More churches are selling properties to developers

originally appeared in The Wall Street Journal:

When a new resident moved into a new 3,000-square-foot condo in Seattle's Capitol Hill neighborhood in August, he was looking forward to living with its 30-foot ceilings, polished-marble floors and 20-foot-tall stained-glass windows. One thing he didn't anticipate, however, was people knocking on his front door to ask what time services were or to speak to the pastor.

According to the new tenant, a 50-year-old technology executive at Amazon, people still thought it was a church because of its exterior, they didn't realize it had been transformed into a home.


Some of the most attractive Philadelphia apartments are bargains even in a hot rental market like Philadelphia.

The apartment, which he bought for about $1 million, sits inside a former Christian Science Church that was converted into 12 townhouses earlier this year and renamed the Sanctuary.

The building is one of a number of church-to-home luxury conversions popping up around the country. As dozens of churches close or move to different quarters each year, they're finding second lives as condo developments and townhouses.

The conversion process is growing more common as shrinking congregations and shifting demographics have made it difficult for some congregations to stay afloat financially. According to a March report from CoStar Group, CSGP -0.60% a real-estate research firm, 138 church-owned properties across the country were sold by banks last year, compared with 24 three years earlier.

The Roman Catholic Church, for example, has closed hundreds of churches in recent years. In 2000, there were 19,236 Roman Catholic parishes across the U.S.; that figure fell to 17,644 by 2012, according to the Center for Applied Research in the Apostolate, a nonprofit research organization that compiles church statistics. United Methodists have seen the number of churches shrink by about 7% over the past decade or so, with 300 to 400 churches closing or merging each year. In 2000, United Methodists had 35,537 churches, compared with 33,069 in 2011.

The Seattle church where the new resident now lives was built around 1908 as First Church of Christ, Scientist, and counted about 800 regular attendees in its heyday. But by 2006, its congregation had dwindled to about 25 people, so the congregation relocated and sold off the church property for $1.3 million.

Architects have found creative ways to convert these historic buildings—which often have 40- or 50-foot-high ceilings, few or no interior walls and stained-glass windows—into homes and apartments that will sell for millions of dollars.

But it isn't an easy process: Not only do the structures need intensive interior reconstruction and upgrades to meet modern building codes, but they often have been granted landmark status, further complicating renovations.

The good news with churches is that you have 40-foot-tall ceilings, but the bad news is that you have 40-foot ceilings, says Continuum Company's chief executive and developer, who in the early 1980s renovated an 1846 Greek Revival-style church in Manhattan's Greenwich Village to create 15 co-op units. And because churches are usually landmarks, you can't change the facade, he adds. Most big urban renovations cost about $10 million and can take two to four years, or in the case of the Seattle project, about $12 million over a five-year period.

In the Boston area, more than a dozen churches have been converted to residential projects over the past decade or so. That's in part because there has been a steady supply. The Archdiocese of Boston closed 76 parishes in the metro area under a 2004 consolidation plan, selling 38 of those for just over $73 million. (To signify that a church is no longer a church, the archbishop signs a decree that relegates the building to profane use.)

One of the churches closed was a Tudor-style church called St. Aidan's in Brookline, Mass., where John F. Kennedy and Robert Kennedy were both baptized. It reopened in 2009 as a residential project. The church's stone facade and slate roof were preserved, but the interior walls were reframed to support two additional floors. The church was converted into nine high-end condo units that each sold for between $1 million and $1.8 million.

Many of the units in St. Aidan's have two-story windows, granite countertops and double-height living rooms with overlooking balconies. Some units also have exposed wooden trusses from the church as well as the church's original dentil molding.

Those rarefied architectural details are a major attraction for many occupants of church-to-home conversions. A research engineer for Boeing recently moved into a 2,900-square-foot, two-bedroom townhouse in the former Christian Science church in Seattle with his fiancée. We figured that a place would hold its value more if it was unique, like a piece of art, he says. And it's pretty hard to replicate a 100-year-old church.

He and his fiancée love to entertain in their four-story townhouse, which has 35-foot-high ceilings. The dining table sits underneath two 20-foot-tall stained-glass windows. It's the perfect space to play music, he says of the space. Whatever you play sounds like it's live, like you're in a concert hall as opposed to listening through a stereo.

In the guest bedroom, there's a skylight that looks onto the church's main stained-glass dome. The couple installed an electric blind over the skylight so they can surprise guests with it when they visit.

People who live in church conversions say that they easily find uses for some of the more unusual artifacts. An automotive executive and his wife bought a converted 1920s Presbyterian church in 2007. It's now a 3,463-square-foot home 20 minutes outside Denver. They say that their four granddaughters like to come over and ring the steeple bell, pulling a rope hanging in the home's foyer. We have a tradition of ringing it on New Year's, he adds.

