on the church’s 200th anniversary. He accepted, even though he had long warned clergy whose churches were involved in community development to stay away from those boards. “I violated my own advice,” he said. “I think it was OK to accept it at the time, but I should have let it go immediately.”

BUTTS TOOK OVER on the eve of the financial crisis and the subsequent recession, which hit neighborhoods like Harlem especially hard. A Federal Reserve study last year showed average income among nonwhite and Hispanic families fell by 11% from 2010 through 2013, compared with an 8% increase among white households. The downturn caused tenants in Abyssinian-owned properties to fall behind in their rent at the same time that the stock-market crash caused private donors to rein in contributions.

Compounding matters, financial support from the government didn’t keep up with rising costs to provide social services, forcing Abyssinian to dip into its dwindling pile of cash to pay rent for child-care centers and other programs. According to data from the city comptroller’s office, Abyssinian has received $12 million from the city during the past five years to provide social services, a total that hasn’t been nearly enough to pay program-service costs that have risen to $30 million, from about $3.6 million annually in 2002.

“It’s not an unusual problem,” said Michelle Jackson, associate director at the Human Services Council, a Manhattan-based advocacy group. “Many local nonprofits are finding that government support isn’t keeping up with demand.”

To help fill the gap between the community’s needs and cash on hand, Abyssinian in January 2012 borrowed $39 million against the Ennis Francis Houses, a 232-unit complex at the corner of West 124th Street and Adam Clayton Powell Boulevard that the organization had bought for $6.9 million in 2004, after the U.S. Department of Housing and Urban Development moved to foreclose on a slumlord. The money was used to fund expansion and rehabilitation of Ennis Francis’ low-income housing units, but the new loans also meant Abyssinian was taking on debt it could ill afford.

Five months later, some Abyssinian-owned low-income apartments on West 135th Street set up an installment plan to pay the city $1.9 million in overdue real estate taxes. In a footnote to its 2011 financial statement, Abyssinian said that “to continuously improve liquidity, the corporation continues to develop and implement a variety of fundraising and other revenue- generating strategies, including specialized and targeted donor appeals, moneterization [sic] of assets and costs containment.” That was a convoluted way of saying: “We have a problem.”

“Sometimes people bite off more than they can chew,” NYU’s Mays said. “You’re the only game in town and you take on extra-wonderful work but you don’t have the infrastructure to support it. You can be juggling Peter to pay Paul.”

In October 2012, Wright stepped aside to become CEO of the United Way of New York City. Butts said: “I kept believing that we could get through this. I really had faith in our leadership. I saw good things.” Without mentioning Wright by name, he said that Abyssinian was led by “a brilliant person, young, and I wanted to invest in our youth. I probably just hung on a little too long. So by the time I acted to change leadership, we were really on the wrong path.”

Butts’ choice of replacement baffled many: Ralph Dickerson, a former leader of the United Way of New York City whom the charity determined had diverted $227,000 of its assets for his personal use before he left the nonprofit in 2003. Dickerson agreed to reimburse United Way in 2006. Butts had served on United Way’s board and said he was impressed with Dickerson’s leadership. “You don’t judge a man by his stumble, but by his stride,” he said. “I knew if anyone could help me in a challenging moment to streamline the organization and get it moving in the right direction, Mr. Dickerson could do that.”

Dickerson, who has since left the organization and didn’t return a call for comment, indeed streamlined the nonprofit. At one point, Abyssinian Development had nearly 150 people on its payroll, Butts said. It’s now down to nine. Abyssinian also began selling real estate to raise cash.

“It’s not the organization’s mission to sell property to pay the bills,” NYU’s Mays said. “They can’t guarantee what will happen after the properties are sold.”

In the short term, the sales have caused only more headaches.

THE RENAISSANCE BALLROOM was a symbol of Harlem’s vibrant past, and preservationists fought long and hard to protect the building at the corner of West 138th Street and Adam Clayton Powell Boulevard, where Duke Ellington’s orchestra and the New York Rens, an all-black pro basketball team, held court in the 1920s.

But the “Renny” was an abandoned wreck for its last 30 years, and keeping it standing drained Abyssinian Development’s dwindling resources, Butts said. Last year, the nonprofit agreed to sell the site for $15 million to BRP Development Corp., a firm whose managing partner, Meredith Marshall, is a member of Abyssinian church. A fifth of the new building’s 134 apartments will be reserved for low-income households.

Investors like Wallace Cooke, however, are angry that a Harlem landmark was sold. He says he and his partners haven’t gotten paid since the sale a year and a half ago and are owed more than $4 million. Cooke was part of a group of investors who in the early 1990s bought a stake in the Renaissance and two other properties acquired by Abyssinian. He claims his consortium has been paid less than $600,000 of the nearly $5 million it’s owed. He is exploring litigation.

