Church/House of Worship Appraisal Considerations: Adaptive Reuse - Church Conversion Alternative

(This archived article was published in 2012.  More recent data is found in the articles section of our web site). Recently, the 27 member First United Church of Aurora, Illinois voted to close. The congregation, which originally formed in 1837, had been in its current home for 140 years since its construction in 1871. The congregation had dwindled from 876 in the early 1960s. The upkeep of the structure became too much of a burden for the few left. The Northern Illinois Conference of the United Methodist Church approved the closure and will take over the building. Reportedly, they are hoping to use it for another religious purpose.

What happens to religious facilities when they are no longer useful to their original users or for their purpose? As church appraisers in the Chicago metropolitan area this is an issue that comes up with some frequency.

Sometimes the church/synagogue property is sold to a different congregation, as in the case of the 27,787-square-foot, former Northwest Suburban Jewish Congregation facility in Morton Grove, Illinois, which was purchased in 2010 by St. Mary's Knanaya Catholic Parish, an Indian Catholic organization. At its peak, the Northwest Suburban Jewish Congregation served some 750 families; however, membership had fallen to 150 and programs could no longer be maintained at acceptable levels.

Sometimes the church building is acquired by a non-traditional group such as the Meditation Center of Chicago, which acquired the 55-year-old, 17,060-square-foot, Friendship Presbyterian Church in northwest Chicago in 2010.

Sometimes the religious facility is torn down and the site redeveloped, as with the 10,400-square-foot Wilmette Lutheran Church in 2010.

And sometimes the building is adapted to another, altogether different, non-religious use such as office, retail, multifamily, educational, etc. An example is Mallinckrodt in the Park, an 81-unit, 5-story, senior condominium conversion in Wilmette. Prior to conversion in 2006, the 1918 Italian Renaissance building has been a convent and a college.

The chart below shows a breakdown of the purchasers of religious facilities in the metropolitan Chicago area by CoStar, Inc. Although some of the purchasers identified as individuals probably intended to use the facility for a religious purpose, it is clear that once sold, many religious facilities are destined for a different use. When completing a religious property appraisal, we often need to look at many alternate potential uses.

 

 Source: CoStar, Inc.

Church attendance has been declining in U.S. since the 1950s reducing the demand for religious facilities, even very beautiful or historic ones.  Vacant and underused structures in search of an alternative use have proliferated in the wake of households migrating from city centers to the suburbs. Religious facilities are specialized products whose potential for conversion may not always be readily apparent. Unlike other older buildings, obsolete religious facilities and schools having distinctive identity, structural integrity and architectural appeal are good candidates for adaptive reuse, particularly if the building may be converted to a profitable or otherwise beneficial use. In many cases, conversion may be cheaper than new construction. The reuse of religious facilities may produce other benefits related to historical preservation, environmental sustainability or economic development.

Although it might seem sacrilegious to adapt a religious facility to an alternative use, such buildings are usually deconsecrated by a priest or other authority, prior to redevelopment or conversion,  by removing the blessing that had previously consecrated the property and so pronouncing that its use as a place of worship has ended.

Cleveland State University's Robert A. Simons and Eugene Choi recently completed a study to determine what building and neighborhood characteristics were most associated with the end use of conversion projects for religious facilities and schools.* The study's purpose was to determine the factors most significant in determining the type of adaptive reuse sought for old religious buildings and schools including physical building characteristics and other external elements such as location and neighborhood demographics.

The authors' findings offer valuable insights to religious organizations selling property, to developers considering an adaptive reuse project, and to public agencies for economic development.  For example, number of stories is among one of the more important building characteristics affecting the ultimate reuse of religious buildings and schools. More stories favor apartment conversions, while other uses prefer fewer stories. While the age of a property matters, with younger buildings more likely to be adapted as apartments, the authors caution that this may be due to the particular characteristics of the properties they happened to have surveyed. They speculate that older buildings having historic features that can be showcased may produce greater benefits. But if buildings do not have historic features, they tend to be converted into low-income housing. So it is reasonable to expect that younger religious buildings and schools are more likely converted into apartments.

