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Real estate values pose problem for churches, non-profit tenants

| Nov 18, 2015 | Commercial Real Estate |

This blog has previously written about the conflicts that surround the sale or proposed demolition of Philadelphia’s old church buildings. Usually, the parties in conflict are the congregation that wants to reap profit by selling the building for a lucrative development as commercial real estate and neighbors who want to preserve the character of the neighborhood. A new type of conflict is arising, this time involving non-profit entities who have rented all or part of older churches as a means of saving on operating costs.

An exemplar of this conflict recently surfaced at the Episcopalian Church of the Crucifixion in South Philadelphia. Among its other notable features, the church was the site of Marian Anderson’s early musical recitals. For the last two years, the Bella Vista’s Luna Theater Co. has rented portions of the church for its offices, performance space, and storage. Real values around the church building have climbed significantly in the last several years, and the Episcopal Diocese apparently wants to evict the theater and sell the building. The theater repeatedly asked for a long-term lease extension, but the church ignored the inquiries. Now, the theater is faced with the difficult tasks of finding new offices and rehearsal and performance space. For its part, the diocese is non-committal on the possible sale of the church.

Over the last ten or twenty years, churches and non-profit organizations have been able to forge relationships that benefited both entities. The churches were able to covert little-used spaces into revenue-producing space, and the non-profits were able to find inexpensive space for their activities. Now, the high prices for commercial property threaten to disrupt or end these relationships, and no one seems to have a mutually satisfactory solution.

In any event, both churches and their non-profit tenants can benefit from consulting an experienced real estate lawyer. A knowledgeable attorney can provide advice about the effect of leases, provide assistance in either terminating a lease or negotiating an extension that may be able to serve both parties.

Source: South Philly Review, “Luna Theater losing to Diocesan demands,” Bill Chenevert, Nov. 5, 2015

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