Campus Development – FAQs
What will the church gain from this before the 10th year concludes and fair market leasing of the land starts?
So if the project is completed as proposed the benefit to FBCA is really in three financial pieces.
1. We would at the start receive the proceeds from the sale of the ½ acre that fronts College Street from which we expect to get between $8 and $10 million dollars. That money would likely be in escrow until the parking deck becomes usable (12 to 18 months) but we would stipulate that the church receives the income from the escrow during that time which should offset the income we currently receive from One Oak. The parking deck likely would be the first building built so we anticipate the entire $8 to $10 million being released from escrow within a year or so. David Hart suggested that we can safely expect a 5% return on the sale proceeds when invested so that
would generate approximately $400,000 per year if the funds are left unmolested.
2. We would get income from the land lease on phase one after the 10 year period of $1 rent. At that point we would receive something over $300k per year.
3. Finally, when ground breaks for phase 2 we would immediately begin receiving money from the second land lease from the front parking lot on the Y side. That should be about $240,000 per year or so.
The missional benefits of affordable housing are a benefit but one other large benefit is the possibility of additional space for our programs that may be available in the new building that will house the Y. We are discussing being able to use that space for AFTA or CDC or other programs. Also, the park greenspace on top of the parking deck could give us a venue for additional outdoor programming and use.
The idea is that the Church would be a centerpiece of a new downtown neighborhood so the opportunity for members is there as well since this is more intended as permanent housing rather than tourist vacation homes.
As to the Furman Group a. What have they been paid and who made the payments? b. What will they be paid in the future and who will make the payments? c. What other benefits will they receive in the future?
To this date we have expended about $50,000, about $23k to Furman for shared expenses, as approved by the Deacons. Most costs going forward will be split three ways with the YMCA, FBCA and Furman. Furman will likely be
the developer of some of the structures and will ultimately make their money upon renting or selling property depending on how we structure the project. The affordable housing would likely be operated by a developer that operates similar properties. Furman would identify and engage such a Company in consultation with the other partners.
Is it correct to say that there can be no Phase 1 without a commitment to Phase 2 as well?
Without Phase 2 we miss out on the missional portion of the plan. Much of Phase 2 is in the YMCA’s control. If phase one gives the Y a new facility and phase 2 isn’t done, we basically allow them to do with their property as they wish and would have little say what that looks like.
We now have approximately 350 parking spaces available to our members (250 at the church and 100 at One Oak) . How many free spaces will be available to our members after completion of both phases: For Sundays, Wednesdays, unexpected funerals, committee meeting, mission ministries, etc. ?
We are requiring access for all activities that the Church has. That will likely be software driven either through some type of vehicle marker or key card, or it could be done with ticket validation. The guarantee of perpetual parking would be evaluated by our legal team, and it would likely be documented by a deed restriction or contractual agreement as well and would not be able to be avoided. If parking cannot be provided on our terms, we simply cannot do this project. It is one of the 4 original charges to the ad hoc committee and has little room for negotiation.
How does the church plan on covering the $30,000 monthly note to First Citizens Bank after word gets out and tenants start to vacate prior to receiving any money from the sale of One Oak ? How long will they hold One Oak proceeds in escrow? Can we get a projected timetable on that span of reduced or no income?
We anticipate tenants staying for the majority of the time since they have signed leases. This will be evaluated, and provision will be made. The One Oak committee is meeting face to face with key tenants to assure them that we want them to stay and the time they would be required to vacate is still uncertain at best. We are not extending any leases past 2025 currently. We anticipate the sale proceeds would be held for about 1 year, but our intent will be to negotiate that we would receive the income it earns during that time to offset the loss of rents. Our debt will be less by the time construction starts but this is a part of the equation that will need to be considered and we believe the loss of rent income will be of short duration. We are working with our bank to arrange an interest only period while the development activities take place and we believe that will be accepted.
What are the external “hard stops” that could prevent this project from moving forward?
- Failure of the City to approve the design plans
- Failure of the City to be willing to run the Parking Garages
- Inability to realize the financial revenues anticipated
- The Church or the YMCA not approving the plan.
