Churches End Up Paying Property Taxes

We just learned that churches, who desire to lease instead of own their facilities, will likely end up paying real property taxes to the owner of real property who is obligated to pay these taxes to the State of Colorado regardless of the occupant of the building.

We think this is just plain wrong.

In our opinion, the intent of the state real property tax exemption doesn’t regard ownership but only use. The State of Colorado Property Tax Exemption Statute states that in “the general assembly hereby finds, declares, and determines that the uses of property which are set forth in this part 1 as uses for charitable purposes benefit the people of Colorado and lessen the burdens of government by performing services which government would otherwise be required to perform. Clearly there is no mention of property ownership. We believe that the owner of real property, who leases to a qualifying tax exempt entity, should have their real property taxes abated for the portion of the space occupied by the qualifying entity.

Currently, in order to qualify for real property tax exemption, a church must both own the property and also use the property for qualifying charitable purposes.

Colorado Revised Statute 39-3-106 (1) states that: Property, real and personal, which is owned and used solely and exclusively for religious purposes and not for private gain or corporate profit shall be exempt from the levy and collection of property tax.

It is our hope and perhaps a future goal to find a way to revise this to match the original intent of the statute.

VACANT Retail Boxes Offer Church Facility Choices

With the continuing malaise plaguing the economy and consumer spending at its lowest level in a decade, unprofitable retailer operations are being shuttered leaving vacant spaces in retail shopping centers across American. According to Mary Beth Jenkins with the Laramie Company, who recently reported at the Rocky Mountain Real Estate Expo, there are 54 retail boxes currently unoccupied in the greater Denver area. This does not include the many additional automotive facilities that too lie fallow.

Development Advisors, LLC (“Advisors”) believes that many of these empty retail buildings would be desirable as a new church facilities. Retail boxes offer many of the attributes that churches are seeking today—visibility, access, parking, and services like restaurants to frequent before and after Sunday services.

Not long ago, the mere presence of a church in a retail center suggested that the shopping center had lost favor with retailers who abandoned the center for greener pastures elsewhere. But today, the reputation of a shopping center with a church has changed. These days, weekend and evening traffic from a church can transform a slowing retail center.

There are many examples of churches that occupy retail space in the greater Denver area including:
▪ Calvary Chapel South Denver: 9052 West Ken Caryl Avenue; Littleton, CO 80128.
▪ Orchard Christian Center purchased the former Beau Monde shopping center at the NWC of I-25 & Orchard Road in Greenwood Village, CO.
▪ Foothills Community Church 8270 W 80th Ave; Arvada, CO 80005.
▪ Flatirons Community Church 400 W South Boulder Road; Lafayette, CO 80026-8856.
▪ South Fellowship 6560 S Broadway; Littleton, CO 80121.
▪ Colorado Christian Fellowship 10630 E. Iliff Avenue; Aurora, CO 80014.

Refinance Debt in 2010

At the Rocky Mountain Real Estate Expo, we heard that interest rates are projected to increase in 2011 primarily as a result of competition from the US Government. Apparently a $6 Trillion pool of available debt capital will be reduced to only $3 Trillion because of this new competition. This new demand will put pressure on this supply thus causing the cost of this debt resource to increase.

As a result, we suggest that our church clients make plans during 2010 to refinance any debt expiring in 2011 or 2012 before this possible rate spike.

Denver Softens Land Use Regulations for Churches

We are pleased to report that, after talking with Denver Planning, city staff met and discussed the current Denver Zoning Code’s treatment of church and similar public assembly uses, and revisited how or whether the New Code should change that treatment. Denver Planning has agreed to remove the assembly area size restriction (see our previous update entitled Denver Proposing Strict Land Use Regulations for Churches) and to permit churches in all zone categories. Instead, planning will use the existing administrative review process. This will apply to a church moving into a residential or mixed-use zone district to occupy an existing building for the first time (different use prior to), to expand an existing building, or to develop a new building ground-up. This is customary in our experience and likely typical for other municipal jurisdictions along the Front Range. Further, we understand that in commercial zone districts, in which residential is not present, there would be no administrative review process even though it would still be necessary to apply for a change of use from zoning (if not previously used by a church)

The only restriction (limitation on use) remaining would be the 11 pm end-time for regular hours of operation in a residential zone district.

