After reviewing all of the information collected so far, there are a variety of options to consider.
Site Consideration
RED Church needs to determine if they are wanting to maintain at a size of 100 people or grow. Depending on this decision, RED Church may need to acquire a larger piece of land.
Market Analysis
The market does not seem to thick of churches. Being the bible belt, it is expected to have plenty of churches, and with a large population in such a small area, the market can take another benevolent institution.
Regulatory Analysis
Churches find favorable treatment when considering taxation and land use. The only obstacle will come down to obtaining a building permit for each of the sites. Since there is a loss of revenue, the city may not want to give the building permit for a church on the 6.4 acre site which is Dallas North Tollway Frontage.
Financial Analysis
Financial Analysis is where everything starts to get heated and fall through. Based on the financials and projected giving of the congregation, many of the options for land purchase or even the leasing option of the current Indian Restaurant are not feasible. Without having a pro-forma budget for church expenses we can not make an accurate decision and recommendation. Ball-parking the allowed property expense (whether lease or debt service) at 50% of the annual receipts allows for a $60K payment. The only option that comes close to that is the 1.14 acre lot with new construction. Projected debt service is $83,863. This is 68% of the budget. It seems like this will not be a viable option.
Unless RED church has additional funds for an equity investment into a property, it does not look like any of these options are feasible.
I have never considered the RE possibilities of a Church and find this an incredibly interesting project/ feasibility study. If your numbers are correct, it seems like many churches would not be built. I wonder if there are other benefits (501c3)to a project like this.
ReplyDeleteThat is a good question Tim. And of course time ran out on us for such a quick development analysis. I had to assume a lot and there is a lot more that goes into the feasibility study for such a development. But I don't think we are too far off in the numbers crunching.
ReplyDeleteWith some quick scanning I found that there are some grants that can be applied for. These do not subsidize the property development directly, but are contingent upon the social work efforts demonstrated by the church.
ReplyDeleteWayne - I like your idea of underwriting a church. No credit and unreliable revenue make it a pretty challenging undertaking, so its impressive to even attempt it. Could a 2nd or 3rd generation traditional retail space be a viable alternative for RED in that zip code?
ReplyDeleteRyan: Absolutely. After our Monday due date, this came to mind. I've been aware of the store-front churches, and obviously this most always goes without a property purchase, it would be a lease, which sometimes is more feasible than a property purchase. I was really shooting for the pride of property ownership. Do you see anything else that could be an option?
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