- The inability to obtain and receive the tax credits mentioned by Furman in their presentation
Is there any liability to the Church for something operated in one of the constructed spaces and operated on land we own?
Possibly, but we have that same liability now with One Oak and we would obtain and maintain significant insurances as we currently do.
What is the relationship of the CMP proposal and the Capital Campaign?
The Strategic Planning process, and planned Capital Campaign, are key to caring for immediate needs of our current facilities. The upcoming campaign will be critical to raising funds needed for the purpose of necessary current capital needs including exterior restoration, replacement of our failed chiller system and various other important capital needs. Our hope is that the actions we take related to One Oak Plaza and our Campus Master Plan could provide ongoing revenues, for years to come, to help address long term deferred maintenance needs of the Church as well as other mission and ministry opportunities.
Explain “affordable housing” as pertains to the proposed use of our properties?
Affordability is typically based on area median income. The category proposed for the majority of housing served by this project would be in the the 80% of AMI threshold. That level is considered workforce housing. The level served determines the income the property can generate. We have discussed setting a lower level at least for some portion of the property. The lower the level the less income the property generates and the less we would anticipate being able to build. There is currently a shortage in all of these levels in our community. For more information about affordable housing in Buncombe County, please click HERE.
Will the congregation be allowed to vote absentee ballots.
The deacons are working on a plan to allow members to vote even if they cannot be present on May 1. More to come on the mechanics of that but this vote requires a 300 member quorum under our bylaws. If you can’t be present, we encourage you to vote in this manner.
The presentation noted the property line between the YMCA and the church. The project covers both areas. So is the same developer leasing the land from both entities for the one project? So the YMCA and FBCA would have to agree to the same lease? It was pointed out that we could put restrictions in the land lease document. But how does that affect the lease on the YMCA property? Don't we only control our piece? And they may not like our restrictions. Or we their restrictions. Are the church and the YMCA negotiating separately or as a team?
Currently the only joint asset that would be split is the parking deck in phase 2. We will have to determine whether this will be handled as an undivided interest in the property, or a partnership, or by some other mechanism. Again this is one of many details that will need to be concluded when we know more and if the City agrees to take over that facility.
How will we use the proceeds and will they be restricted in some way? The membership of our church will certainly ebb and flow over the coming years and I think we will have to be responsible with our budgeting to make sure we don’t overspend on salaries and programs during lean years. Because of this, the congregation needs to be assured that these funds can’t be touched during to make up for those type of budget shortfalls.
Like everything else in this conceptual plan we will make that decision as a congregation. In discussing this preliminarily the finance committee is supportive of retiring our existing debt and then establishing a long-term reserve for which the income earned could be reinvested, used for capital needs or used for missional or ministerial needs. Use of the corpus could be earmarked to require congregational vote if the church chooses to as part of the requirements of any sale. Other churches have developed missional approaches to new, earned revenue, and we could research and review potential models before making a decision. The commitment is there to be good stewards of these potential new earnings, and there will be careful consideration to our approach.
What are the potential risks to FBCA regarding the development both financial and non-financial?
The financial risk initially is that we pay for development design plans and the City doesn’t approve. There is risk between the time we enter into a sale agreement and those funds are held in escrow until the parking deck is competed which should be about a year. We believe that this risk is minimal if, by contract, the only way the buyer can get their funds returned is because of non-performance by the developer (Furman). A company (Furman) that has been in business 188 years isn’t likely to default or not perform on an asset it will have already entered into an agreement with the City to produce. Another key risk is that as this proceeds we begin to lose tenants at One Oak and our current income stream begins to dwindle before we reach the point of a sale.
We believe we have little other financial risk other than reputational risk. Other risks will likely be mitigated by positioning the property inside the LLC the Deacons created or in the Endowment 501c3 we created to protect our other assets. These decisions will be made in close consultation with legal counsel and transfer of any assets can only be done by congregational authority.
