The house on the corner of Oak Hill Drive and Boyle Avenue – with its bunches of bougainvillea crawling along a chain-link fence – looks like any another cozy single-family home in Escondido. But 1385 Oak Hill Dr. is more than it seems. Until recently, a charity owned the property. Two local developers, both friends of the charity’s executives, bought the home in quick succession and each sold it for hundreds of thousands of dollars more than they paid.
The story of that charity, Affordable Senior Housing Foundation, and 1385 Oak Hill Dr. reveals the sometimes short distance between for-profit and nonprofit companies – and the questions that can arise when large profits result from the company’s transactions.
In August 2020, Affordable Senior Housing, a nonprofit that runs a senior center, owned the house on Oak Hill Drive. San Diego home prices had just leapt to an all-time high.
Zillow valued the Oak Hill property at $505,900. But it was at that same time, Affordable Senior Housing’s board members decided to sell the property, without listing it, for $150,000, according to property records. They sold it to Eric Bills, a friend of Tom Sutton, the charity’s chief financial officer, according to the most-recent documents filed with the California Secretary of State.
The new deed of ownership wasn’t submitted to county officials until March 2021. Two and a half months later, in late May, Bills sold the house for $350,000 to another person with connections to the charity’s executives. He confirmed he made no improvements to it. This time the home went to a house-flipping company owned by Robert Baird, a Poway resident, and two of his sons. The Bairds are church friends of Matthew Parks, the charity’s chief executive officer.
Again, Bills did not list the property on the open market. The $350,000, sales price was far lower than the Zillow estimate, which had grown to $624,400. A smaller 3-bedroom, 2-bath house on the same street sold for $640,000 around the same time.
A little more than a month after buying the home, the Bairds listed it. Six days later, they had a buyer on the line for $624,999, according to property records.
San Diego’s real estate market was firing. Between August 2020 and August 2021, home prices rose 26.2 percent, according to one index.
Charities like Affordable Senior Housing are legally barred from making deals that enrich other people at the expense of the charity itself. That’s the deal they strike with the federal government by becoming nonprofit organizations: In exchange for not paying taxes, they must serve the public good, rather than a particular person’s private business interests.
“Selling something for hundreds of thousands of dollars below market value is not putting the best interests of the nonprofit first,” said Miranda Fleischer, who specializes in nonprofit law at the University of San Diego’s School of Law.
Parks and Sutton, who at times have held a majority on the foundation’s three-person board, are also part-owners of multiple for-profit companies that have large business contracts with the foundation.
They say they understand how the under-market-value sales might raise questions, but they insist they were acting in the best interest of Affordable Senior Housing.
In 2017, weeks after Affordable Senior Housing was registered in California, the charity purchased Oak Hill Residential Care, a senior care center in Escondido, set up to serve roughly 100 residents. Part of the deal included 1385 Oak Hill Dr., which sits across the street from the senior care center and was used as a storage space.
Affordable Senior Housing was created to “develop and operate housing specially designed for the elderly,” according to its founding documents. It would also “provide affordable housing on a charitable basis.” Originally, Parks and Sutton didn’t have any intention to sell the storage facility/house, they said.
California taxpayers subsidized the purchase with a $5.1 million loan from the California Enterprise Development Authority. The financing is tax-exempt, which means borrowers like Affordable Senior Housing save money by paying a lower interest rate, effectively, than if they took out a traditional loan.
After securing the property, Affordable Senior Housing set about refinancing with a loan backed by the Department of Housing and Urban Development. HUD loans typically have lower interest rates, because the federal government guarantees them. Sutton and Parks said the HUD loan would help them save hundreds of thousands of dollars a year.
But problems with the HUD loan led them to urgently sell 1385 Oak Hill Dr., Sutton and Parks said.
Getting a HUD loan is a long and complicated process. It requires, among many other steps, a property appraisal. But, Parks said, the appraisal unintentionally excluded the property at 1385 Oak Hill Dr. in its assessment of Affordable Senior Housing’s holdings.
