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Maximizing Real Property Value For Religious Organizations

Religious and charitable organizations often have access to revenue streams they may not have considered. By presenting slightly different possibilities to organizations, Capell Barnett Matalon & Schoenfeld’s (CBMS) real estate practice has helped these groups create financial sustainability from under-utilized properties.

For example, let’s assume a church in a New York City already owns a vacant lot across the street from its main house of worship, but wants to maximize its income. Where another firm might see a flat plot of land, CBMS lawyers see a blank canvas that just needs a little creativity and construction to further the mission and ministry of the organization.

Using the vacant lot example, we’d begin a process like the one below to help the organization reach its earnings potential:

  1. We order a survey to be sure of the land area.
  2. We thereafter prepare a zoning and market analysis. This way we know what possibilities are economically viable and in line with the strategic mission of the organization.
  3. We continue to learn the organization’s mission plans. We want the client to think about why they need the lot and what they hope to achieve from it. Answers typically include revenue, special use, or community engagement and can often be a combination of answers. We then determine the transaction structure—ground lease, sale, joint-venture, etc. This is also the best time to review the transaction’s potential tax consequences.
  4. Based on the information compiled from 1-3, we issue a request for proposals (RFP) to developers and construction companies. CBMS has a transparent system for RFPs; since we don’t represent developers or construction companies, we avoid any conflicts of interest.
  5. We review the proposals and work with the church to select the plan/developer that will best serve its interests.
  6. We prepare the transaction documents, which ultimately are submitted to the New York State Attorney General’s office and/or the Supreme Court of New York, as appropriate.
  7. The developer generally handles the construction and building management.

This process can take between six and 12 months or sometimes longer depending on the scope of the project and the client’s needs.

Some Finer Points

When we draft the transaction documents, we typically try to ensure that the church can still use the land or certain portions. In the case of a parking lot, we’d try to keep a set amount of parking spaces for parishioners and employees, no matter who ultimately operates the land. If a new structure were to be built, we’d make it a point to include a rider allowing the church certain use rights for events or meetings. With each client comes a different needs, which we do our best to accommodate in all transactions.

It is important to note that should the church decide to lease the space to another entity for more than five years, it would need the approval of the New York State Attorney General under state law.

CBMS has helped several religious and charitable organizations convert existing properties and assets into revenue generators. If your organization would benefit from a real property conversion or transaction, contact us.