Is a grocery store still under consideration under the development in phase 1? It seems to have been dropped and I’m curious why since given the concentration of housing having one within walking distance seems important.
The idea has not been completely dropped, but the prospects are uncertain at this point. Initially we had some level of interest from a well-known grocery chain, but they will not commit until there is a firm project ready for completion within 12 months. Several of our regional chains have stores a short way from the project such as Ingles, Trader Joes, Harris Teeter etc. Others only will go into a stand-alone property. So, getting someone on board at this point is a bit uncertain. We aren’t there yet, but a grocery is still a high priority, although not a certainty, so we didn’t want to promise something that we ultimately can’t deliver. Furman has approached several possible brands but at this moment no one has committed.
Will we have to pay capital gains tax on the money we receive from One Oak ?
The tax implications of this will need to be evaluated thoroughly. We likely would not have to pay capital gains, but we could have to pay unrelated business income (UBI) tax on the land lease income. That will be a part of the due diligence so that an accurate total return can be determined.
Who is the legal mind that stands at the ready to represent FBCA in preparation of any agreements that may be necessary if we go forward with this CMP?
We are committed to protecting the church’s interest throughout this project from a legal perspective. The legal expertise we would desire for a project of this magnitude will require careful vetting and review. We have several folks that have been discussed, but a decision has not been made, mainly because we don’t want to spend that money, nor have been authorized to until the Church adopts the plan.
Will the plan have any impact on our tax status as an exempt organization?
We do not believe so, if we structure it properly. Other churches and nonprofits have successfully created similar ventures without losing their exemptions. While this is likely more complex than most, as long as we pay any tax necessary, we believe the plan is sound and possible. However, we will have hired professionals guiding us through this project and have every confidence that this can be completed in a way that maintains our exempt status. It could require us to pay unrelated business income tax on some portion of the income stream and if that is the case, we will comply with the tax code.
What will be done to minimize the environmental impact of such a massive development.
All of the partners (FBCA, YMCA and Furman) are extremely sensitive to being good environmental stewards in this project. Furman has significant experience in building GREEN buildings including those with LEEDS certifications. As the design phase begins, emphasis will be placed on these environmental concerns.
How close will the buildings be to the Church?
On the One Oak side the buildings will likely begin (based on current design plans) near the current divider between the two rows of parking currently available. On the Y side construction will begin on the other side of the driveway that borders the sidewalk. Every effort will be made to retain several view corridors that will preserve the prominence of our dome and structure. Our hope is that the proximity of our facility to those living there will be an opportunity for engagement and exploration of faith as we invite them into our world and as we travel out into theirs.
Why is it necessary to build high-rises around our beautiful structure?
While every effort has been made to place these tall buildings as far from the Church as is possible given the real estate we have to work with, high rise structures are the only opportunity we have that allows the density we need to fund the project and make it support the benefits we will receive as a result of the sale of the small portion of our land. Hoteliers determine value based on the number of rooms available and the value of the location as determined by demand. We are one of a handful of properties in the downtown area that are identified by City planning as being appropriate and desirable for a hotel facility. That makes this small parcel of land very valuable for that specific use but not for most others.
What is plan B if the church decides not to pursue this?
Our only option is to come up with some type of plan to make the necessary improvements to One Oak and perhaps forfeit the income stream we have relied on for our facility capital needs over these last 29 years. It would likely include incurring significant debt. Further, it would put the YMCA back in the position of having to develop their own property in order to get a new facility and would likely eliminate any consideration of affordable housing. It will delay inevitable hard conversations about the church’s financial viability and role in the community.
How were the land lease payment amounts determined? Was it the result of a negotiation between the church and the developer? If so who represented us? This kind of activity is not in our normal world and I would think we would have used experts in this field since we are making a long term commitment. How does a person determine what the appropriate value for land to be leased and the rate?
The lease value is determined based on appraised values we received from an independent appraiser. In that the amounts and details have not been finalized by our experts, this is another of the areas that details will need to be negotiated and worked through by our legal counsel at the appropriate time should we decide to move forward.