A community healthcare center that has served residents on Cleveland’s East Side for nearly 60 years is at risk of losing its properties after defaulting on an $11 million loan from a New Jersey-based private equity real estate company, according to a lawsuit the company filed last month.
All Pro Capital Funding asked a judge to appoint a receiver over Northeast Ohio Neighborhood Health Services and its properties, including most of its health clinics. The health center, commonly known as NEON, is a nonprofit that offers medical services to patients regardless of their ability to pay.
A court-appointed receiver would have the power to run the nonprofit’s finances and sell its properties, with the goal of collecting money owed to All Pro Capital.
The firm says NEON owes at least $8.8 million and has failed to make required payments for seven months. NEON has not filed a response to the lawsuit. Willie Austin, the CEO of NEON, did not respond to calls and emails from Signal Cleveland. Austin signed the loan documents with All Pro Capital. Alonzo Barker, the organization’s chief information officer, said in a phone call on Wednesday that he had no knowledge of the lawsuit.
In a statement, All Pro Capital wrote that it “believes the appointment of a receiver is ultimately in the best interest of NEON and its stakeholders.”
“NEON borrowed funds from All Pro Capital. NEON is now in default under that loan agreement and has refused to respond to inquiries to work out a resolution,” the statement read.
Currently, the NEON network includes six open health centers and two which are temporarily closed, according to its website.
In the past decade, problems for NEON have mounted. A partner in a project to open a fresh food market was convicted in federal court of embezzling more than $800,000. NEON’s flagship health center in Hough closed after it was destroyed by fire. A former Cleveland City Council member who championed restoring the Hough facility was sentenced to prison for stealing from the organization.
All Pro Capital referenced these events as reasons it no longer trusts NEON: The nonprofit “has exposed itself to a fraudulent scheme which causes All Pro Capital to question the wherewithal of NEONHS’s management team,” the court filing read.
In addition to the lawsuit from All Pro Capital, other creditors and companies that did work for the healthcare center are also demanding payment in court.
Northeast Ohio Neighborhood Health Services faces multiple lawsuits
- Florida company Cedar Advance LLC filed a civil suit in March against NEON and its CEO, Willie Austin, claiming that the company owes it $1.8 million in damages. A lawyer representing NEON and Austin denied the allegations.
- Creditor Jason LaPonza asked the court to file a judgment lien against NEON and Austin for about $1.5 million in late May. LaPonza claimed he had lent NEON and Austin $1 million in 2020, but it was not paid back. An attorney representing NEON and Austin admitted liability for the debt in a court filing.
- A cleaning service that worked for NEON sued the nonprofit in March, asking for about
$182,000 in unpaid bills and about $287,000 for breaching the contract. A lawyer on behalf of NEON denied the allegations in a court filing.
Loan meant to rebuild Hough Health Center
The $11 million loan NEON received was meant to be used for “business purposes,” including restoring the Hough Health Center, court documents said. Austin signed onto the loan with All Pro Capital in May 2022, about a year after the fire.
In order to get the loan, NEON granted All Pro Capital a mortgage on much of the nonprofit’s property – including five of its operating health clinics, the temporarily closed Miles Broadway Health Center, the temporarily closed Hough Health Center and the group’s corporate headquarters.
The mortgage gives All Pro Capital the ability to take over this property and sell it if NEON defaults on the loan.
Interest started building on the loan almost immediately after Austin signed onto it, adding $3,361 per day, according to court documents. NEON began making payments to All Pro Capital of about $100,000 approximately every month, which paid for the growing cost of interest but didn’t touch the $11 million originally owed.
The loan was supposed to be paid back in full by June 2023. But NEON asked to extend that due date twice, and All Pro agreed, according to court documents. The deadline was pushed back by a year. NEON kept making payments on its interest.
In September 2024, All Pro Capital alleged that NEON didn’t make any payment – not on the interest or the $11 million originally owed.
At the end of the month, All Pro notified NEON that it was going into default, telling the healthcare center that it hadn’t kept up with interest payments and hadn’t paid off the principal of the loan.
All Pro said in court filings that NEON “has failed to even acknowledge” the notice of default and that the nonprofit has not made any more payments toward the loan since August 2024.
The lender asked the court to place NEON’s properties should be put into the hands of a receiver.
What powers would a receiver have?
In a document filed with the court, All Pro requested that the court appoint two people as receivers who have experience in healthcare management.
All Pro said it wants the receivers to take control of NEON’s property – including everything from the organization’s real estate to revenue brought in from patients to insurance proceeds. The receiver could then sell the property, with consent from All Pro.
The lender also asked the judge to allow the receivers take actions, including changing the buildings’ locks and to have power over NEON’s employees. And for NEON to hand over information to the receivers, from payroll records to unpaid vendor invoices to information and passwords for websites and social media.