New York City Boom Heaven Sent for Churches Selling Land

After getting ordained in 2012, the Rev. Christopher Ballard was assigned to a historic Episcopal church in Brooklyn, New York, and got to work on a key part of his new job: real estate development.

Ballard, 49, decided to sell the rectory of the Church of St. Luke and St. Matthew as well as an adjacent parking lot -- 43,000 square feet (4,000 square meters) of buildable residential space behind the landmarked church in Clinton Hill. The site is listed for $8.6 million, money that would help cover maintenance on a house of worship that dates to 1891.

“This market is not going to come back with the big guns the way it is now -- this is the time to do it,” Ballard said in an interview on the second floor of the Romanesque Revival church, a half-mile from the Barclays Center arena. “This is about being prudent stewards of the congregation.”

With prices for land and buildings surging across New York, religious institutions are pursuing real estate sales to generate cash and support their missions. Many of the city’s churches and synagogues were built decades ago, and those running houses of worship find themselves with massive, architecturally distinct structures that require costly repairs.

For clergy at churches from Washington Heights to Park Avenue to Wall Street, and across Brooklyn, navigating the rough-and-tumble world of real estate development is part of the job description, said Mitchell Moss, a professor of Urban Policy and Planning at New York University.

“You can’t be a successful member of the clergy in New York unless you know how to take advantage of the land market,” Moss said. “The only difference between a real estate developer and a member of the clergy is the clothes they wear.”

Land Prices

The churches are entering the market amid growing buyer appetites for New York land. Manhattan development sites sold for an average of $445 a square foot last year, up from $366 in 2012 and a post-recession high, according to Massey Knakal Realty Services. Commercial-property sales may reach a record $63 billion this year, a 68 percent jump from 2013, on the strength of rising prices in Manhattan and increased investor interest in the outer boroughs, the firm estimated in January.

Real estate buyers also are turning to northern Manhattan, where the 88-year-old Wadsworth Avenue Baptist Church in Washington Heights is on the market for $8 million. The congregation wants to construct a new building at the site and take 30,000 square feet for the church, leaving about 67,500 square feet of potential residential space for a developer.

Original Roof

“We’re asking for a solution for continued ministry and presence in this neighborhood,” said the pastor, the Rev. Joshua Blair, whose church still has its original roof and single-pane windows. “We believe the same God that has helped us stay around this long has a plan for the future.”

About a dozen developers have expressed interest in the property as Washington Heights becomes a destination for apartment hunters seeking cheaper rents, said Robert Shapiro, who is handling the listing for Massey Knakal.

“This would not have been an option two years ago,” Shapiro said. “Everything we have right now in Washington Heights is moving very quickly and draws tremendous interest.”

For the French Evangelical Church on 16th Street in Chelsea, inquiries from developers have come steadily for several years, said Dan Nicolas, a church trustee. The property, built in 1835, was in danger of collapse until the congregation sold an adjacent townhouse to Einhorn Development Group for $4 million in 2012, Nicolas said.

Air Conditioning

Einhorn this year agreed to buy air rights, unused buildable space that can be transferred from one property to another. As part of the deal, French Evangelical will get cash and 5,000 square feet of space in a planned condominium tower on the townhouse site, some of which the church plans to rent out.

The congregation has spent $2 million on improvements, shoring up columns and installing air conditioning for the first time, and will use the rental income to establish an endowment fund, Nicolas said.

“At some point, the church wasn’t going to be able to undertake the repairs,” Nicolas said. “We’re doing this to preserve the church.”

As nonprofit organizations, religious institutions generally don’t pay property taxes or levies on real estate sales, said Dan Kurtz, a partner at law firm Skadden Arps Slate Meagher & Flom LLP in New York. That can change if a church owns property that isn’t used for a religious purpose, as with the new space French Evangelical will obtain from Einhorn.

“You need a tax-exempt owner and a tax-exempt use,” Kurtz said.

