Orange County has been a mecca for sales of high-profile religious properties over the past year, though it’s less of a Promised Land when it comes to pricing for smaller church sales.
The three largest church-related sales in OC during 2011 traded hands for nearly $95 million on a combined basis. Renovating those properties to make them suitable for new church-goers could add another $30 million or more to that already-high price tag, according to reports.
In comparison, the average sale of a church in Southern California was for just $2.2 million last year, according to brokerage data from CBRE Group Inc. There were 88 church-related sales in the region last year, with about 30% of those deals closing in the fourth quarter, the brokerage’s data show.
Just 10 or so churches larger than 40,000 square feet traded hands in Southern California over the past two years. The most active deal size was for properties running 5,000 square feet to 10,000 square feet.
Trophy church properties going to market these days “are few and far between,” said Eric Knowles, senior vice president for the San Diego office of CBRE, and head of the brokerage’s religious facilities group. “I don’t expect to see too many [in Southern California] this year.”
But OC had more than its share of trophy sales in 2011.
Last November’s $57.5 million sale of Garden Grove’s iconic Crystal Cathedral campus to the Roman Catholic Diocese of Orange was arguably the country’s most prominent church-related transaction of the year.
The headline-making sale saw the diocese outbid Chapman University, private developers, other churches and wealthy investors for the Crystal Cathedral’s glass-plated building and 35-acre campus, which includes some 329,000 square feet of office, meeting and other space. The deal takes the diocese’s prior plans to build a new, $200 million cathedral elsewhere in the county off the table.
Millions in Renovations
Market watchers expect the diocese to eventually spend several million dollars more to renovate the 2,800-seat Crystal Cathedral—which has long been home to the Hour of Power television show—to fit Catholic worship requirements.
The Orange diocese, which oversees some 1.2 million Catholics in its domain, could also end up selling other property it owns to help finance the deal, according to reports.
The Crystal Cathedral sale, which played out in Santa Ana’s federal bankruptcy court, was just one in a string of notable deals made by OC churches last year.
Fullerton’s Eastside Christian Church closed on a deal last April to buy a pair of Anaheim commercial buildings that will serve as the growing congregation’s new campus.
The church paid $20 million for the 20-acre property, a one-time site of Boeing Co.’s sprawling operations in the city. It was one of the larger commercial real estate deals in North Orange County to close last year.
Eastside is in the midst of renovating the buildings and land. It expects to move into the new location by this fall, with estimates for the redevelopment project running $20 million to $25 million.
The Anaheim property Eastside is buying includes two buildings—a two-story, 200,000-square-foot industrial building at 3330 E. Miraloma Ave. that’s the hub of the new church facility, and a six-story, 200,000-square-foot office building at 3370 E. Miraloma that the church has proposed using for auxiliary purposes.
The six-story building was recently relisted for lease or sale, but a sale price has not been disclosed in brokerage data.
Campus Sale
Eastside’s move to Anaheim is partly being financed through a deal announced last April to sell its existing 8.2-acre campus, located next to California State University, Fullerton, for $16.6 million to the Dong Shin Presbyterian Church.
Eastside’s existing 90,913-square-foot facility, at 2505 Yorba Linda Blvd., is expected to close in August for about $183 per square foot.
Dong Shin Presbyterian is a Korean-American church already based in Fullerton that counts about 1,000 members, compared to the roughly 4,300 worshippers that go to Eastside every weekend.
The big-dollar prices seen in the Crystal Cathedral, Eastside and Dong Shin church transactions took place despite brokerage data that show the local sales market for churches and related buildings has a way to go to reach pre-recession levels.
The average sale price of an OC church was about $164 per square foot last year, according to CBRE’s Knowles. That compares to a high sale price of about $309 per square foot seen in the boom real estate year of 2007, when OC churches on average took just 75 days to sell.
Quicker Sales
Now it typically takes more than 250 days to sell a local church property, a figure that’s down slightly from a year ago, Knowles said.
“Churches were one of the groups that really didn’t acknowledge the changes in pricing” that occurred during the downturn, he said. That’s accounted in large part for the increased time it takes for a property to sell these days.
Churches in Los Angeles County sold last year at an average of about $187 per square foot, according to Knowles’ data. That’s about 15% higher than OC pricing, for closed deals.
“L.A. is still the strongest market in Southern California,” he said.
A recent report by Santa Ana-based Grubb & Ellis Co. detailing religious properties currently up for sale in major U.S. markets lists OC as having the second-highest asking prices of any tracked region on a price-per-square-foot basis.
OC churches on the market have average asking sale prices just under $250 per square foot, trailing only New York, which has prices close to $375 per square foot, according to Grubb’s report.
Los Angeles-area churches on the market now have asking prices closer to $200 per square foot.
OC church properties take the longest to sell of any market, according to the report from L. Thomas Morgan, senior vice president for Grubb’s San Diego office and national director of the brokerage’s religious property division.
Less Action Ahead
Don’t expect many blockbuster church-related deals in OC this year. The priciest local church currently on the market is a 30,000-square-foot Yorba Linda property at 18821 Yorba Linda Blvd.
The site, owned by Calvary Baptist Church, is being offered for sale at $6.5 million, or about $217 per square foot, according to CoStar Group Inc. data.
Smaller deals, in the $1 million to $3 million range, should make up the bulk of sales transactions in 2012, said Sean Ward, first vice president for the Orange office of CBRE and a member of the brokerage’s religious facilities group.
“There’s a ton of those churches,” which typically serve between 100 and 400 members, Ward said.
Many larger churches seeking to grow are looking at warehouses and other non-traditional buildings as potential new sites, in the Eastside Christian model, he said.
That assumes the churches can get city zoning approvals for their plans to reconfigure those sites. Many cities aren’t keen on losing tax revenues from one-time big-box retail or other sites that are turned into places of worship, local brokers noted.
There’s more than 480,000 square feet of older, vacant big-box retail space in OC that could be reconfigured into uses that include churches, schools and medical, according to CBRE brokerage data.