“I know Butts is a man of God,” said Cooke. “He also owes a lot of money to me and some people who may be just as noble as he is.”

Asked about Cooke’s claim, Butts responded: “If they want to push it and they want to go to court and put it all on the table, people will see,” he said. “I stand by that. They got paid some.”

Butts may have a similar conflict brewing with the Pathmark property, which was sold for $39 million earlier this year to Gary Barnett’s Extell Development Co., a firm that has unveiled plans to construct what’s described as the world’s tallest residential skyscraper, on West 57th Street. The Community Association of the East Harlem Triangle, a nonprofit that was Abyssinian Development’s partner in the project 20 years ago, claims it’s owed $10 million and has received only $3 million.

“Triangle is a small organization, and Abyssinian took advantage,” fumed Derrick Taitt, president of the East Harlem Community Triangle, who said he has hired lawyers, though he hasn’t filed a lawsuit. Butts said Taitt’s assertion is “absolutely wrong.”

Meanwhile, fighting for every dollar, Butts and his partner in the Pathmark deal have filed a lawsuit contending they have the right to buy out the city’s 49% stake in the project for $1. The city disagrees, and the matter is pending in a New York state court. If they win, they’d get all $39 million of the sale proceeds. If they lose, they’d be forced to share about half of the $39 million with the city.

Butts also faces complaints from the upwardly mobile families who are remaking Harlem. They include Christina Robilotto, 39, who works at a genetic-testing company and in 2011 bought a rehabilitated brownstone that Abyssinian Development had acquired for $1 from the federal government in 2007.

Robilotto, who paid about $960,000, has filed a lawsuit charging Abyssinian sold her a lemon. Pipes leaked because contractors punctured them with nails during renovation, insulation wasn’t properly installed, the roof leaked, the basement flooded because the contractor poured mortar and other debris into a drain, and the moisture made the walls moldy. The boiler was too small to heat the three-story structure and was installed without a thermostat. She and her husband, who works in computer security, have spent thousands on repairs, and she seeks the full cost of fixing up the place.

“You shouldn’t have to rebuild a brand-new house from the inside out, especially after you’ve committed all your money to the purchase,” said her attorney, Joshua Bauchner. He said Abyssinian had the renovation done on the cheap to save money and “took advantage of people, hoping they would not have the money to fight.”

In a legal filing, Abyssinian asserts that Robilotto’s beef is with Harlem Village Homes II Housing Development Fund Co., which, Abyssinian argued, is a separate and distinct organization, even though it’s described as a “controlled entity” in Abyssinian’s 2011 financial statement. Abyssinian’s attorney, Charles Simpson, wouldn’t comment.

At least one major sale appears to have gone smoothly. This past May, Abyssinian sold 28 brownstones and low-rise apartment buildings for $26 million to a lower Manhattan-based group called Genesis Cos. The firm is run by Karim Hutson and Brian Benjamin, native New Yorkers who met at Harvard, where the Pathmark development was a case study in their business-school class. To Butts, these young developers personify everything he’s tried to achieve.

“These are minority developers, young black men, and would they get an opportunity if not for me making sure they got it?” he said. “Back in the ’80s when this land was available, no black developer had a chance at it.”

Benjamin, who was born 38 years ago at Harlem Hospital and lives in the neighborhood, is pleased Butts has faith in him, but he and Hutson have a lot of work to do. The 358 apartments they’ve bought need “drastic” amounts of work, he said, because Abyssinian didn’t have a lot of money to pay for upkeep. The partners plan to spend $24 million—almost as much as they paid for the apartments—to install new kitchens and bathrooms using minority- and women-owned contractors. Backing from the city, Citibank, Morgan Stanley and the nonprofit National Equity Fund make it possible to upgrade the apartments without raising anyone’s rent, Benjamin said, adding that some tenants don’t believe it.

“We’ve promised that these apartments will remain affordable for another 45 years,” Benjamin said. “When that agreement expires, our intention would be to extend it by another 30 years.”

BUTTS STILL HAS PLENTY of real estate left. In 2011, Abyssinian had $155 million worth of real estate on its books, and the recent sales reduced that figure by about a third. In the past four years, however, the value of Harlem property has risen by about 40%, said Michael Vargas, co-founder of Vanderbilt Appraisal Co. That suggests Abyssinian’s remaining portfolio is probably worth about $155 million.

