FEATURE ARTICLE, AUGUST 2004

NAVIGATING THE SALE OF RELIGIOUS PROPERTY
By using a sealed-bid offering, religious organizations can maximize property value.
Martin Jablonski

Religious organizations face distinct challenges from other real estate owners when dealing with property. For starters, a religious organization is accountable to multiple constituencies for making decisions that affect its real estate assets. The decision to maximize real estate value not only involves whether to sell, lease or jointly develop an asset, but to whom to sell, or with whom to lease or jointly develop.

Religious organizations frequently answer to two boards — one made up of clerics and the other of lay people. Decisions must be justified to the congregation who effectively voice approval or disapproval at the collection plate. An unpopular real estate decision that maximizes the value of an asset, but impairs the fundraising ability of a religious organization, is counterproductive.

There is pressure to responsibly put the property to use for the common good. If it is decided to sell a property, care must be taken to assure that the property’s end use will not be in conflict with the philosophy or teachings of the organization. For example, religious organizations may not want their properties used for the purposes of gambling or liquor distribution.

Because of the many constituencies and issues surrounding a religious organization’s property assets, more and more of these organizations are working with real estate professionals who bring marketing knowledge, experience and technical expertise to the table. This collaboration is resulting in a more sophisticated process for utilizing real estate assets to support the religious organization’s core mission.

Sealed-Bid Process

When the decision to dispose of surplus property has been made, religious organizations often find themselves in an awkward situation. At times, ministries or groups associated with the organization seek to acquire the property at below-market prices. This is contrary to the goals of the disposition. A new process has emerged that not only establishes market value for the property, but also creates a transparent process by opening up bidding to all interested parties.

While the sealed-bid process is not a new process for disposing of surplus property, its application has been augmented to deal with the complexities of a religious organization’s many stakeholders. The benefits of the sealed-bid process are many:

• Performing due diligence results in better decision-making

• Maximizes value through the solicitation of multiple offers

• Creates a specific time frame for the disposition

• Involves community input

• Results in a sale price closer to the retail, rather than the wholesale, value.

Due Diligence for Better Decision-Making

Extensive development-related due diligence data is gathered to address challenges of re-adapting the property to a higher and better use. This information is packaged to suggest creative solutions to obstacles that affect the entitlement process such as access, appraisal, condemnation, conservation, demolition, easements, encroachments, environmental, flood plain, highest-and-best-use studies, legal documentation, preservation, public relations, site design concepts, site engineering, soil conditions, surveys, title, utilities, variances, wetlands and zoning.

Going to market with the most relevant entitlement issues fully addressed by the religious organization has the following benefits:

• The owner develops a clearer awareness of the property’s advantages and disadvantages.

• With the true value of the property defined prior to marketing, the owner realizes greater value in a transaction whether it is a sale or lease.

•As a member of the community where the property is located, the owner has more leverage to complete the entitlement process with the property, because it is a known and trusted entity.

• Because owners control the timeline of the disposition, they are better able to forecast not only the value, but also when the value will be realized.

• Owners can avoid the many missteps that can derail a transaction.

• Providing interested parties with the information required to make buying decisions increases the number of bidders, because much of the time-consuming “heavy lifting” has been done.

• Completing the due diligence before going to market produces a highly efficient process and significantly reduces the marketing timeframe.

Maximizing Value through Multiple Offers

The sealed-bid timetable creates a sense of excitement and urgency. It will often become an event that merits publicity — thereby building increased awareness of the process and bringing more bidders to the table. The limited amount of time to make a decision forces buyers to put the property offering on the front burner. While other opportunities can wait, the sealed-bid has a specific deadline date. Buyers also are more likely to submit their best price, because they recognize that there will be competing bids.

The religious organization sees a greater number of bids by allowing purchasers to retain their anonymity and to quietly submit their intentions. Multiple offers provide the owner with an accurate picture of the true market value of the property in the shortest period of time. Because all offers are due on the same day and include required and specific input from all bidders, the owner can easily compare offers on an “apples-to-apples” basis. The process enables owners to determine quickly which offers are in their best interest to shortlist.

Consensus Building

The purpose of consensus building is to align the interests of the religious organization with those of the community. An important part of the sealed-bid process is to approach municipal officials to determine their expectations for the subject property. This initial consensus building begins with the municipality, but often involves county, state and federal agencies such as the Metropolitan Water Reclamation District or the Army Corp of Engineers. Generally, elected officials are most concerned with more global issues and the economic impact on their constituents, whereas government employees are more focused on the nuts and bolts of making a project happen.

Glen Creek Estate
Case Study

The Archdiocese of Chicago recently conducted a sealed-bid offering for 92 acres of its surplus land in south suburban Glenwood, Illinois, called “The Glen Creek Estate Offering.”

Consensus-building efforts with the Village of Glenwood helped determine the highest and best use of the property and involved emphasizing its location adjacent to the Glenwoodie Golf Course, which is owned by the village. It was decided that if additional land parcels were added to the offering, it could be positioned as a golf course residential community development. Demographic reports confirmed that 30 percent of the population in a 10-mile radius is over the age of 50, and that a new golf course development would have a high likelihood of success. In order to augment the offering, the Archdiocese and Tower Advisory Real Estate Services worked closely with surrounding land owners and ultimately assembled three additional land sites bringing the total offering to 175 acres.

Substantial due diligence on entitlement issues — including engineering studies and design concept plans — was completed in February in preparation for the launch of the March marketing campaign targeting residential builders and developers. Prospective purchasers were directed to the website www.landorbuildingsforsale.com. After signing a confidentiality agreement, downloadable from the website, prospective purchasers were provided with a user name and password to access extensive due diligence and entitlement data for the property.

Tower worked closely with village officials throughout the process and even used the Glenwoodie Golf Course’s golf carts to conduct tours of the property offering. The tours were completed in April, and offers were due on May 20. Of the many offers received, three were shortlisted for further discussion. Currently those offers are being compared and analyzed to determine which ones meet the Archdiocese’ objectives for a responsible disposition.

One of the many advantages of the sealed-bid process is that, unlike an absolute auction, the high bid does not have to be accepted. At times, it’s not the high bidder who wins, but the bidder whose proposal is more aligned with the religious organization’s mission that is successful. Offers can be negotiated or not accepted at all if they do not meet the organization’s objectives.

Martin Jablonski is a real estate advisor for Tower Advisory Real Estate Services.

©2004 France Publications, Inc. Duplication or reproduction of this article not permitted without authorization from France Publications, Inc. For information on reprints of this article contact Barbara Sherer at (630) 554-6054.