HUD would only back a loan against all pieces of property owned by Affordable Senior Housing, said Parks and Sutton. And since the Oak Hill property had been left out of the appraisal, it wasn’t part of the deal underway. HUD officials presented two options, Parks said: Sell the house, or get out of the HUD queue and start over.
Parks said he performed an analysis that showed Affordable Senior Housing would lose as much as $800,000, if it had to restart the HUD loan process. Parks and Sutton said they would be happy to provide the analysis to Voice of San Diego during an initial interview. The next day, however, Sutton and Parks said they would provide no further comment or any of the documentation they initially offered to share.
“It was definitely in the interest of the nonprofit to fire sale it and not get kicked out of the HUD queue and have to make up that $800,000,” said Sutton.
They sold it to Eric Bills – and acquaintance of Sutton’s, who had become a friend, Sutton said. Sutton and Parks said the property was in bad condition when they sold it to Bills for $150,000 and not worth the $505,900 that Zillow estimated. County tax assessors had placed the value at roughly $390,000 at the time, but tax assessments are frequently less than actual market value of a home.
The house had “no walls,” said Sutton. “It wasn’t in a livable condition,” added Parks. Sutton claimed he had videos of the house proving this he would provide to Voice, but he later declined to provide them.
Sutton and Parks declined to provide documentation from HUD that showed they were forced into a quick cash sale.
In essence, Sutton and Parks say they would have lost more by restarting the HUD loan process, than they left on the table by selling the home for $150,000.
A HUD spokeswoman, Shantae Goodloe, declined to say whether HUD officials told Parks and Sutton to sell the house quickly or risk losing their place in the HUD queue.
According to Parks and Sutton, they were in quite a predicament – a predicament that ultimately helped their friends make lots of money. Bills sold the house to family friends of Parks for $350,000. Those friends then sold the house to a family for $624,000.
The California Office of the Attorney General has a charities division that is responsible for enforcing state nonprofit laws. Officials for the Attorney General’s office declined to comment on whether the sale of the home warranted further investigation, but did point Voice to online legal guidance. The Attorney General’s office is charged with investigating “breaches of fiduciary duty” and “sales of charitable assets at an unfair price,” the guidance notes.
“Special attention should be paid where there has been no legitimate effort to market the charitable asset widely to insure maximum return,” a separate guide from the Attorney General’s office notes.
Sutton and Parks did not say whether they tried to market the house to anyone other than Bills. Bills, aside from being Sutton’s friend, had also done contract work for Sutton and Parks, they said. They declined to answer whether they offered 1385 Oak Hill Dr. to the house-flipping family known by Parks, who later bought the property in May 2021.
Sutton and Parks are part of a web of nonprofit and for-profit companies that tap into multiple parts of the senior care industry – an industry valued at nearly $1 trillion per year, according to one report.
They are part owners in at least two companies, which have had contracts with Affordable Senior Housing. Parks and Sutton are both board members for Affordable Senior Housing, according to the charity’s most recent, publicly available tax return – giving them a majority on a three-person board. (They declined to provide the current makeup of the board.)
In other words, Sutton and Parks control the vote on contracts their companies get.
Miranda Fleischer, the nonprofit legal expert, said while it is allowed to have nonprofit boards of just three people, it is not considered best practice.
One of Sutton’s and Parks’ business ventures is Torrey Pines Development Group. Torrey Pines had a lucrative contract in place with Affordable Senior Housing, from almost the moment the charity was formed.
In 2017, weeks after Parks registered Affordable Senior Housing with the California Secretary of State, the charity purchased Oak Hill Residential Care for roughly $18 million. Torrey Pines helped broker the acquisition. It collected $540,000, or 2.9 percent, in acquisition fees. The fees came out of the seller’s end, they said.
“It was a market rate fee,” said Sutton. “When you put the work in, it’s OK to get paid for it.”
