The position of churches as buildings is different today from what it was in an earlier America. Once, no one needed to ask where the church was. You just went to where all the roads came together and looked for the steeple. Today, churches may be physically overshadowed by multi story buildings. A church may be out in the woods. It may be a storefront. It may be a chapel in as incongruous a place as the strip in Las Vegas. Older church buildings are re used as apartments, artist lofts, karate studios, and restaurants. New congregations find homes in old schools and offices. Congregations compete for space in the market as part of the general "mix." Churches were once built at great cost, as a statement of reverence, with arches that reached toward the heavens and masonry to last forever. Beautiful stonework and finely hewn beams can add to value for churches and for non church uses. But, at other times, those same things that make a church so full of meaning can impede its value: don't most of us feel at least a little uncomfortable with the thought of dinner on what once was the altar?
The traditional method of valuation for a church, as for other special use property, is the Cost Approach. Calculate what it would cost to build the building, deduct depreciation, and add land value. But how do we measure depreciation? And what does it matter if it costs a million dollars to replace a building when none of the brokers in town can seem to fetch offers of more than half that? The Cost Approach is in disfavor in the valuation of commercial buildings because it typically produces value indicators well in excess of what buildings sell for. Cost today is considered indicative primarily in the valuation of new buildings in healthy markets. If cost is not indicative in the valuation of offices or industrial buildings (which are generally not worth what it costs to build them), why should we expect it to be any better in the valuation of churches?
A good method for the valuation of a church is to begin by answering those things that can be answered. What is the land worth? That should provide a floor. What does it cost to build it? That may give us a ceiling. Beyond that, what special elements may produce value? Is there a source of rental income? Weekday parking on site for a nearby commercial building that needs it? The basement, for a day care center? The steeple, to house a cellular dish? Can the building find a market for re use, as general "shell" space? What is space of that kind worth? Last, how does it compete in the market of churches? Once, data of this kind were difficult to obtain. Today, a brief search through a data service provides region wide information of church sales. Appraisal Data Source reports a range of prices in Greater Boston in recent sales from $18.00 to $77.00 per square foot of building. Given the range, where does our property fit?
The skill of an appraiser in the analysis of a church is in making a clear picture of potentially diverse data. It may be important to communicate to a client that the price a church will bring cannot be predicted with the same precision as the price of a house or a rented building. The value of a church as real estate, in fact, may depend on the value of all those things to which it may be converted. To value a church can mean keeping an open mind to a broad range of possibilities.
Eric T. Reenstierna, MAI
The Reenstierna Associates Report is published as a service to the clients of Eric Reenstierna Associates and other real estate professionals. The views expressed are those of the articles' authors and do not necessarily reflect those of other members of the organization. Copyright 1996. All rights reserved.
Eric Reenstierna Associates