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Sky’s the Limit for Urban Churches Selling Hot Property

c. 2006 Religion News Service (UNDATED) A crunch on open space in many rejuvenated cities has developers courting churches with multimillion-dollar offers to buy their property and sometimes even the air above their heads. Finding the sky is the limit, many congregations are cashing in. “In an urban area, air rights are just as much […]

c. 2006 Religion News Service

(UNDATED) A crunch on open space in many rejuvenated cities has developers courting churches with multimillion-dollar offers to buy their property and sometimes even the air above their heads.

Finding the sky is the limit, many congregations are cashing in.

“In an urban area, air rights are just as much as 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.

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.

On Manhattan’s tony Park Avenue, the Byzantine-style Christ Church United Methodist is dwarfed by high-rise apartment buildings on the corner of East 60th Street. The 70,000 square feet of “air rights” above the church is considered developable space that can be sold to the highest bidder, 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, D.C. _ 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 that 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 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 and cardinals have the final say, the semi-independent status of mainline congregations leaves 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. “Unfortunately,” she sighed, looking at the sketch, “the people don’t come with the building.”

Some church leaders are concerned that a lucrative real estate market has made churches vulnerable to the lure of development. Presbyterians in New York, for example, have launched a city-wide building survey to determine which properties could be sold off, and which should stay.

The members of West-Park Presbyterian Church on New York’s Upper West Side were offered $40 million for their crumbling building on Amsterdam Avenue, but decided to sell air rights for about $15 million to build a 21-story mixed-use condo tower that will fund repairs to the church.

“We wanted something more creative than finding a developer and just selling (the building) to the highest bidder” and walking away, said West-Park’s pastor, the Rev. Bob Brashear.

Real estate veterans say the big-dollar “walk-away” deals are tempting for aging churches, but caution against moving too quickly, or taking the first offer that comes along.

“Whatever you do, do not sign anything with the first person who contacts you,” said the Rev. Andrew Mullins, pastor of New York’s Episcopal Church of the Epiphany, which is planning a condo project. “I don’t care if it’s John D. Rockefeller. Don’t sign anything.”

MO/PH END ECKSTROM

REPEATING with new 7th graf to clarify how air rights are transfered from churches to developers.

Editors: To obtain 16 photos from projects in New York, Washington and Chicago, go to the RNS Web site at https://religionnews.com. On the lower right, click on “photos,” then search by subject or slug.

An expanded (1,875 words with trims to 1,400) version of this story with an anecdotal lede is also available in RNS-SKY-LIMIT.

SPECIAL REPORT: CHURCHES AND REAL ESTATE

FIRST OF TWO PARTS