If you have questions or need any help, please feel free to contact us.

Denver Proposing Strict Land Use Regulations for Churches

Churches need to become familiar with the sweeping changes proposed to Denver’s land use regulations—Denver’s New Zoning Code. These changes will certainly impact churches currently located or desiring to be in the City and County of Denver. We recommend that as a property owner, you go view the new zoning map to learn about the proposed new zone district for your church property.

Further, after a quick review of Draft #3 of Denver’s proposed new zoning code, it states in section 11.3.2.5 entitled “Public or Religious Assembly” that Special Exception review is being proposed for >300 seats in Residential Zone Districts and >600 seats in all other zone districts. This could be a big problem for a church owner that needs to sell its property and also for a church seeking to purchase and renovate an existing building, if your church does not comply with the seating regulations.

It’s possible that any renovation work that would require a building permit could trigger a Special Exception which is akin to a complete rezoning of the property. This could invite neighbors to object and the size of the assembly area (worship or sanctuary space) to be modified and therefore rendering the property less valuable for future church use.

If you have questions or need any help, please feel free to contact us.

Church to sell prominent Cherry Hills Village church property

Rarely does such a high-quality property, in a proven Denver-area location, become available to purchase, but the Colorado Community Church property at 3651 South Colorado Boulevard can now be purchased for a fraction of the cost to construct new. This is a terrific opportunity for a church user or a Christian investor.

This well-known church property is a proven location (Cherry Hills Village, Colorado) for successful church operations and growth. The property was home to Cherry Hills Community Church for 10 years beginning in 1985 prior to being purchased by Colorado Community Church in 1995 to accommodate their surging growth under Dr. Mark Brewer. Colorado Community Church desires to downsize and relocate this campus to a smaller facility.

Nearly $6 million has been spent renovating the building (completed in 2006) including adding a new fellowship hall, chapel, café, children’s classrooms, and completely replacing the parking lots. This luxury 75,000 SF church facility is arguably worth nearly $19 million but now can be acquired and occupied immediately for only $9.9 million.

On a typical Sunday, several thousand adults and children can be served in this “like-new” luxury church property which has a sanctuary for 1,200, a fellowship hall for 600 and children/youth areas to accommodate 400.

This church is ready for immediate occupancy. Whoever ends up purchasing this great church property, is almost certain to see their church community prosper. You may click here to download a brochure.

If you would like more information, please contact Scott McLean at Development Advisors, LLC at 303-534-3344 x103.

Video Church Gaining Momentum

On a recent trip to northern Colorado, I met with several pastors of large and leading churches including Paul Trimble with Crossroads Church in Loveland. Paul talked about the growing phenomenon of churches accomplishing new expansions by obtaining smaller new sites all simulcast from a “headquarters” facility. There are a few churches along the Front Range that are doing this today including Rocky Mountain Christian Church in Niwot and Frederick.

Paul shared with me a DVD of a leadership podcast that Andy Stanley of Northpoint Community Church (Alpharetta, GA) conducted in his Leadership Podcast dated 5-1-2009 says that the “old paradigm” of the senior pastor having to be both a gifted, dynamic and attention-retaining speaker AND the operating leader of the church is has gone away because of the video church phenomenon. This is a very good thing since a gifted speaker/lecturer/motivator/speaker is rarely a qualified administrator. In fact, you don’t want your gifted communicator anywhere near administration. Andy says that there is a movement afoot to do video churches all across America by “partnering” with churches that own “under-utilized” real estate. This is an opportunity for the kingdom to come together like never before. Many people will object to this change. But this could be incredibly beneficial to the declining trend of Christian worship in America. A bazillion dollars has been spent on real estate, much of which remains underutilized by many churches with shrinking congregations.

I also met with Pastor Clay Peck, lead pastor at Grace Place church based in Berthoud, Colorado who told me about Mark Driscoll with Mars Hill Church in Seattle who operates seven popular church venues in one of America’s most un-churched cities. Further Mars Hill just opened a new venue in Albuquerque, NM—just 1,500 miles from Seattle! Mark discusses how to preach in a multi-site format at his blog. Mark has boldly stated that Mars Hill plans to expand to 100 churches in the next 10 years. Wow.

