Windermere selling real estate; Mo. convention seeks injunction
JEFFERSON CITY, Mo. (BP)--In November, the chairman of Windermere Baptist Conference Center denied that any of its real estate was being sold. Now he has admitted that some of its real estate is for sale to private developers to build houses, condos and retirement units at the troubled facility along the shores of the Lake of the Ozarks in central Missouri.
At their board meeting on Nov. 17, Windermere trustees disclosed that they had incurred $21 million in debt as of the end of 2004 and announced the sudden departure of Frank Shock from his chief executive officer duties.
These revelations prompted Missouri Baptist Convention lawyers to seek “emergency discovery” in its suit against Windermere and four other breakaway entities from the convention, along with an injunction to stop the sale of any real estate.
According to a story posted Dec. 1 on the website of one of the breakaway entities, the Word & Way newsjournal, Windermere chairman Arthur Mallory was asked by a trustee Nov. 17 “if selling some of Windermere’s property was an active consideration.” Mallory said no, that property would not be sold, because that would “disrupt development plans” under the master plan, which was five-10 years old. "This [expansion] was not a Johnny-come-lately decision," he said.
The next day, on Dec. 2, Mallory reportedly had a phone conversation with the Word & Way to “clarify” his comments. In an online story dated Dec. 7, Mallory said some Windermere property will be sold to private developers for residential development, and that this has been part of the master plan all along.
“We hope people who buy will use Windermere as a place to volunteer,” Mallory was quoted as saying.
The news articles did not identify the trustee who asked the initial question on Nov. 17, nor did it explain how the trustee could be unaware of the master plan to sell lots, if in fact it had existed for at least five years or more.
On Dec. 6, Missouri Baptist Convention attorney Michael K. Whitehead filed a motion for “emergency discovery,” telling the court that financial revelations about Windermere may require an injunction to protect its assets. The hearing on that motion has been set for Dec. 15 before Judge Tom Brown in Cole County Circuit Court. Whitehead told The Pathway, the convention’s newsjournal, that a hearing on the injunction to stop the sale of any Windermere real estate would be scheduled after the emergency discovery was completed.
“We knew they felt desperate when they tossed Frank Shock overboard,” Whitehead observed, “but now they seem willing to take the ship down with them, in the sea of red ink they created.
“We will ask the court to stop them, to protect the land that Missouri Baptists worked so hard to acquire and which has been dedicated to ministry.”
Financial information about Windermere was contained in Internal Revenue Service Form 990 for 2004, a public record required from tax-exempt nonprofits, which was obtained by The Pathway. Signed by Shock on Nov. 15, 2005, it showed Windermere had an operating deficit of $2 million and a total indebtedness of $21 million at the end of 2004.
The financial disclosures came amidst news of the Nov. 17 departure of Shock from daily operations. Shock continues to hold the title of president and chief executive officer until a replacement is found, but apparently he does not retain any of the duties of either office. He has been Windermere’s CEO since December 1989.
Mallory, in announcing Shock’s departure, told the Word & Way that Shock was “the face of Windermere.” Mallory went on to say how Shock and his late wife, Barbara, left their “thumbprints and fingerprints” all over Windermere, noting how Barbara Shock had directed the interior design work for several buildings at the facility.
Shock told the paper, “I am pleased that we have worked out an ending that is good. You know when it’s your time.”
Mallory’s accolades to Shock include the CEO’s presiding over a period of growth but make no mention of the growth of Windermere’s debt under Shock. Windermere reported $13.6 million of loan debt in 2003, according to the Form 990, which grew to $19.5 million in 2004. The report is signed by Shock and dated Nov. 15, 2005.
The motion for emergency discovery, set for hearing on Dec. 15 at 9 a.m., asks the judge to allow MBC attorneys to re-depose Mallory and to depose a bank representative from Allegiant Bank (now National City Bank) in St Louis, which loaned Windermere the money and mortgaged its property.
