Churches Close At Record PacePosted by Phil Ferguson on January 25th, 2011 – Comments Off on Churches Close At Record Pace – Posted in religion
from the Wall Street Journal.
Since 2008, nearly 200 religious facilities have been foreclosed on by banks, up from eight during the previous two years and virtually none in the decade before that, according to real-estate services firm CoStar Group, Inc. Analysts and bankers say hundreds of additional churches face financial struggles so severe they could face foreclosure or bankruptcy in the near future.
200 building put to productive use. Another step forward for the economy and tax revenue for the local cities. It is a win-win.
Religious denominations of all kinds have suffered in recent years as donations have declined, with many Catholic parishes closing and synagogues merging their congregations. But the property-financing problems have been concentrated among independent churches…
Many of the independent churches do not have the huge reserves that 1,000 year old organizations have. I’m sure they are losing money also they just have a lot more of it lying around. Some mega churches build on the idea that they will keep getting more and more members. Numbers are shrinking and people are giving less – it’s a bad combination.
In many cases, churches ran into trouble after borrowing to build bigger houses of worship needed to accommodate growing congregations in once-booming housing markets.
Pastors Rich and Lindy Oliver decided their Family Christian Center needed more space after their congregation rose from a few hundred in the early 1990s to 650 by 2002. The church borrowed $4.2 million and began building a new 1,000-person sanctuary on 11 acres in Orangevale, Calif., including classrooms and a space for adult learning
But when housing prices across California began tumbling in 2006, followed by a surge in unemployment and foreclosures, many congregants moved away, and those who were left reduced their tithing sharply. Meanwhile, the property, valued at $8.5 million in 2002 was appraised at just $2.5 million in 2008.
Stretched to the limit, the pastors stopped making payments. “I just told the bank to take it,” Mr. Oliver said. “If you’re a church with a piece of property upside down and no one will refinance the loan or lend you more money, there’s not really another choice but to walk away.”
Uh… you could pay the bills! I bet this guy kept his house and all of the things he bought. If only the members could raise some money…
In November, the Olivers raised $700,000—not nearly enough to rescue the previous church—from donations and personal loans from church members and used it to lease a former furniture store in a strip mall in Roseville, Calif.
So… They walk away from the money they owe but the church still gets $700,000 – what a scam! What kind of idiot keeps giving these people money.
But during the real-estate boom, regional and community banks attracted churches with lower rates on shorter-term loans. At the same time, some bond underwriters began offering churches more money up front if they issued so-called compound-interest bonds. In such cases, churches often paid nothing until the bonds came due years later, but then had to pay both the principal and accrued interest, which often doubled the amount they owed.
Many such bonds come due in the next few years. But with property values down and cash in short supply, many churches won’t have the funds to pay and will have trouble refinancing. “In 2011 and the next couple of years, we’re going to see a big maturity wall hitting these churches,” said Scott Rolfs, head of Wisconsin-based investment bank Ziegler and Co.’s Religion and Education practice.
Oh my…. that is some piss poor planning. It would be like you buying a $100,000 house and paying nothing for 7 years. At the end of 7 years you would need to pay $200,000. It’s ok if you income keeps going up (or if the church gets more suckers) but if the cash dries up and now the property is only worth $60,000 you are in deep shit.
I look forward to a world with fewer churches.