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City churches reap real-estate cash
Robert brashear, a New York City pastor, rubs his fingers against the 117-year-old walls of his church, and a shower of red dust sprinkles the sidewalk. Above him, scaffolding protects pedestrians from falling 20-pound chunks of sandstone.
Inside, water stains line the walls and cracks trace the barrel-vaulted ceiling of Brashear's West-Park Presbyterian Church on Manhattan's Upper West Side. Brashear estimates that repairs would cost at least $10 million.
There are, he says with a sigh, "no resources to cover that kind of expense" in a 100-member church. But like so many other urban pastors, Brashear has seen his financial salvation--and it's coming out of thin air. |
The open space--or air rights--above Brashear's church will soon be sold for about $15 million to a developer. who will erect a 21-story condominium complex that cantilevers over the back of the church. The new building will include church meeting rooms, 40 low-income housing units and 40 market-rate condos. Once repairs are paid for, Brashear hopes to invest the remaining funds.
From New York to Seattle, downtown congregations are striking deals with developers--deals worth tens of millions of dollars. Those willing to sell are often mainline Protestant congregations saddled with aging buildings, growing deficits and shrinking memberships.
While a red-hot real-estate market has cooled considerably 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 many large cities, air rights can be bought and sold. A church that doesn't reach the maximum height allowed by zoning laws can sell the unused space above its roof to a developer, who can transfer that space to an adjacent building. Such churches can make millions off a "vertical asset" that would otherwise go unused.
The result is unexpected "manna from heaven" for some churches, said M. Myers Mermel, a real estate broker and member of Christ Church United Methodist in New York, which negotiated a $30 million air rights deal in November.
While proceeds have replenished bank accounts, expanded social outreach and breathed new life into aging sacred space, the high-stakes transactions can be risky for clergy and congregations unprepared for the cutthroat world of real-estate development.
In places like New York, Chicago and Washington, where the only place to go is up, low-rise churches are attractive targets. Increasingly, developers are willing to pay top dollar not just for land, but also for the air above a church's roof.
"The cities with the hottest real-estate markets and [sale of air rights] will be the places where the phenomenon sticks out the most," said Richard Peiser, professor of real-estate development at Harvard's Graduate School of Design.
Consider a few examples of churches striking real-estate gold:
* In Chicago, a 60-story condo tower will rise above St. James Episcopal Cathedral in the heart of the city's Magnificent Mile area. St. James will sign a 120-year lease on its land in a deal worth at least $10 million. Fourth Presbyterian Church in Chicago has explored a similar venture, though approval by the city is uncertain. "In an urban area, air rights are just as much an asset as a piece of property," said John M. Buchanan, pastor of the 5,400-member Fourth Presbyterian and editor-publisher of the Christian Century.
* In the shadow of New York's Empire State Building, the quaint Episcopal Church of the Transfiguration razed its parish house and sold its air rights for a 55-story luxury condo building that will net about $7 million for the congregation. Uptown, the Episcopal Cathedral of St. John the Divine is planning two education and residential projects that the New York Times estimated will generate at least $40 million over the next 20 years.
* In Seattle, the terra-cotta domed roof of First United Methodist Church will soon make way for a highrise office tower. Church officials say they can't maintain the 1910 building and would prefer to spend money on outreach to the homeless. The Seattle Times estimated the deal is worth about $30 million.
* In Washington, the city's insatiable housing market prompted St. Luke's United Methodist Church to sell part of its land to a developer who built condos that sell for up to $2 million each. The church made about $6 million on the deal, said pastor David Myers; it now plans to fund a homeless shelter and feeding program. Without the infusion of cash, Myers said, his small congregation probably would have closed its doors.
Traces of the trend can be found in smaller cities as well. In Sarasota, Florida, First United Methodist Church was offered $17 million for its downtown property that abuts a new residential/retail complex. The church, however, turned down the deal after "sentimentality ruled the day," said copastor Art McClellan.
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