August 7, 2014
The newest frontier for real estate developers? Churches.
Bal Harbour Shops was among the first to turn to religion when it struck a land deal with a neighboring church for a 200,000-square-foot expansion of its luxury retail center.
But in the last week, trading has been brisk for church properties, with deals recorded across South Florida.
One buyer, Staten Island, N.Y.-based real estate investment trust, Helm Equities, scooped up a 23,534-square-foot church on an 85,729-square-foot parcel in Miami’s Design District.
A company tied to Aventura-based Elion Partners also closed on a church, paying $3.2 million for an 18,754-square-foot center in Wilton Manors.
And in Margate, Abundant Life Christian Centre Inc. struck a $5.6 million deal for a worship center on Royal Palm Boulevard.
But in a transaction that dwarfed its predecessors, Chicago-based Golub Group closed a $21 million deal Wednesday,spending about $7 million per acre for church-owned land across the street from First Baptist Church of West Palm Beach.
“You don’t normally see people buying and selling churches,” said Calkain Companies managing director Michael Zimmerman. “Usually, churches are passive investments, better than having money sitting in the bank. But on a deal like the one in the Design District, that’s definitely a land play. It’s not that investors want a church per se. It’s more likely the church is in the path of things, and it’s essentially a land deal.”
That’s what happened with Bal Harbour Shops in 2012. The luxury retail complex struck a deal with Church by the Sea to acquire land on 96th Street in Bal Harbour, where the church building had stood for about 70 years. In return, the retail developer carved out a piece of property in the northwest corner of its shopping center to build, at its expense, a new 50,000-square-foot building for the congregation.
“There’s such a need for land and such a lack of it that companies are having to get creative,” said Jose Antonio Hernandez-Solaun, president of The Easton Group, a Miami-based developer. “That’s just the kind of the cards we have to play with. Churches are among the only groups that have a glut of land still available.”
From Consecrated to Condos
Investors like Golub and the family of Bal Harbour Shops developer Stanley Whitman have big plans to convert the underutilized parcels into massive high-end projects.
Golub, for instance, plans 100 Class A condominiums priced at about $5 million each. It worked for two years on the First Baptist Church deal, closing Wednesday on the Chapel by the Lake, a parcel on the east side of Flager Drive, across from the main church hall.
The sale will spur new real estate investment across the region and finance First Baptist Church of West Palm Beach’s expansion by the end of the decade.
The congregation plans dozens of new churches, and has started construction on campuses in Jupiter and Boynton Beach.
“The work has already begun,” said spokesman Kevin Mahoney, pastor of stewardship. “Our desire is to create 100 new churches in South Florida.”
Analyts say last week’s deals point to an emerging niche market in which churches sell underutilized parcels in exchange for new buildings or money to fund expansion and mission work.
“Everybody’s realizing they need to strategically look at business models and how real estate aligns with the bigger picture. It’s not dissimilar to what we did when we were working with cities, states and schools figuring out that they had to deal with changing demographics,” said Kenneth Krasnow, managing director for CBRE Inc., which established a national division about four years ago to work with churches and nonprofits. “You’ll see some church-to-church transactions, but more often than not, the properties that are being sold on the higher end are for redevelopment. You’ve got churches that have been in these areas for a long time, and the areas have grown around them. A lot of them are being sold for redevelopment.”