The motion reminds the court that the Missouri convention seeks the return of the real estate that was transferred to the breakaway board and now is in dispute: 1,300 acres of shorefront property at the Lake of the Ozarks. The actions by Windermere trustees, according to the motion, appear to be calculated to laden the property with a “lethal debt load” so that the Missouri convention cannot afford to recover the land.
“We will ultimately ask the court to cancel the mortgage of Allegiant Bank when Windermere is returned to the MBC,” Whitehead explained. “The bank had notice before it loaned the money about our lawsuit claiming that the breakaway board lacks legal authority to mortgage the real estate. When the court nullifies the breakaway board, it should also nullify the bank loan and mortgage.”
Breakaway trustees for the center told Word & Way after the Nov. 17 meeting that they had a plan to refinance the embattled entity’s debt, which would reduce the principal from $21 to $14 million. They did not explain how they would pay down the debt, but they did mention a possible sale of bonds. The trustees also announced that they had agreed to pay an out-of-court settlement of $600,000 to a contractor, Hicks Construction of Niangua, Mo. Hicks had filed a lien for more than $400,000 after going unpaid for his firm’s work on Windermere’s controversial Wilderness Creek expansion project that began in 2002.
Windermere’s financial trouble began in 2001 when trustees violated Missouri corporate law by amending the conference center’s charter to become self-perpetuating, without MBC approval. That action set into motion a legal battle with the MBC that includes four other entities --– Word & Way, The Baptist Home retirement facility, Missouri Baptist Foundation and Missouri Baptist College -– where trustees also amended their charters without MBC approval. The five entities have assets totaling more than $240 million.
Shortly thereafter Shock and the trustees embarked on the aggressive Wilderness Creek expansion project, but financing collapsed into chaos in 2002 when angry contractors started filing liens for work for which they were not paid. Windermere secured financing for Phase 1 in 2003, landing an $18.75 million loan from Allegiant Bank. The bank made the loan despite warnings from Missouri Baptist Convention attorneys who wrote a letter to the bank warning that the center was embroiled in litigation. The Allegiant loan enabled Windermere to compensate the angry contractors and all but one (Hicks) dropped their liens.
An analysis of Windermere’s Form 990s from 2002 through 2004 shows that business has remained flat, with receipts totaling $3.15 million in 2002; $2.93 million in 2003; and $3.11 million in 2004. But expenses rose every year during that period, from $3.9 million in 2002 to $5.27 million in 2004, shackling the center with additional debt that grew from $750,482 in 2002 to $2.16 million in 2004. Net assets over the same period plummeted from $2.38 million in 2002 to $451,138 in 2004.
Details were not disclosed regarding the renegade trustees’ plan to refinance Windermere’s debt. News reports suggested that a new loan was obtained for $14 million, with a plan for sale of public bonds to fill the gap. Missouri convention leaders are concerned that the bonds may be peddled to unsuspecting Southern Baptists throughout the state, who may wind up losing their money, either due to court action or to financial problems at Windermere. The acknowledged land sale also be a source of funds for paying down the indebtedness.
In a related development, lawyers for the Word & Way threatened to sue the Missouri convention’s executive board for “tortuous interference with a contract or business relationships.” Attorney Jim Shoemake, in a letter dated Nov. 23, complained about a motion during the MBC’s annual meeting in October objecting to recent advertising placed in the Word & Way by three entities related to the MBC. The convention directed MBC Executive Director David Clippard to write the three entities -- LifeWay Christian Resources, Guidestone Financial Resources and the Missouri Baptist Credit Union -- to ask that they stop advertising with the Word & Way. Shoemake’s letter was sent to Whitehead, who replied in a letter to Shoemake that the threat was baseless and the MBC letter was justified.
“The convention has every right to ask [the SBC entities] not to patronize the breakaways,” Whitehead said. “The prodigal paper has no reason to expect the Baptist family to patronize it, until it comes back home.”
Don Hinkle is editor of The Pathway, newsjournal of the Missouri Baptist Convention, on the Web at www.mbcpathway.com.