Building for the Future

OXNARD â€”  When they settle into airy apartments on a tree-lined street, six homeless families will have a longshoreman named Fred Brown and Section 664 of the Internal Revenue Code to thank.

For 24 years, Brown and his wife, Frances, owned a two-story building on South E Street. Now it’s owned by Project Understanding, a Ventura-based agency helping the homeless that never before could provide long-term housing.

But this was no ordinary sale.

The building’s transfer took two years and required the kind of fiscal acrobatics associated with much bigger deals. The real estate and financial professionals who volunteered their services for the complex transaction passed up at least $30,000 in fees and commissions.

When it was over, the group that helps the homeless owned an apartment building, and the Browns walked away with a bigger retirement nest egg and a life insurance policy for their heirs.

“It’s still amazing to me,� Brown said. “I can’t believe how all this came about.�

The Browns didn’t set out to change the world. All they wanted was to sell their building, one of several properties they own around Oxnard. They had no idea that the daunting tax problem they encountered could be turned into a boon for the homeless.

“What we’re talking about is turning around people’s lives,� said Rick Pearson, executive director of Project Understanding. “We want people who live in this place to be so successful in the future that nobody would guess they were once homeless.�

The couple bought the building near downtown Oxnard in 1974 and lived in it for eight years. When Brown wasn’t working on the docks, he was making repairs at his building. Even after he and Frances moved out, he dropped by frequently, unplugging a sink here, plastering a wall there.

“We finally decided to sell it because we’re getting up there,� said Brown, who at 68 still sometimes works double shifts as a marine clerk at the Port of Hueneme. “You sort of get tired of repairs and painting and tenants in general.�

But when they listed it for sale in 1995, they faced a shock: The capital-gains tax would eat up $80,000. That meant they wouldn’t break even and would face the continued headaches of apartment ownership.

Meanwhile, another tale of frustration was being played out at a homeless shelter in Ventura’s poorest neighborhood. For nearly five years, Project Understanding had been housing families down on their luck in a converted pharmacy at Ventura Avenue and Vince Street.

Conditions were cramped. For as long as two or three months at a time, families were separated from one another not by walls but by curtains and flimsy office partitions. Tensions mounted quickly.

“As many as 20 people suddenly were forced to live together,� Pearson said. “It beat the car, but it lacked privacy.�

Project Understanding knew it had to move in a different direction.

“We were wondering what to do next,� Pearson said. “We knew we needed a longer-term program, where families would have time to get their feet on the ground, and a network of people who could help them with things like parenting, budgeting and job skills.�

The Browns and Project Understanding heard about each other through Karen Campbell, a Ventura real estate agent who helps out at a yearly fund-raiser for the group.

Her proposal seemed simple enough: The Browns would place their building in what is known as a charitable remainder trust. Project Understanding would apply for a federal grant to buy the building from the trust. Because Project Understanding is a charity, the tax code would exempt the Browns and their trust from the hefty capital-gains tax.

But complications multiplied quickly.

To make sure the arrangement worked for the Browns and for Project Understanding, Campbell had to line up some high-priced help for free. Several banks turned her down, but Santa Barbara Bank & Trust finally volunteered to underwrite a mortgage without charge.

As the deal progressed, Ventura financial planner John Graves of the Renaissance Group also signed on. So did CPA Tom Gallardo, attorneys Dan Higson and JoAnn Wedding, the Chicago Title Co. and Aliso Escrow, among others.

But then came another snag. The Browns wouldn’t be allowed to transfer ownership of the $320,000 building to the trust until they owned it free and clear. But even after refinancing another property for cash to pay off the mortgage, they came up $54,000 short.

For added drama, there was a tight deadline. For tax purposes, the deal made most sense only if it were to be completed by Dec. 31. That meant the Browns had to find $54,000 in a hurry. A couple of Project Understanding supporters lent them the cash until the organization’s grant from the federal Department of Housing and Urban Development came through a few weeks later.

When all the dust cleared--after four simultaneous escrows had closed and the Browns had signed a dizzying array of documents--everyone emerged satisfied.

Through their trust, the Browns had gotten rid of their building. In addition, they walked away with a big tax break and a stream of monthly income from investments held by the trust.

Project Understanding wound up with six one- and two-bedroom apartments for families in need. When the Browns die, the group will own the building outright, as well as the money remaining in the trust.

The Browns’ heirs--they have 10 grown children from previous marriages--wound up with a life insurance policy on the couple for the value of the building they would have inherited.

And, the yet-to-be-chosen homeless families will wind up with decent homes for as long as two years--plus the kind of help that’s just as valuable as a roof and four walls.

“We’re not just trying to house people,� Pearson said. “We’re going to provide them with a support network that will help them put their lives together. Many homeless people have no one who cares whether they make it or not. Quite literally, some of them just curl up and die.�

Families will pay 30% of their incomes as rent--the same as for government-subsidized housing. For people on welfare, that comes to about $150 or $200 a month.

Under the plan, each family will be “adopted� by a local church congregation. Members will help the families with everything from learning to shop wisely to getting the kids’ cavities filled, not to mention simply being there for encouragement.

“It’s not one case manager handling 50 families,� Pearson said. “It’s a lot of people making a difference in people’s lives.�

Of course, the most immediate difference will be felt by the building’s present tenants, who have been told they must move to make room for the homeless. Homeless families will be moved in as current residents leave.

The irony hasn’t eluded Pearson.

“We certainly don’t want to make people homeless in order to provide apartments for homeless people,� he said. “We’ll be working with them to find suitable accommodations.�

Even so, Benjamin Pulido does not look forward to the move.

“It’ll be hard for me to find another place where I can feel I’m safe enough,� said Pulido, a construction worker who lives in a one-bedroom apartment with his wife and 16-month-old daughter. “This is close to the church, and the Police Department is just about a block away.�

Pulido has checked the ads for about three weeks but hasn’t found as nice a place for $600 a month.

“It’s too bad we have to move, but there’s nothing we can do,� he said.

Pearson said his group would pay for residents’ moving costs, and in certain cases, provide an extra subsidy for people who must end up paying more rent.

“We don’t want to hurt anybody,� he said. “We want them to say they came out of this well.