Monday, May 01, 2006
Churches Making Millions Selling "Air"
[Virtue Online] A rendering shows a proposed 60-story condo building that will rise above St. James Episcopal Cathedral in Chicago. The project is being built using air rights purchased from the cathedral.
Holy Cross Roman Catholic Church near Times Square in New York City sold its air rights and a vacant parking lot to a developer who erected a 50-story residential building that now looms over the church.
The Rev. Donna Claycomb, pastor of Mount Vernon Place United Methodist Church in Washington, stands in a chapel beset by mold and disrepair. The church will sell two adjacent buildings to a developer, and money from the deal will help fund repairs at the church.
A shortage of open space in many rejuvenated cities has developers courting churches with multimilliondollar offers to buy their property and sometimes even the air above their heads.
Finding that the sky is the limit, many congregations are cashing in.
"In an urban area, air rights are just as much an asset as a piece of property," said the Rev. John Buchanan, pastor of Fourth Presbyterian in Chicago, which is working on a deal that could bring in $25 million.
From New York to Seattle, downtown congregations are striking deals worth tens of millions of dollars. Those willing to sell are often mainline Protestant churches saddled with aging buildings, growing deficits and shrinking memberships.
While a red-hot real-estate market has cooled some in recent months, industry veterans say the church trend remains strong, especially in revitalized cities where the supply of condominiums and office space has not caught up with demand.
In some cities like New York, where the only place to go is up, developers are willing to pay top dollar for not just land, but also the air above a church's roof.
On Manhattan's tony Park Avenue, the Byzantine-style Christ Church United Methodist is dwarfed by high-rise apartment buildings on the corner of E. 60 th Street. The 70,000 square feet of "air rights" above the church is considered developable space that can be sold to the highest bidder to overshadow, even though the church has no plans to build up.
Christ Church negotiated a selling price of $430 a square foot - twice the going rate in New York's cutthroat real-estate market - for the unused vertical space. The November deal generated $30 million for the church.
The church's pastor, the Rev. Stephen Bauman, said the sale of an unused "vertical asset" will fund ministry programs, including a public school in the South Bronx that has been "adopted" by the church.
In Chicago, Fourth Presbyterian Church hopes to overcome neighborhood opposition to a proposed 60-story condo tower that would bring the church $25 million for selling its air rights along Michigan Avenue. The money, in turn, will allow the church to expand its tutoring programs, care for the elderly and do more outreach in the city's housing projects.
Nearby, St. James Episcopal Cathedral has signed a 120-year lease worth more than $10 million to erect a 64-story tower that includes a 65,000-square-foot Canyon Ranch wellness center and restaurant.
In Seattle, an office tower will replace First United Methodist Church in a deal that preservationists estimate at $30 million. The money will be used to build a new church facility and fund a homeless shelter and feeding programs.
In Washington - one of the nation's healthiest condo, office and retail markets - Calvary Baptist Church sold one building and a parking lot to make way for new office buildings in a rejuvenated Chinatown neighborhood. The $11 million profit was quickly consumed by church renovation projects, and cost overruns put the congregation in the red.
But gleaming new facilities - five kitchens, a recording studio and a rock-climbing wall, to be exact - have re-energized the parish.
Calvary's pastor, the Rev. Amy Butler, said the young professionals who now call the neighborhood home have helped double attendance on Sunday mornings, and the facilities allow the church to host several new programs.
"This is big-time real estate," said Butler, who said the deal has been both a blessing and a curse, "and we don't know what the hell we're doing."
A few blocks away, First Congregational United Church of Christ plans to raze its 1960s-era building for a new facility that will include condos to feed Washington's insatiable housing market. Church officials are negotiating a deal that will preserve social-service programs on site, and proceeds will help build the church's endowment.
Some Roman Catholic churches have gotten in on the game, with St. Paul's Catholic Church near New York's Lincoln Center selling its air rights in two separate deals worth a total of about $35 million. But the most active players appear to be mainline Protestant churches, including Episcopal, United Methodist, Presbyterian and Lutheran congregations. Unlike Catholic churches, where bishops have the final say, the semi-independent status of mainline congregations allows them to play the market more freely.
After decades of declining membership, many mainline congregations are using their biggest remaining asset - their property - to rethink their ministry and presence in U.S. cities.
There are risks for churches not accustomed to the cutthroat world of urban real estate. Ministers trained in sermons and counseling often find themselves unprepared for hardball negotiations and high finance.
"I'm a new pastor, and it's been Real Estate Development 101 from day one," said the Rev. Donna Claycomb, pastor of Washington's Mount Vernon Place United Methodist Church, which is selling two classroom buildings for a new office project worth several million dollars.
An artist's rendering of a new eight-story atrium in Claycomb's new building is optimistically filled with vibrant, young parishioners and children. The average age of her 50-member congregation is now 82.Add Your Comments and Ideas now...
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Thanks for making me laugh out loud this morning. That one quote from Rev. Butler was just too much. Interestingly, the congregations opinion of all of this seemed lacking in each of the churches mentioned. Now that's a business meeting I'd like to be a fly on the wall at.
Posted by: adam | May 2, 2006 7:57:32 AM
I'd love to see these pictures.
Posted by: Chris | May 2, 2006 11:12:40 AM
Really? Have these things also secured new income sources for the next time the congregation falls short of funds?
I'm thinking we could sell a whole lot of Nebraska sky for development, and as the broker, I'll only charge our church members 10 %.
Todd, please tell me that these Monday posts are only because you found to many unbelievables for Friday... PLEASE tell me that.... PLEASE!
Posted by: Jeff | May 2, 2006 11:18:31 AM
Record company EMI sign a deal with the estate of crooner Dean Martin to use the singer's likeness.
Posted by: Jan Pittman | Jun 22, 2007 2:44:17 AM
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