Conversions of more than 200 religious facilities and schools in the U.S. over the 25-year period from 1984 to 2009 were researched. The investigators found that condominiums are the dominant reuse category of the five examined -- condominiums, apartments, cultural (such as museums and arts centers) office and retail.  With condominiums as a reference category, or benchmark, against which the other uses are compared, the traits that most influence the selection of alternative apartment, cultural, office or retail uses are highlighted. These are summarized below:

Apartments

Religious buildings and schools are more likely reused for apartments if they:

• are larger
• are younger
• have a brick exterior
• are located in census tracts with higher vacancy rates
• are located farther from the airport
• are located on a main street
• are not located on a corner

Building size and distance from airports affect school reuse more than religious properties, while number of stories, percentage of owner occupied households in a census tract, distance from a park and distance from a highway affect religious buildings more than schools. Religious buildings and schools redeveloped earlier in the analysis period were more likely to be reused for apartments. Schools are more likely than churches to be reused for apartments. Religious buildings and schools sold by hierarchical organizations are more likely reused for apartments.

Cultural Uses

Religious buildings and schools are more likely reused for cultural uses if they:

• have fewer stories
• are closer to the airport
• are located on a main street
• are located in an inner city

Religious buildings more likely than schools to be developed for cultural purposes. Location on a main street has greater influence on school conversions than on religious properties. Building size and local street location have greater impact on religious facility reuse than on schools. As with apartments, religious buildings and schools redeveloped earlier in the analysis period were more likely to be reused for cultural purposes.

Office

Religious buildings and schools are more likely reused for office uses if they:

• have fewer stories
• are younger buildings
• are located on main street
• are located in inner city

Schools are more likely than churches to be reused for offices. Main street location and number of stories exhibit more influence on school conversions than on religious properties.

Retail

Religious buildings and schools are more likely reused for retail uses if they:

• have fewer stories
• are located on main street
• have and older population in the surrounding census tract
• have lower gross housing rents in the surrounding census tract
• are closer to a highway
• are closer to airport
• are located on a main street
• are located in an inner city

Churches are more likely than schools to be reused for retail. Main street location and number of stories have greater impact on school conversions than on religious properties. Religious buildings and schools sold by hierarchical organizations are more likely to be reused for retail.  The age of population affects schools more than churches.The following table shows which factors are most associated with the various project results:

Apartment

Cultural

Office

Retail

Larger building size Fewer stories Fewer stories Fewer stories Younger building  Closer to airport

Younger building Older population High vacancy rate in census tract  Location on main street

Location on main street Lower gross rent Farther from airport Inner city location Inner city location Closer to highway Corner location Earlier conversion date School more likely than religious facility Closer to airport Earlier conversion date Religious facility more likely than school Location on main street School more likely than religious facility Location in inner city Brick construction Religious facility more likely than school Hierarchical seller more likely Hierarchical seller less likely

As special use properties, religious facilities appraisals present challenges not found in the appraisal of conventional properties. If the building's useful life for a congregation is at an end, the church appraiser will have to value it based on its most likely alternative use. This is especially true in the case of financing by a federally insured institution, where market value is premised on a value in exchange, or what a property is worth in the general market, as opposed to a use value, which is the value a specific property has for a specific use, under the requirements of the Federal Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA) of 1989.

While religious facilities may continue in use as places of worship, in some cases demographics and market conditions may no longer support its continued use. The research by Messrs. Simon and Choi may help the church appraiser to better identify the most probable use and user of the property as is if available for sale on the open market.

 *Simons, Robert A. and Eugene Choi. "Adaptive Reuse of Religious Buildings and Schools in the U.S. Determinants of Project Outcomes." International Real Estate Review, 2010 Vol. 13 No. 1: pp 79-108.