Layoffs, complaints plague SeedAmerica

SeedAmerica’s slogan is “You can do well by doing good.”

Doing good, in SeedAmerica’s case, means taking donations of vacant industrial buildings, renting them to small businesses and using some of the proceeds to start a Christian-based business school.

In 2007, SeedAmerica CFO Wayne Norris, CEO Joseph Johnson and vice president Steve Shelby (from left to right) posed for a photograph outside their Alpharetta office. Johnson is the only one still with the company.

SeedAmerica

What is it? SeedAmerica is a non-profit company whose goal is to turn distressed industrial sites into job centers and use the excess rental income to start a Christian-based business school. It has been accumulating buildings since 2005.

How does it work? Property owners donate buildings to SeedAmerica in order to realize large tax deductions. The company calls the transaction the 561 Exchange, based on IRS publication 561. SeedAmerica then is supposed to seek tenants for the buildings.

What went wrong? SeedAmerica failed to generate much rental income and lenders stopped making loans against its properties. The company founder blames the economy.

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Companies that give their buildings to the Alpharetta-based non-profit can take a tax deduction that, in theory at least, is worth more than a sale.

Now, just three years after acquiring its first property, SeedAmerica is staggering. The company recently laid off the bulk of its workforce — about 50 people — after having little success leasing space and seeing its credit dry up.

“You’re getting buildings that have been sitting empty for years that other people couldn’t sell or lease,” said former SeedAmerica employee Dane Becker. None of the properties is in Georgia.

Becker and other ex-employees due thousands of dollars in back pay, and a development official in Illinois, are questioning SeedAmerica’s sincerity.

“I feel like we got bamboozled,” said Tracey McDaneld, economic director in Salem, Ill., a town of 9,000.

In November, SeedAmerica acquired a former printing plant in Salem that once employed 900 people, and promised to make improvements to attract tenants.

But all SeedAmerica has done is scrap parts of the building and turn off the utilities, McDaneld said.

“You can’t show a 685,000-square-foot building with no light,” she said. SeedAmerica also failed to honor a golf tournament pledge and didn’t pay a local lawn service, McDaneld said.

“I don’t know where Jesus ever said don’t pay the lawn service guy,” she said. “It’s sad, especially because of the Christian principles they tout on their Web site. I hope and pray they had good intentions.”

Some former employees are equally scornful. Sandi Morris, who filed suit to recover at least $6,700 in back wages, said, “I don’t know if God was ever invited to play in this game we had with SeedAmerica.”

Joseph Johnson, SeedAmerica’s founder, said his company has been rocked by the same problem facing other businesses — access to capital.

SeedAmerica used lenders who focus on assets not cash flow to obtain loans against the distressed properties. Many of those lenders have folded up or are not returning calls, Johnson said. Without that money, SeedAmerica could not make its payroll and was forced to let people go, he said.

Most former employees believe SeedAmerica is a victim of the times and are not angry, Johnson asserted. In general, communities are pleased with the company, he added.

“They have been wonderful to work with, very responsive,” said Judy Gray, an economic development official in Orange County, Indiana.

“Everything you are hearing is coming from one small group that worked together,” Johnson said in an e-mail. “I can probably name them because of the problems we had with them while they worked for SeedAmerica and the threats that they have made to use people like you as leverage.”

As for scavenging metal at the Salem building and shutting off the lights, Johnson said that building most likely will become a warehouse, so emptying it adds to its value. SeedAmerica also demolished a 356,000-square-foot building in Clinton, Mass., because of carrying costs.

Those properties and several others may not belong to SeedAmerica for long. Eager to raise cash, the company is looking at auctioning 12-15 properties — 60-75 percent of its portfolio, Johnson said.

The company will use the proceeds to make good on the wages, he said. Prospective buyers will be offered lease-to-own deals or owner financing, Johnson said.

But those sales could affect donor tax deductions if the IRS determines the appraisals were inflated based on the prices realized. Appraisals were done to the highest standards, Johnson said, so the tax breaks should be safe.

Becker called SeedAmerica’s business model “nuts” because it’s built on maintaining a flow of short-term loans.

“You’re constantly borrowing to pay your debts over and over and over again,” Becker said. “You can’t sustain yourself like that. I’m never going to see my money, period. I know that.”

Johnson, who moved SeedAmerica from Ashland, Ohio, to Alpharetta in January 2007, acknowleged the company has focused more on acquisitions than renting space, but added its assets grew to $50 million in just three years.

He said the downsized SeedAmerica can survive on the rent it does collect. In the future, the company will be more selective about the properties it accepts, he said.

On its Web site, SeedAmerica has removed information about its accomplishments listed under “Testimonials” and “Who We’ve Helped.”

Johnson said that was done “as a precautionary step against the blackmail threats” from a former employee. “We fear hacking and other unnecessary harm that he may cause to get us to cave into the pressure to pay him before all others.”

Ex-employee Chris Brooks, a worship pastor at a church in Cumming near SeedAmerica’s offices, stopped by the company on a recent morning. He blamed the economy for his job loss.

“I believe in what the company stands for,” Brooks said. “I believe in the ultimate direction it’s going. I have no doubt it’s going to reach its goal.”