He and his wife eat breakfast every morning in a nook where the altar used to sit. The couple sleeps in the choir loft, which overlooks the space. When you're in bed, you're in the center of the church, which is a great feeling. There are exposed wooden beams remaining from the original structure throughout the home, and one wooden pew from the church sits in the living room, along with more plush couches. Despite its novelty, the pew is often the last seat chosen by guests.

Developers of church projects say they are sometimes hesitant to convert sacred structures into commercial enterprises. the developer of a late-19th-century Baptist church in Watertown, Mass., into eight condo units, says he had mixed feelings about buying the property in 2003 for $1.4 million, especially because it was located in the same town where his family had lived since emigrating from Armenia in the early 1900s. While the sale allowed the congregation to move to a more suitable location, it was also a move away from a special place, he says. But I have very good feelings about saving a historic building.

The developer spent about $9 million on renovating the property, which includes eight units in the church, two units in the former rectory and four townhouse units he built on the church's former parking lot. Of the eight units in the church, five have sold for between $700,000 and $1.5 million. The four townhouse units sold for around $1 million each, and the two units in the former rectory sold for about $700,000 each. The developer says he tried to build units with modern amenities, such as dishwashers, cellulose insulation in the walls and laundry rooms with washers and dryers, while also retaining some of the unique architectural elements of the church, such as its wooden trusses and paneled ceilings. Some of the units on the second floor have living and dining areas with 36-foot-high ceilings.

Our unit isn't churchy at all, but it definitely feels unique and different and not boring, according to a fundraiser who moved into a three-bedroom condo there. She says that she has, however, experienced some backlash in the community over living in a former church. The cable guy had a hissy fit about having to install cable in a church, she says. He acted like the world was ending because people were now living inside churches.

Although it's still relatively rare in the U.S., the adaptive reuse of churches has become a popular practice in other countries, like the U.K. In 2006, the Royal Institution of Chartered Surveyors found that since 2001, about 500 churches in London alone had been converted into homes. In other countries, such as Germany and Russia, people still regard the concept of living in a church as disrespectful, says Bart Kellerhuis of Utrecht-based firm Zecc Architects, which has done several church-to-home conversions in the Netherlands.

One of challenges in such conversions is reducing the vast space of a church into something more livable. Living spaces can feel overwhelmingly grand, and heating costs can be considerable.

A couple in Chicago paid $600,000 for a former Lutheran church in Chicago's Humboldt Park neighborhood last year, says it is virtually impossible to keep the room where he they sleep warm. The roof isn't insulated, making it hard to heat the 3,500-square-foot space with a 39-foot ceiling.

We don't keep the heat running, otherwise we'd owe thousands of dollars in heating bills, he says, an information-technology specialist for Blue Cross Blue Shield of Illinois. But even if we did, the heat would just rise and escape through the roof. The fact is that this structure wasn't built for continuous habitation.

Philadelphia's Papers, Lenders at Odds

By The Wall Street Journal

The company that owns Philadelphia's daily newspapers plans to ask its lenders to wipe out about $300 million in debt in exchange for about $90 million in cash, real estate and bankruptcy costs, according to people familiar with the matter, likely sparking a battle for control of two of the country's largest papers.

The proposal, expected to be filed in a bankruptcy court as early as the coming week, sets up a clash between the lenders and the papers' chief executive officer, Brian Tierney, a Philadelphia advertising and public-relations executive who won a 2006 auction of his hometown dailies, the Philadelphia Inquirer and the Philadelphia Daily News. The operating arm of the papers' parent company has been under bankruptcy protection since February.

In bankruptcy court, lenders often agree to forgive some of what they are owed in return for ownership stakes that push aside existing shareholders. Instead, the proposal offers creditors about $35 million in cash, ownership of the papers' headquarters and related real estate valued at about $30 million, and little to no equity in the new company, according to the people familiar with the matter. The company would be left with almost no debt.

The company's proposal also includes a plan to absorb about $25 million in costs related to exiting bankruptcy, including repaying a bankruptcy loan and paying professional fees.

The papers' lenders include CIT Group Inc., distressed-debt specialist Angelo, Gordon & Co. and Citizens Bank, a unit of Royal Bank of Scotland Group.

Some creditors also say they doubt the value the company places on its real estate, and say it's unclear they would be given ownership of the real estate outright.

Philadelphia is shaping up as a test case for how newspaper businesses will be reconfigured, as many corporate-debt defaults hit the struggling industry. The Philadelphia papers are among at least five significant newspaper bankruptcy-protection filings since December, as deep declines in print advertising have left the papers unable to repay their loans.

Two newspaper publishers, Journal Register Co. and the Star Tribune in Minneapolis, are emerging from bankruptcy protection owned by creditors and with a reduced level of debt. Mr. Tierney is agitating against this emerging blueprint, which he says leaves newspapers with too much debt and tees them up for rebound failures.

The newspapers' financial woes have not affected the market for Philadelphia apartments. Why Settle For Ordinary Philadelphia Apartments When You Can Live In An Historic Landmark!