Bob Brashear 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 a repair bill of 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 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 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 2005.
While proceeds have replenished bank accounts, expanded outreach and breathed 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 for not just land but also the air above a church’s roof.
“The cities with the hottest real estate markets and (air rights) will be the places where the phenomenon sticks out the most,” said Richard Peiser, professor of real-estate development at Harvard University’s graduate school of design in Cambridge, Mass.
Consider a few examples of churches striking real-estate gold:
- In Chicago, two 60-story condo towers will rise above Fourth Presbyterian Church and St. James Episcopal Cathedral in the heart of the city’s Magnificent Mile. Fourth Presbyterian will sell the air rights above its building for $25 million, and St. James will sign a 120-year lease on its land in a deal worth at least $10 million. “In an urban area, air rights are just as much an asset as a piece of property,” said John Buchanan, pastor of the 5,400-member Fourth Presbyterian.
- In New York, in the shadow of the 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 high-rise 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.
Traces of the trend can be found in smaller cities as well. In Sarasota, Fla., 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 co-pastor Art McClellan.
Some churches retain some space for themselves in the new projects, but except for a shared address, many of the high-rise condos, offices and hotels being constructed have little direct connection with the church.
Catholic churches have gotten in on the game. St. Paul’s Catholic Church near New York’s Lincoln Center negotiated two air-rights deals in 1984 and 1998 worth about $35 million, for example.
But the most active players appear to be mainline Protestant churches, including Episcopal, United Methodist, Presbyterian and Lutheran congregations. Unlike Catholic churches where bishops and cardinals have the final say, the semi-independent status of mainline congregations allows them to play the market more freely.
“I think what is happening is mainline churches are having to do some self-examination about where we’re going,” said Cindy Voorhees, a Los Angeles Episcopal priest and church consultant who has studied the trend.
The decision to make a deal often flows from necessity. “[T]hey’re usually not looking at those opportunities unless there’s some economic pressure to do so,” said Michael Slattery, research director for the Real Estate Board of New York.
In some cities, developers are “cold-calling” churches with offers to buy property. Concerned denominations have taken steps to minimize the temptation to sell and quickly spend.
New York’s Episcopal bishop, Mark Sisk, has directed his clergy to turn over real-estate proceeds to a trust fund controlled by the diocese. All the money belongs to the local church that made the deal, but it can be spent only with diocesan approval.
“Parishes don’t waste the money; they’re not being at all frivolous,” Sisk said. “But the appeal of an immediate need is going to be more compelling than the appeal of an unknown need 50 years from now.”
The New York City Presbytery has launched a building survey of its 98 churches to figure out what shape the real estate is in and how congregations can best consider deals, sometimes by working together. “The church is changing, and we’ve got this huge big real-estate question,” said Arabella Meadows-Rogers, who oversees New York’s Presbyterian churches.
Slattery says churches should find experienced professionals to broker their deals because they “have something that someone else wants, and they need to recognize that.”
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