Milwaukee Social Development Commission buildings face foreclosure risk

The Social Development Commission’s property corporation faces a foreclosure lawsuit for owing nearly $3 million in mortgage payments on its North Avenue buildings in Milwaukee, according to court records.
SD Properties Inc. is the tax-exempt corporation that owns the buildings of the Social Development Commission, or SDC.
Forward Community Investments Inc., a community development financial institution with Madison and Milwaukee offices, filed a complaint March 27 against SD Properties and SDC with the Milwaukee County Circuit Court.
SD Properties owes Forward Community Investments approximately $2.3 million in principal and interest for a 2020 construction mortgage and about $679,000 for a 2023 mortgage, for a total of just under $2.98 million, according to the complaint.
“FCI would be thrilled to see the critical services provided by CR-SDC return to the community,” said Ryan Zerwer, president & CEO of Forward Community Investments, in a statement. “However, the past 12 months, communication from SD Properties, Inc. has failed to provide sufficient information on actionable plans to fully resume operations and start meeting their financial obligations.”
SDC has been in turmoil since last April after it abruptly stopped operations and laid off staff. The agency reopened in December and is now preparing for a public hearing on its community action agency status.
William Sulton, SDC’s attorney, confirmed that SD Properties is in default on its mortgage payments.
“SDC has been in discussions with FCI about what kind of remedies they intend to pursue, so I guess it’s not a complete surprise,” Sulton said.
“I think the impact of the foreclosure case is it puts the North Avenue building at risk, and if there is no North Avenue building, then that is the majority of programs that SDC had in ’23.”
SDC also is listed on the lawsuit as a defendant as a guarantor for SD Properties.
Background and timeline
Forward Community Investments has been a lender to SD Properties since 2015 through its Community Development Loan Fund, which provides “financing to nonprofit organizations and community organizations for mission-focused projects that will work to reduce racial and socioeconomic disparities across the state of Wisconsin,” according to the complaint.
SD Properties entered into a construction mortgage on Jan. 22, 2020, of approximately $1.98 million plus interest, and then modified the agreement on July 22, 2020, to increase the total amount to $2.36 million.
In March 2023, SD Properties entered into a separate agreement in which it would owe about $665,000 and interest for a mortgage of five property parcels, which include the main office at 1730 North Ave., a warehouse at 1810 North Ave. and parking lots, according to court documents.
SD Properties defaulted on a “significant loan” in April 2024, according to Zerwer.
SD Properties also defaulted because it did not pay the entire amount of debt and interest owed for 2020 mortgage by the end date, or maturity date, of Dec. 22, 2024, according to the complaint.
Forbearance action stalled
Before the legal filing, Forward Community Investments presented SD Properties in the fall with a forbearance agreement, in which it would refrain from immediately collecting the obligations due from SD Properties, and revised it several times.
However, Zerwer said revisions on the agreement reached an impasse in March.
SDC board members discussed a “time-sensitive” resolution related to SD Properties at an emergency meeting on March 24 and decided to postpone taking action.
“We’ve been doing many strategic moves to prevent the foreclosure of this building and possibly a deficiency judgment against our Teutonia (location),” said Vincent Bobot, an SDC commissioner and chair of the SD Properties board, at the meeting.
“If there’s not a foreclosure, it means it’s still going to be drawn out and still take quite some time, but nevertheless, we want that time,” he said.
Board members planned to return to the item at a later meeting so they could discuss it directly with Sulton, who was not at the meeting.
The forbearance agreement would allow SD Properties to keep the North Avenue main office and the 18th Street warehouse, Sulton said, but SDC’s main issue now is having no funding.
“Even if we win the lawsuit, without any funding, we’ll just end up with another lawsuit down the road,” Sulton said.
Legal proceedings
SD Properties has retained attorneys from Kerkman & Dunn to represent it in the foreclosure case, Sulton said.
SDC and SD Properties have 20 days to respond to the summons and complaint before the case proceeds in court.
“We feel we have been patient and extended every opportunity to the leadership of SD Properties, Inc. to work in partnership with us to resolve the loan default,” Zerwer said. “In fact, we call upon SD Properties, Inc. to once again work with us on a forbearance plan.”
Public hearing Friday on SDC
The Wisconsin Department of Children and Families is hosting a public hearing on SDC’s designation as a community action agency from 11:30 a.m. to 1 p.m. on Friday, April 4.
The hearing will be held in the Milwaukee State Office Building, 819 N. 6th St., in Conference Rooms 40 and 45 on the first floor.
Milwaukee Social Development Commission buildings face foreclosure risk is a post from Wisconsin Watch, a non-profit investigative news site covering Wisconsin since 2009. Please consider making a contribution to support our journalism.