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Washington Post: Churches Look to Residential Real Estate to Support Congregations

August 08, 2009

The new apartments in Landover have all the features one expects to find in a luxury complex. There's a state-of-the-art fitness center, a quiet courtyard, nine-foot ceilings and oversize windows.

Residents can use a theater, a barbershop, a beauty salon -- even a chapel.

Yes, a chapel.

The small church, with its plush blue seats, ornate fixtures and pulpit, was included in the architectural plans at the request of the developer: Jericho City of Praise, a 19,000-member congregation in Landover.

"There is just so much to do here, so many amenities," said Eugene Selden, 67, who moved June 16 with his wife, Olivia, to Jericho Residences near FedEx Field.

For years, the faith community has been a driving force in building affordable housing such as the unit where the Seldens live. And despite the recession and the accompanying risk of attempting a project now, Jericho and some other Washington area churches have recently taken their involvement a step further, purchasing properties and partnering with developers or builders to construct communities that can include subsidized units, full-price residences and even commercial space.

Churches have a steady income from weekly donations to spend in a depressed real estate market and to qualify for financing. The churches say their goal is to diversify revenue streams so that, among other things, they can expand their community service projects to support growing congregations. And the developers can get tax benefits.

The churches acknowledge the financial risks, said Midgett Parker, an attorney who represents about 80 churches in Prince George's County. An oversupply of housing units and tightening credit markets have affected them, Parker said.

"The contract could fall through; the market could fall apart," he said. Churches "manage the risk," he said, by including clauses in contracts with developers that allow them to reclaim their property if a developer abandons a project.

Parker said many churches are counting on a turnaround in the real estate market. Plans for their projects are being drafted and are moving through the planning and zoning process so they will be well positioned when the market rebounds.

Terry Lynch, executive director of the Downtown Cluster of Congregations, a consortium of 43 churches and synagogues in the District, said the move is part of "a new economic reality" for churches that need money to "maintain a large vibrant congregation." Churches have to meet their social missions, and as memberships expand, the demand for services grows -- even beyond what they might be able to support with member donations, Lynch said. "You have to be savvy in how to pay for extended ministries," he said. "How do you offer substance abuse programs, food banks and other programs without reliable funding? On top of that, they are paying for utilities, youth ministries, educational facilities. . . . It's very daunting."

Jericho Senior Pastor Betty P. Peebles said the decision to build Jericho Residences, a 270-unit independent-living facility for seniors that opened in June, has been part of the church's vision since it moved from the District to Prince George's in 1997. Today, 130 residents live at the apartment complex.

"We've always wanted to serve the whole man," said Peebles, who moved the church to larger quarters where it could be closer to its congregants and expand its ministries. The apartment complex, which includes 110 affordable-housing units, complements the church's Christian training center, elementary school and youth center, she said.

Jericho, which paid off its mortgage in seven years, purchased the property for the apartment complex in 2007 for about $4 million, according to land records. It took out a mortgage on the property for $3.6 million.

Evangel Cathedral, another megachurch in Prince George's, with a membership of about 4,200, is seeking approval of a detailed site plan for a more expansive project. It would include 640 townhouses and multifamily units and 3,000 square feet of retail space on about 50 acres. Known as the Moore property, the site is in an unincorporated, rural area north of Route 4 just outside the District. The Evangel project is part of a larger 534-acre mixed-use development known as Westphalia, which would include 15,000 homes and about 6 million square feet of retail and commercial space, hotels and restaurants and a half-dozen schools.

The United House of Prayer in the District, which has built hundreds of apartments in the Shaw neighborhood, filed an application in March with the Zoning Commission to rezone property the church owns off Rhode Island Avenue NW, between Sixth and Seventh streets. The application to rezone the building for 16 apartments is scheduled to be reviewed Sept. 10 by the commission.

Parker, who is general counsel for Greater Morning Star Apostolic Ministries, said the church bought 50 acres off Ritchie-Marlboro Road in Largo when it moved from Northeast Washington in the mid-1980s. The church planned to build its sanctuary on the top of a hill and leave the rest of the property vacant but recently decided to bring in housing developer Trammel Crow Residential to plan a project on 15 acres there.

Like all of the other church developments, the Trammel Crow project is intended to appeal to many buyers but will provide congregants the opportunity to live within walking distance of their church.

The Prince George's District Council, which is made up of the County Council and reviews zoning cases, granted conditional approval of the project last year. Trammel Crow is preparing its detailed site plan.

"People are still working projects through the approval process on the assumption that financing will be available a year or two from now," said Tom Bozzuto, chief executive officer at Greenbelt-based Bozzuto Group, a construction and management firm that has worked on numerous church projects. "But in terms of actual starts, it's tougher to get financing than it was a year ago."

Patrick Ricker, a broker and developer who is working on the Moore property project with Bishop Don Meares, senior pastor of Evangel, said he will begin negotiations to sell the 375 lots to builders after the detailed site plans are approved. The plans have been filed, but it is not clear how long approval will take, said Ricker, who is not a member of Evangel.

"From a church standpoint, it's smart" to diversify, Ricker said. "It's just like any other investment, like buying a CD or buying stock." The Moore property is not Evangel's first real estate investment. Several years ago, the church sold land next to its sanctuary on Route 214 to a builder to construct an active-adult complex. Cameron Grove has 735 homes, including single-family houses, duplexes and condominiums.

For the developers, one advantage is that they can get tax credits for agreeing to work with nonprofit groups. Tax credits vary based on the project's location.

Bozzuto Group first began partnering with churches in 1994, when the company worked with Reston Interfaith Housing to build 48 apartments in Reston's North Point neighborhood. The units are for working families who pay below-market rents. Since then, Bozzuto has seen an increase in the number of churches becoming involved in housing developments.

The company is discussing housing developments with about three churches. "That would not have been happening years ago," said Bozzuto, who is not a member of Jericho. "I think there are more churches that define their ministries more broadly than they had years ago."

Jericho Residences is one of Bozzuto's most recent projects.

Olivia Selden, 67, who is a diabetic, has lost six pounds since she and her husband moved there, thanks to her exercise routine in the gym and her occasional walks around the hallways.

And, they are saving $546 a month in rent because they meet Jericho Residences' affordable-housing requirements.

"This place has just been a blessing all the way around," Olivia Selden said.