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Church Real Estate Market Shows Values for Churches Looking to Expand

Significant opportunities nationally on the purchase of new land or buildings

by Scott Rolfs     Added January 09, 2012

As we enter 2012, the real estate market is still ripe with values for churches seeking to expand. During the 2003-2008 boom period, it was a challenge for churches to find good space for expansion as the booming economy was driving up prices and construction costs. That dynamic obviously has been different since the downturn in late 2008.

While the slow economy has made fundraising and budgets a challenge, it has also provided for significant opportunities nationally on the purchase of new land or buildings. At the current moment there are two key tailwinds driving these opportunities: low prices on commercial real estate along with low interest rates. Churches should know that these conditions will not last forever. While none of us can predict when an economic recovery will kick in, it is plausible that the return of simple inflation will push real estate prices significantly higher in coming years.

While many churches have focused on available space in commercial strip malls and former big-box retail stores, there are also values out there on the vacant land front, as well. For many landowners, they had hoped to sell their commercial acreage at significant profits and not hold on to the parcel for years and years. Those who own vacant land know it is not without significant carrying costs. Property taxes, along with any required debt service, start to add up each year a real estate investor holds a vacant parcel. With no buildings on the site, there is no “income” or income potential to vacant land—just holding costs. Therefore, if your church has been eyeing up a site for development that has not ever “hit the market,” Ziegler encourages you to determine who the owner is and give them a call. While the owner may not yet want to sell, it is possible their mental and fiscal fatigue in carrying the site will make them open to receiving an offer.

While your church may not yet be ready to build on a new site in 2012, it is possible that you could find the location you have always wanted at a discounted price. Saddleback Church in California, for example, took advantage of depressed property values during the economic downturn of 1990-1992 to acquire its beautiful campus location in 1992. With interest rates low, finance of such a site can be affordable. Additionally, some municipalities may make the property tax-exempt if you elect to use it immediately for religious purposes or even ball fields or the like.

One way to learn the ownership status of a parcel you are interested in is to obtain the public tax records. In many locales these records are available online or via a visit to your local register of deeds office. You can learn the owner of the parcel and proactively reach out to that person or entity. You can also learn if the property taxes are current. Delinquent property taxes could be a sign that the owner may be in a financial position where they have to sell the parcel. You may also find out that a bank owns the property via foreclosure but has not yet put it on the market.

It may be a challenge to proactively step out with an expansion plan in this environment, yet this is precisely the time when values exist. Expanding ministries should know all the opportunities that exist in their areas.

Scott Rolfs is managing director of Chicago-based Ziegler & Co.’s Religion and Education Finance sector (http://www.ziegler.com/investment-banking/religion/).