We all need to be thinking about expanding our reach. What is your plan to expand?

Facility Goal or Dream On

What do you dream about? Are you pursuing your dreams? Do you have goals that will direct you to realize your dreams for your future, or are you leaving it all up to chance?

Over the past several months, the staff of Development Advisors have talked with literally hundreds of churches here in Colorado to learn more about their growth and therefore their need to expand their facilities. Advisors specializes in working with churches that need to expand. Nearly 10% of these churches suggest that they have growing congregations (PTL) and that they have the desire to expand their church facilities in the future.

Many of these church leaders have a vision for their future, but many of these churches have not stated their desires, their dreams, in writing. What these churches need are goals and specifically a facility goal.

Just like that vacation you have been planning, its critically important that you have a road map showing how you get to each one of your destinations and then get home!

At Development Advisors, we lead our church clients through the process of establishing goals for their facility expansion in the first of four phases. In Phase 1, we help churches clearly define their vision, know their membership, plan financially, plan the right size staff and manage their critically-needed volunteers. Such goals must specifically articulated in writing and matched with a church’s future facility desires. We lead our clients through this Phase 1 process in order to create the church’s Facility Goal.

Financing Successfully Arranged

Development Advisors just completed a unique “syndicated” arrangement to finance a new 100,000 SF church facility in south metro Denver for our client Mission Hills Church. What an incredible challenge! But we praise God for his leading and for his provision.

As it turned out, we could not have picked a more difficult time to procure debt financing. It’s still very soon after the credit collapse of 2008. There is no question that the “collapse” continues well into this new year (2009). We solicited no fewer than 12 lenders seeking debt financing for the $29 million MHC project. In collaboration with Keith Carson at Mission Hills Church, at least 8 complete packages of historic and credit information were provided to lender candidates. Together, we solicited conventional lenders, non-conventional lenders and private lenders (such as foundations). I am pleased to announce that Mission Hills Church was successful in obtaining up to 62% of its total project costs ($29 million) in the form of a syndicated commitment from both FirstBank and from Share Financial. Share is a church bond underwriting company based in Dallas, Texas. Share has done many bond underwritings all across the US over the past 30 years including First Aurora AOG (Aurora, CO) and Rocky Mountain Christian Church's (Niwot, CO) new Frederick plant.

Not only are church bonds a good solution for church expansion projects, but they make excellent investments for church members who essentially invest in their own church. Personally, I intend on purchasing some of these highly secure and above-market yield financial instruments. Church bonds historically have a lower default average than municipal bonds and Share has not had a single default in its’ 30 year history.

You may wish to learn more about the MHC new building project entitled "Called to Something Big".

Audio Visual Lighting Costs

Its amazing how much a church needs to spend these days for a state-of-the art AVL system. As Mission Hills Church ("MHC") got started looking at the costs to outfit its 117,000 SF new church facility, both my partner Tim Dreessen and I were shocked.

After much research and discussion, it was decided that MHC would hire Clair Brothers out of Manheim, Pennsylvania, to complete the design for a new AVL systems for the main santuary, the chapel, the youth area (of course), the children's area (including the Early Learning Center) and the lobby (to name a few key areas).

The initial estimates were well north of $3 million, nearly $25/SF. This would equate to almost 20% of the proposed hard costs for the project. Outrageous!

But just today, I heard that another southeast Denver metro area church (not Cherry Hills) spent $3.2 million for all of its AVL installations and spent an eye-popping $23/SF including about $2M in its worship center which seats almost 2,000 persons.

Over the course of vetting and value engineering, MHC was able to get the proposed costs down to around $2.2 million ($18.80/SF). Now that the reality of the woeful financing markets have taken a hold and we have revised downward the budget for every system/item in the reduced new proposed building (100,000 SF), the overall budget is still $1.4 million ($14/SF).

While I don't profess to being more than a music loving baby booming classic rock listener, I bet that what MHC gets for $1.4 million will be hands down compared to what they have now and certainly better than most churches of its size. Further, the design we will install will be scalable meaning, that when giving picks up sometime after the grand opening, MHC can add this gizmo and and that gadget to achieve the type of facility that will be few and far between in the greater Denver area.