Butts said he is now planning to sell part of the Ennis Francis Houses, where tenants have complained about mold, bugs and heating problems. A portion of the complex on West 124th Street stands out as an unfortunate reminder of another era: Residents were moved into a new high-rise, and the building now stands vacant, with windows broken and boarded up, and garbage strewn about.

While Butts lines up a buyer, his nonprofit faces the loss of another key part of its mission: social-service work. That mission was funded with a combination of private and city money, but private donors have stepped away because Abyssinian hasn’t filed timely financial statements. At a Sept. 18 meeting, two people from the mayor’s office told Butts and his staff that Abyssinian’s lack of audited statements had forced a “hard stop” on $3 million worth of city contracts.

Effective Jan. 1, Head Start programs that had been run by Abyssinian will be taken over by the Harlem-based Ecumenical Community Development Organization, while Abyssinian’s homeless and other services will be handled by SoBro, a Bronx-based nonprofit. Butts said Abyssinian would apply to resume its Head Start and seniors’ programs.

Abyssinian’s real estate reach

Properties owned (red) and sold (green) by Abyssinian Development Corp.

Butts occasionally feuded with Mayors Ed Koch and Rudy Giuliani, but the level of hostility between him and Mayor Bill de Blasio is something new. Butts has criticized the mayor for failing to fire the police officer responsible for Eric Garner’s death and this past May accused him of ignoring the black voters who carried him into office.

“Black lives matter when it’s time to vote. But when it’s time to do other things, they don’t seem to matter,” he told NY1. That same month at his church, he hosted a gathering of black community leaders and lawmakers from around the city to discuss their displeasure with de Blasio.

Butts said his public remarks were designed to get the mayor’s attention. He didn’t get the response he wanted and finds his lack of access to City Hall perplexing, given his experience with issues de Blasio cares about. Butts said he only recently met with Schools Chancellor Carmen Fariña, more than a year and a half after she took the job. “It was a great meeting,” he said. “Why did it take so long? I’m raising that question with the mayor. If you want partners to build affordable housing and if you want partners to improve education, what am I, chopped liver?”

Butts’ defenders contend that his relationship with de Blasio is par for the course these days among black leaders. “Who in my community has a good connection with the mayor?” said Harlem’s congressman, Charles Rangel, who replaced Adam Clayton Powell back in 1971. “I don’t think his relationship is any different from any Harlem leader I know of.” (Asked what he thinks of Butts, Rangel replied, “Adam Clayton Powell was so big, he sent two to fill his shoes: one a pastor, one a congressman.”)

The mayor, who said after Butts complained in May about a lack of access that he had been given a meeting only weeks earlier and should get “up to date on the facts,” appears to have decided that Butts is now someone he can safely ignore. Some major corporate backers have stepped away from Butts in recent years. JPMorgan Chase was Abyssinian Development’s largest donor in 2011, giving $1.2 million, according to the nonprofit’s financial statement. But a spokeswoman said the bank no longer gives money to the organization.

It’s clear that after 26 years, Abyssinian needs to reboot. Butts is looking for a new CEO and trying to find board members who can help advance his agenda in the new Harlem. The existing board is full of what Butts called “faith-based salt of the earth” from the community who can’t afford to write big checks and lack the expertise to run an organization as complex as Abyssinian.

“Part of the new governance is to get a board chair who can attract others who can catch the vision to run this more according to—I don’t even know how to put it—more in line with the best secular business practices,” he said. “It’s going to be tough. Tough for me to swallow but very necessary.”

Butts said his new mission will be expanding economic opportunity in Harlem and improving education. One possible example of his organization’s new direction could be its 2011 agreement with Starbucks, the lone corporate sponsor to appear on Abyssinian’s website. The coffee giant promised to share some profits from its West 125th Street location with Abyssinian and provide “strategic technical and management assistance” to support the organization’s job-training and placement programs.

It’s a long way from salvaging blighted city blocks. Then again, the neighborhood doesn’t have many blighted blocks left to save, thanks in part to Abyssinian. The organization’s mission of rehabilitating streets, creating sought-after schools and reviving business and career opportunities for Harlem residents is, to a large degree, accomplished.

Once Abyssinian files its delinquent financial statements, Butts plans to start asking the city’s banks, corporations and foundations to fund his new social mission. After the bailouts of Wall Street, he believes corporate leaders should be familiar with what it’s like to need help after a setback.

“I’ll tell them, ‘Ladies and gentlemen, there was a period of tough times. Do you know what they are?’ ” he said. “Of course they know. This was a stumble here. You know my stride, and I’m coming back to you again. And I think we’re going to be just fine. I hope. I could be wrong. But I hope.”