In January, I had the privilege to co-lead a webinar with Glenn Wood from Seacoast Church (one of the smartest guys I know) for The Church Network (Thanks, Phill!). The topic was Creating Capital Reserves, which is near and dear to my heart.
As part of the Q&A section, we had a great question asked that was partially related to capital reserves, but had a much broader implication…especially with the current environment of church’s acquiring other facilities for church planting, multisite and mergers.
A business administrator from a church in Oklahoma City asked: What broad considerations should be given in evaluating an opportunity to acquire a 70,ooo-square-foot church facility that is 35 years old, with 20 acres immediately adjacent to our present 34-acre ministry campus? We are very early in the exploration and discovery phase of actively pursuing conversations with the other church’s real estate agent about structuring a potential purchase.
GREAT QUESTION! I was so pleased to have someone looking at a possible acquisition from this perspective and not just from “Wouldn’t it be cool to have more builds/space?” perspective.
Below is my response:
There are a number of factors that we suggest vetting as part of the exploration related to a facility/property. I am attaching (in this case, linking to) a multiple-tab spreadsheet that we have developed to help churches when looking at purchasing other property. While not all will apply, there will be some that may be helpful.
In addition, here are the first things we look for when considering a purchase such as you have described:
Zoning — It does not appear to be an issue given its proximity to your property and that it is already used as a church; but, zoning should be explored and fully understood prior to a purchase. However, if this facility was not already a church use, zoning might become a larger concern.
Site conditions — Are there any site-related issues such as easements, utility locations/availability, setbacks, storm water retention, wetlands issues, Phase I Environmental, current parking (condition and appropriate amount), etc.? While these might not impact the current use of the facility, if you make modifications or additions, these factors will likely have to be addressed.
Physical facility attributes — Is the building equipped with an automatic fire suppression system? If the worship space is less than 1,000 seats and it was built prior to 2000 (the year the International Building Code was released), it might not have one. If you do any major renovation to the facility, and there is any assembly area that can accommodate more than 300 people, you will likely have to add a fire sprinkler system. You would need to budget about $5 per square foot for a retrofit system, plus the cost of getting an adequate fire line to the building — usually a 6-inch line with pressure to accommodate at least 300 gallons per minute.
Other considerations include:
- Are there any asbestos materials?
- Are the electrical components “up to snuff”? (T8 lights, adequate panels, etc.)
- HVAC — a biggie. First, is it adequate? Second, what is the age and life cycle? This is a major factor that can reach up and bite you as HVAC units generally have a life expectancy of 15 years. So, in a 35-year-old facility, when were these units replaced last?
- Accessibility — Same with #3a above, renovations can trigger a code compliance. But beyond the code issues, think about the potential occupants and their well-being and accessibility, such as:
- Are all restrooms ADA compliant?
- Are there stairs or changes in grade/elevation? If so, are there ramps?
- Can a handicap person navigate the site and buildings?
- Are there multiple floors? If so, is there an elevator?
Condition — The condition of the facility and any deferred maintenance must be considered. How much will it take to get it to a condition that is congruent to your other facility and to tell the story you are striving to communicate? This needs to be vetted in great detail so you have a clear understanding of this matter.
Function — How will you use this space, and why? It is great to get another 70,000 square feet on 20 acres … but how will it be used? What is the good ministry reason for adding this much space? Is it properly arranged/designed to fulfill the mission and vision of the church (the who/why)? Will you have to perform major renovation to structure the space to fit your ministry objectives instead of you having to change your ministry initiatives to fit the building? This is huge!
Affordability — Beside the cost of acquisition and financing, can the church afford adding $350-500,000 of operational costs? If we use $5 to $7 per square foot for operations and reserves (remember that we used $7 in the webinar), you will add a significant amount of cash flow drain. Is the church ready for that? Can your current budget absorb that much additional impact?
The above represents some of the items that must be explored and navigated by any church looking to acquire another facility. Be careful to not get too excited about the “deal” that you do not perform adequate due diligence. The time, energy and/or money invested to do the above will be worth every dime and minute.
Tim Cool is project executive at Visioneering Studios in Charlotte, NC, and founder of Cool Solutions Group. Since 1986, Cool has served the church community in the areas of construction, facility planning and facility management. He can be reached at email@example.com. This blog originally appeared on his blog, “Cool Conversations Live.”