Queen’s Gift

Real estate deals have long been part of the business for Trinity Church in lower Manhattan, thanks to a gift of 215 acres (87 hectares) of land from the Queen of England in 1705. Trinity now operates a property arm that manages 6 million square feet of commercial space, most of it near Hudson Square, an area between Houston and Canal streets on the west side that was rezoned in 2013 to allow more residential development.

The Episcopal congregation also plans to build a mixed-use ministry office and residential tower behind its historic chapel on Trinity Place, a short walk from Ground Zero.

On the Upper West Side, the Cathedral Church of St. John the Divine, where a funeral for actor James Gandolfini was held last year, signed a deal that would allow a residential project on part of its 11-acre campus, said the Rev. James Kowalski, who oversees the church as its dean.

430 Apartments

After years of fits and starts, including failed talks with Equity Residential, billionaire Sam Zell’s apartment landlord, the Episcopal cathedral will lease land on the north side of its property to the Brodsky Organization. The company plans to build 430 apartments on the site, according to Kowalski.

The long-term deal is similar to one made with AvalonBay Communities Inc., which opened a rental tower on cathedral property at One Morningside Drive in 2008. The church takes in about $2.4 million a year from the lease, Kowalski said.

Construction started on St. John the Divine in 1892, with financier J.P. Morgan among its backers. The work has never been finished. For about $300 million, the cathedral could cover deferred maintenance and take steps toward completing the long-running building project, said Kowalski.

“The church is more than a business, but it should always use the best business practices,” he said in an interview at his office in the cathedral’s parish house. “Why would I not want to be doing business with the best and brightest people to advance God’s mission?”

Neighborhood Clash

The collision of church and real estate isn’t without controversy, as developers have clashed with neighbors and preservationists. At the Upper East Side’s Park Avenue Christian Church, Extell Development Co. is redrawing plans for a condo tower on land near the property after an initial design drew opposition. The proposed building would have bent around the church’s spire, blocking light into the century-old church, which was modeled after La Sainte-Chapelle in Paris.

The city’s Landmarks Preservation Commission, which is considering a historic designation for the neighborhood, must approve a new development plan, said George Artz, a spokesman for the church.

A sale of the land to Extell would enable the church to preserve its sanctuary, completed in 1911, and “insure the long-term survival and vitality of one of the most diverse and progressive congregations in the city,” Artz said in an e-mail.

Brooklyn Influx

Across the East River, churches in Brooklyn are sitting on increasingly valuable land as a flood of young residents pushes up apartment rents amid a dearth of development sites, said Ofer Cohen, president of brokerage TerraCRG.

“There are very few parking lots left just waiting to be developed” in and near the downtown area, Cohen said. “Now that those sites are gone, you have to be a little more creative putting parcels together piece by piece.”

Apartment rents in Brooklyn reached a median of $2,890 a month in February, according to appraiser Miller Samuel Inc. and brokerage Douglas Elliman Real Estate. That was just $210 less than the Manhattan median, the smallest difference since the firms began tracking the Brooklyn market in 2008.

Land prices also are surging. In downtown Brooklyn, which in TerraCRG’s research includes Clinton Hill and Park Slope, residential development sites sold for $177 per buildable square foot last year, up from $87 in 2010, the brokerage said.

The firm is marketing the Recovery House of Worship, a 120-year-old Baptist church on Schermerhorn Street that could fetch as much as $20 million, Cohen said. The church wants to stay at the site, leaving about 63,000 square feet for a developer, who can build a residential tower or a combined office-and-hotel building, he said.

Church’s Mission

Clinton Hill, once a crime-ridden corner of Brooklyn, has seen an influx of wealthier residents in the past 15 years, and St. Luke and St. Matthew now finds itself in the right place at the right time as development pushes up Atlantic Avenue, Ballard said.

He draws a distinction between physical buildings and the church’s duty to the community. If a real estate deal helps Ballard offer more reading programs or services for the homeless, while also ensuring there is money to make necessary repairs, he’s all for it.

“There’s a sense that these buildings themselves are sacred, that the four walls are the ministry,” Ballard said. “It’s really about realizing this is brick and mortar and using that to serve our mission.”