Indeed, controlling both sides of a transaction isn’t necessarily illegal. To stay within bounds, such deals must be done at fair market value – and they frequently trigger additional public disclosure requirements with the IRS. Many nonprofits steer clear of doing business with their executives to avoid even the appearance of a conflict of interest.
At the time, Sutton and Parks were new to working inside of nonprofits, they said. They asked a lawyer whether the deal was legal. They received an official opinion informing them that it was, Parks said.
“I’d be happy to share that with you,” said Parks in the initial interview, before declining to share any documentation with Voice.
Parks and Sutton, according to tax documents, are also part-owners of Bayshire, LLC, a company that runs operations at several senior care centers throughout Southern California and Utah. Bayshire was founded by Scott Kirby. It handles everything from management to staffing and bookkeeping – and provides some services to Oak Hill Residential.
“Torrey Pines Development Group and Bayshire Senior Communities have worked together to develop and operate many assisted living projects,” Parks wrote in a proposal for a senior center in Juneau, Alaska.
Parks and Sutton declined to say how much Bayshire’s contract with Affordable Senior Housing is worth. Kirby did not respond to a request for comment.
Affordable Senior Housing, Torrey Pines Development and Bayshire also all share the same address on many official documents: 1817 Avenida del Diablo in Escondido.
Sequoia Affordable Housing Foundation, another nonprofit, shares the same address and was also registered by Parks.
The full extent of Sutton’s, Parks’ and Kirby’s shared business interests are unclear. The most recent, publicly available tax return for Affordable Senior Housing notes they each “receive fees for guaranteeing the loan” that was used to purchase Oak Hill Residential. The tax return mentions their shared interest in Bayshire and also mentions they “are in other businesses together.”
The new deed, showing Bills as owner of 1385 Oak Hill Dr., was recorded with county officials on March 12, 2021.
Bills “did some work to the house,” said Sutton, but “did not go through a full renovation.”
Bills, however, wrote in an email that he made no improvements to the property. “It was not habitable at the time of purchase or sell (sic)” he wrote.
Still, he managed to sell it for $200,000 more than he bought it with relative ease. Bills accepted a cash offer from Mac Capital – a flipping company operated by Robert Baird and two of his sons, Paul and John Baird – two and a half months after the deed was recorded.
Parks goes to church with the Bairds and had known them since childhood. He introduced them to Bills, he said. When asked whether he attempted to market 1385 Oak Hill Dr. to the Bairds on behalf of Affordable Senior Housing, Parks declined to answer.
The Bairds for their part undertook a much larger renovation, said Parks. (The Bairds did not respond to multiple requests for comment.)
“They put in at least $150,000 or close to $250,000,” said Parks.
The Bairds, however, owned the home for an even shorter time than Bills. They purchased the home from Bills on May 27, according to MLS. A little more than a month later, on July 8, they listed the home for sale. By July 14, they had a buyer on the line ready to pay their asking price: $624,999, according to Zillow.
During the time the Bairds owned the home, no one pulled permits to complete any work on the house, according to Escondido planning officials.
The deal closed on Aug. 7 for $624,000, according to MLS.
The Bairds did not respond to questions about how much they made off the sale or how much work they put into 1385 Oak Hill Dr.
The Bairds, and Parks and Sutton all declined to answer questions about whether the transfer of title from Affordable Senior Housing to Bills to the Bairds was pre-arranged from the outset. Bills wrote in his email no such pre-arrangement existed.
Sutton and Parks said they had a very brief window to sell the property before they would risk restarting the HUD loan process and losing as much as $800,000.
“We were on the clock. We had to make a choice; whether to sell immediately or start over with HUD. We didn’t have time for someone to get a loan or whatever. We had to sell it for cash,” said Sutton. “This should be a story about how [we] are using a nonprofit model to keep rents low for our residents. Make it a positive story… That would be the appropriate thing to do.”