Churches turn to market-rate projects

TRD New York /
Dec.December 03, 2007 11:21 PM

Churches in New York City have always taken 2 Chronicles 2:5 (“and the house which I build is great”) pretty seriously. They have long bought, developed and sometimes sold properties as part of their mission, serving as quiet but important real estate players since at least 1705, when Queen Anne granted Trinity Church 215 acres.

Growth has in many ways been good to them. Trinity, for example, now owns and rents out about 6 million square feet of office space, spread over 18 buildings in Downtown Manhattan, and also holds the sought-after asset of 2 million square feet of development rights.

However, high land and construction costs are making it harder for churches to acquire more real estate to fulfill goals such as providing affordable housing. Several are getting creative, building mixed-income and sometimes mixed-use properties on church land. Some are even turning to developers to help.

New projects and problems

Thirty-two years ago, when Rev. Floyd Flake became pastor of Allen A.M.E. Cathedral in Jamaica, Queens, middle-class families had fled the neighborhood, leaving behind boarded-up storefronts and abandoned houses.

Flake convinced church leaders to begin buying properties in urban renewal areas to expand the church’s programs and services. Urban renewal areas are designated by the New York City Department of Housing Preservation and Development and have specific development plans approved by several city offices, including the mayor’s office and local community boards.

Today, the church has built or renovated more than 525 houses and owns 630 units of affordable housing for seniors. Allen A.M.E. is renovating two 14-unit apartment buildings, which will also be designated as affordable housing, and plans this fall to complete an $18 million residential and commercial complex on the corner of Merrick Boulevard and 111th Avenue, next door to the current cathedral. The new complex will house 54 low-income families and have 21,000 square feet of business and retail space.

In Manhattan in the 1980s, when Harlem was ravaged by crime and drugs, Abyssinian Baptist Church could buy property for as low as $1 a building.

Abyssinian created a community development corporation that brought businesses and money back to the neighborhood. The nonprofit uses revenue from its property investments to house the poor, feed the hungry, build and repair schools — and buy more property. The result is a $299 million operation that owns 435,000 square feet of commercial property, a 90,000-square-foot school and 75,000 square feet of mixed-use property in central Harlem.

It’s all managed by a staff of about 15 people. “We saw a positive, thriving community, but only if we had affordable housing, quality education and people who were civically engaged,” said Wright.

But these days, the economic renewal that Abyssinian helped create has made it much harder for the church to continue investing in real estate. Today, the average price for even a run-down property in Harlem can exceed $1 million. Overall, real estate values have risen more than 300 percent since 1995, according to neighborhood brokers, one of the steepest climbs in the city. Subsidies that helped make property more affordable, such as low-income housing tax credits, are also expiring and may not be renewed.

So Abyssinian is considering trying a new approach. Church officials have talked about creating mixed-income housing, where condos or apartments sold at market rate would subsidize low-income housing, but nothing specific has been planned.

“Gentrification has definitely impacted us significantly,” said Sheena Wright, president and CEO of the Abyssinian Development Corporation. “It’s much more competitive and much more challenging to do the types of projects we do.”

Of course, the church has been part of the gentrification that presents challenges to it.

If a church is struggling, rising real estate prices can certainly work in its favor, says Joseph Holland, president of Holland Horizon Group, a Harlem-based development company. Churches with dwindling congregations and aging sanctuaries have turned to Holland for help, and he’s been able to turn their property into much-needed cash.

Beyond bake sales

For example, Pentecostal Faith Church had started to build a new church at 129th Street and Lenox Avenue 20 years ago, but ran out of money to finish the job. The strong real estate market allowed it to complete the building, but there were trade-offs. Recently, Holland helped the church sell the property to a developer who built a 77-unit luxury condominium building called the Lenox on the spot. The deal allowed Pentecostal Faith Church to get a new home, on the land next to the condos. It will also buy back, at cost, 11,000 square feet of retail space on the ground level.

Holland also helped Bethel Gospel Assembly sell a parking lot at 120th Street and Fifth Avenue, which is being turned into a four-story sanctuary for the church, topped by a 155-unit luxury condominium tower. In addition, the developer will build a 50-unit rental building there for the church to own. The church plans to rent the units at below-market rates.

Holland said churches have a unique bureaucratic structure, and getting anything accomplished usually requires a lot of meetings to get approval from a lot of people. They aren’t always experienced with the ins and outs of real estate transactions, he noted.

“There’s some education that has to be done to help them understand how this transaction works,” Holland said.

Still, when a deal comes together, a church can benefit greatly. Holland said he understands concerns about gentrification, but he believes these projects are helping the community thrive and grow.

“We’re sensitive to the community,” Holland said. “Harlem has historically been a mixed-income community. Over the years, when you had middle-class people leave Harlem, it became less mixed. Now what we’re doing is bringing that economic balance back to Harlem, by creating a market for middle-income people to return.”

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